Despite the fact that the country is officially out of recession, it has not been a tea party for the banking industry.
According to Mr Herbert Wigwe, the Group Managing Director of Access Bank Plc, aside the recession, the nation’s economy and the banking industry were buffeted by the recent volatility in the foreign exchange(forex) market.
He explained that the residual effect of the recession put undue pressures on asset quality of his bank in 2017. In spite of all these, the bank came out strong.
Hear him: “The past few years have been extraordinary for Access Bank. We navigated the financial crisis and its turbulent aftermath while never losing sight of the reason we are here: to serve our clients, our communities, and of course, to earn a fair profit for our shareholders. Despite these challenges we have never lost sight of our sustainable business agenda, and continued to invest in technology and talent to strengthen the future of our company.”
At the last Annual General Meeting of the bank in Lagos, Wigwe told the shareholders that the bank’s “capital position remains strong at 20 per cent, well above the regulatory minimum and has been an effective catalyst for absorbing macro shocks and providing sufficient headroom to leverage market opportunities.”
The past few years have been extraordinary for Access Bank. We navigated the financial crisis and its turbulent aftermath while never losing sight of the reason we are here: to serve our clients, our communities, and, of course, to earn a fair profit for our shareholders. Despite these challenges, we have never lost sight of our sustainable business agenda, and continued to invest in technology and talent to strengthen the future of our company.
In 2017, we demonstrated resilience amid macroeconomic challenges that weighed on credit expansion, asset quality and capital adequacy, to record a largely positive performance for the year.
Gross Domestic Product (GDP) growth for the second quarter of the year, marked the end of five quarters of contraction, with improved performance, driven by minor recovery of oil prices and production as well as sustained growth in other sectors of the economy.
Monetary policy helped cushion the effects of the recession, and moderate the impact on earnings across the industry, as banks explored new opportunities to improve profitability
The financial markets also strengthened in 2017, with the Nigerian Stock Exchange (NSE) recording a 42 per cent return in the NSE All Share Index (ASI) index, earning itself the third best exchange in the world.
This positive trend translated to increased foreign investor confidence and appetite for Nigerian assets.
The Nigerian macroeconomic and banking landscape have undoubtedly been impacted by recent volatility. Despite this, our business has consistently evolved and adapted to changes in consumer behavior, technology and the competitive landscape. We remain committed to achieving a sustainable growth plan regardless of any macro constraints.
Despite marked improvement in the macroeconomic backdrop, the residual effect of the recession intensified pressures on asset quality and cost of risk, resulting in weaker-than-expect- ed earnings during the operating period.
The Group posted revenue of N459 billion, a 20 per cent increase from the previous year, reflecting the strength and sustainability of our diversified businesses and enhanced retail market penetration. However. the exchange rate volatility and other economic headwinds which resulted in significant loan loss provision, affected profitability as profit before taxes reduced by 11 per cent from N90 billion in 2016 to N80 billion in 2017.
The overall quality of our risk assets was also impacted as Non-Performing Loan (NPL) ratio increased to 4.8 per cent in 2017 from 2.1 per cent in 2016 as a result of the heightened risk environment. Nonetheless, our commitment to robust and proactive risk management practices remains imperative as we strive to maintain a healthy balance sheet.
Total assets rose by 18 per cent from N3.5 trillion to N4.1 trillion, while loans and advances of the group grew by 11 per cent to close at N2.1 trillion as at December 31, 2017, largely on the back of the currency devaluation in the second half of 2016. Customer deposits increased by seven per cent to N2.2 trillion from N2.1 trillion recorded in 2016.
As a group, strong capital and liquidity are considered necessary enablers of sustainable growth and profitability. Our capital position remains strong at 20 per cent, well above the regulatory minimum requirement and has been an effective catalyst for absorbing macro shocks and providing sufficient headroom to leverage market opportunities.
During the year, the group made great strides towards redesigning its systems, keeping our customers at the core so as to effectively cater to their increasingly sophisticated needs. We continued to ensure the implementation of the group’s digital banking strategy to achieve significant customer acquisition, seamless omni-channel custom- er experience and accelerated customer migration to alternative e-channel platforms.
How currency devaluation raised our loan portfolio – Wigwe, Access Bank MD