Access Holdings' Profit Falls 6% as Fund Costs Rise

Access Holdings reported a 5.9 percent drop in its net profit for the year ending in September. This decline comes as the cost of funds surged. The company’s latest earnings report, released on Monday, showed that while revenue increased, rising costs took a toll on profits.

The amount Access Holdings pays to depositors and the interest on borrowings, known as the cost of funds, rose to N1.8 trillion from N1.6 trillion. This increase has taken up most of the interest income the bank generated.

As a result, Nigeria’s largest banking group spent 58.4 percent of its total interest income on these costs during the period. This is an increase from 56.7 percent last year.

A major factor affecting profit is the high fixed deposit rates at Access Bank, its main commercial banking arm. These rates are usually higher compared to other banks, making cost of funds its biggest expense.

Gross earnings for the financial services group grew by 2.3 percent to N4 trillion. This group also operates in pensions, payments, and insurance brokerage across 24 countries, serving over 63 million customers.

The bank managed to lower its provision for bad loans to N92.9 billion from N350 billion. This change eased the burden of bad credit on profits, especially when compared to the end of last year. At that time, issues with delinquent loans affected dividend payments.

Chairman Aigboje Aig-Imoukhuede told shareholders in June that the group is working to restart cash distributions to shareholders.

“The significant reduction in impairment charges, together with growth in net interest income after impairment and net fee and commission income, shows the strength of our core earnings,” said Innocent C. Ike, the CEO.

“As we move forward with our Scale-to-Value agenda, our focus is clear: better execution, strong risk governance, regulatory compliance, careful capital allocation, improved operating efficiency, and better capital productivity,” he added.

Non-interest income saw a boost from net fee and commission income, which rose 12.4 percent to N534.9 billion. This increase was partly due to lower fee and commission expenses.

Other operating income climbed 14.4 percent to N160.7 billion, thanks to higher gains from selling non-current assets.

Pre-tax profit grew 8.3 percent to N667.4 billion. However, profit after tax fell to N474.2 billion from N447.5 billion. Return on equity was 10.6 percent, up from 10 percent a year earlier.