Leading financial institution, Access Bank Plc. (Access Holdings Plc.) has registered the strongest growth in revenue in 10years at almost 42 percent to hit gross income of N1.38 trillion, making it the first banking institution in Nigeria to hit and cross the N1 trillion mark in gross earnings.

The bank’s 10-year record growth in revenue is, however, followed by the first profit drop in five years with after-tax profit down by 5 percent to N152 billion. This reflects a major loss of profit margin from 16.4 percent in 2021 to 9 percent in 2022 – the lowest for the bank in more than a decade.

The bank holding company’s audited financial report for the year ended December 2022, shows that the increase in gross earnings represents as much as N416 billion added to the large revenue pool of the group in the year. However, no part of the increase reached the bottom line.

A disparity in growth between revenue and profit observed at the end of the third quarter (Q3) worsened at full year. Quarterly profit numbers dropped from N48 billion in Q3 to N15 billion in the final quarter – the lowest in the year. At the same time, quarterly revenue rose from N316 billion to N472 billion over the same period.

Total expenses grew ahead of the revenue increase and undermined the ability to convert revenue into profit, leading to the divergence in revenue and profit in the year. The challenge to the bank in the year was located in its lending field where interest expenses and loans loss charges consumed far more than the increase in interest earnings.

While the bank grew interest income by 37.5 percent to N827.5 billion at the end of the year – an increase of N226 billion, interest expenses rose by 55.8 percent to N467.8 billion in the year, claiming over 74 percent of the increase in interest earnings.

Worse than that, is an upsurge in net credit losses that registered a high jump of 137.7 percent in the year, from N83.2 billion in 2021 to N197.8 billion at the end of 2022. Credit losses have swelled for the bank for the fourth straight year, summing up to about N364 billion thrown off revenue in four years to 2022.

The two major cost increases consumed far more than all the increase of N226 billion in interest income in the year and slashed net interest income after loan impairment charges by 25.8 percent to N161.8 billion.

Rapid expansion of the loan book that the bank has seen in the past five years was sustained in 2022 with net customer lending position advancing by a clear N1 trillion to N5.1 trillion at the end of the year. In five years to 2022, the bank’s net loans and advances to customers has jumped more than two and half times from less than N2 trillion in 2018.

The weakness in income net of loan loss expenses was largely remedied by strong gains in non-interest income, which was led by net gains in financial instruments that multiplied more than six times from N44.8 billion in 2021 to N281.3 billion at the end of 2022.

Also, net gains on hedging jumped from a slight loss to close at N19.7 billion over the same period. Fee and commission income equally grew by 24.3 percent to N197.6 billion in the year.

The gains in non-interest earnings were supported by a relative slowdown in operating expenses – which helped to temper the impact of the drop in net income on the bottom line. At N502.4 billion, total operating expenses grew by 35.4 percent, which is below the 42 percent increase in gross earnings.

The moderation enabled a decline in operating cost margin from 38.2 percent in 2021 to 36.2 percent at the end of 2022. This means the bank used a lower operating cost to generate the naira of its revenue in 2022 than in the prior financial year as well as any time in more than a decade.

The cost saving from operating expenses and the improvements in non-interest income provided the upside force that bridged the 25.8 percent drop in net income to achieve a moderate decline of 5 percent in after-tax profit in the year.

Highlights of the bank’s first quarter (Q1) earnings performance in the current financial year, show that the disparity between the growths in interest income and expenses is persisting but with a slowdown in credit losses, profit for the quarter has stretched out to N71.6 billion.

The directors have announced a final cash dividend of N1.30 per share, having paid an interim cash dividend of N20 kobo per share in the course of the financial year.