ACCESSCORP: Interest Earning Assets expansion bolsters gross earnings growth

In its audited financial results for FY'24, Access Holdings Plc (ACCESSCORP: TP"”N42.93) reported an 89.3% YoY surge in gross earnings to N4.8 trillion. This significant increase was primarily driven by a robust rise in interest income, which accounted for 72.8% of the total gross earnings. However, profit after tax rose by a milder 3.7% YoY growth due to a 2.3x YoY increase in interest expenses and a 2.1x YoY rise in operating expenses.

ACCESSCORP experienced a significant 110.4% YoY growth in interest income, primarily driven by a 78.8% YoY increase in Interest Earning Assets (IEA) to approximately N25.6 trillion. The growth in interest income was also supported by a 2.8ppts YoY improvement in asset yields to 17.4%, reflecting the bank's capacity to reprice its risk assets within an elevated interest rate environment. On the other hand, interest expenses surged by 130.7% YoY, largely due to a notable 197.6% YoY increase in interest incurred on deposits from financial institutions and also a 47.0% YoY growth in interest on deposits from customers. Nonetheless, Net Interest Income (NII) rose by 82.4% YoY to N1.3 trillion, leading to an expansion of Net Interest Margin (NIM) to 6.3%, compared to 6.1% in FY'23. 

Meanwhile, Non-Interest Revenue (NIR) came in at N1.3 trillion, driven by a N326.1 billion gain from the disposal of the economic interest related to mandatory convertible notes from its additional Tier 1 (AT1) capital, along with a 15.7x YoY increase in net realised and unrealised foreign exchange gain/(loss) on items not hedged. 

Elsewhere, the rise in operating expenses"”driven by higher personnel costs (+127.2% YoY), IT and e-business expenses (+147.9% YoY), and AMCON surcharges (+63.1% YoY)"”pushed the cost-to-income ratio up to 56.6% from 44.5% in FY'23. Additionally, the income tax expense surged by 105.0% YoY to N224.8 billion, including N55.3 billion attributable to a windfall tax levy on realised FX revaluation gains. This contributed to an increase in the effective tax rate to 25.9%, compared to 15.0% in FY'23.

Due to an increase in the weighted average number of shares and a modest growth in PAT, earnings per share (EPS) decreased by 3.0% YoY to N16.71 (FY'23: N17.23). The bank also declared a final dividend of N2.05, bringing the total dividend for FY'24 to N2.50. This represents a payout ratio of 15.0% and a dividend yield of 9.5%, with N21.50 as reference price.

The newly injected capital from the rights issue is now reflected in the bank's financial statements, evinced by an increase in share capital and share premium from N251.8 billion in FY'23 to N594.9 billion. As a result, the return on average equity (ROAE) decreased to 21.6%, down from 36.2% in FY'23. Additionally, the return on average assets (ROAA) also declined to 1.9% (FY'23: 3.0%), as the growth in total assets (+55.5% YoY) outpaced the 3.7% YoY growth in PAT.          

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CardinalStone Research

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