26.4 C
Wednesday, March 22, 2023

Swap Positions Boost Access Bank’s Profit as FX Gains Spike

Must read

Listen now
- Advertisement -
- Advertisement -

Foreign currency depreciation that led to robust foreign exchange gains buoyed Access Bank Nigeria Plc’s profit as the largest lender in Africa’s largest economy continues to surmount headwinds.

Its profit has been on the upswing since it acquired Diamond Bank in 2019, a strategic decision that ensures the lender increases its footprint across the continent and Europe.

For the year ended December 2021, Access Bank’s net income spiked by 51.41 percent to N160.21 billion in December 2021 from N106 billion as at December 2020.

Return on average equity (ROAE) increased to 17.80 percent in the period under review from 15.60 percent the previous year.

Analysts attribute the consistent growth in profit to gains on swap positions that led to foreign exchange gain of N101.17 billion.

The gains were largely on the part of the treasury bill swap position the Bank entered into. It benefited from currency depreciation, according to an industry expert who does not want his name mentioned for the reasons best known to him.

“However, the lender has to continue to book new transactions to enjoy such positive exceptional items or hope that the currency weakens,” said the analysts

The strike price of the swap transaction was N404 (I&E) window rate in 2020 and it was marked to market at the rate of N416 at the end of 2021, and resulted  in an excess of N12 that was multiplied by a portfolio of $2.7 billion.

Despite the harsh regulatory environment and Covid-19 crisis that crippled business activities and stoked fears of another deterioration in asset quality, interest income was up 22.03 percent to N519.46 billion in December 2021 from N425.66 billion the previous year.

Net interest income (NII) was up 9.94 percent to N219.34 billion in December 2021 from N199.40 billion as at December 2020.

Net interest income (NII) is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors.

Access Bank made money from income from non-lending businesses, including fees for services as fees and commission income increased by 26.73 percent to N118.59 billion in December 2021 from N93.57 billion as at December 2020.

The lender is enhancing transactions across its financial inclusion initiatives as it completed millions of deals through its telco partnership.

It has also been strengthening its position in the payments space with the acquisition as it increased its stake in e-Tranzact to 23% from 5% in September 2021.

The largest lender by total assets has a well-diversified gross loan book of N4.16 trillion as at December 2021 from N3.21 trillion in December 2020, reflecting its strategic approach to mitigate concentration risk.

Customer deposits increased by 24.47 percent to N6.95 billion in the period under review from N5.58 trillion the previous year, reflecting the impact of our continuous and deliberate deposit mobilization

Access was also the first Nigerian bank to issue an AT1 bond of $500mn with a coupon of 9.125% on 30 September 2021, a move which will strengthen its capital position.

- Advertisement -
- Advertisement -

More articles


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

- Advertisement -

Latest article