Access Bank recovers N14 billion in bad loans after merger with Diamond Bank
Few months after its merger with Diamond Bank, Access Bank Plc has recovered a sum of N14 billion in bad loans.
The bank released its 2019 Half Year results and it indicated an increase in its pre-tax profits from N45.8 billion to N74.1 billion. This is the first half-year results since the bank consummated its merger with Diamond providing investors with a glimmer into how the merger has panned out.
Access Bank revealed in its annual report that it paid N62.5 billion (N23.1 billion was cash) for Diamond Bank. They paid 260% or 2.6x the share price of N0.87 . Access Bank also acquired N76.2 billion in PPE from the merger with Diamond Bank.
Also following the merger, Access Bank recovered a whopping N13.9b from bad debts. It is understood that most of the recoveries were from Diamond Bank debts previously provided for.
Findings should that Access Bank was able to recover the loans through tough negotiations with obligors with whom it had a cordial business relationship.
It is on record that Access Bank remains the largest bank by Customer deposits, rising from N2.56 trillion to N4.1 trillion. The closest is Zenith Bank at N3.8 trillion. Within the few months of the merger, it was learnt that Titi Osuntoki resigned from the board while Chizoma Okoli was appointed as Executive Director of the bank.
Meanwhile, on the 2019 H1 results, Net Interest income rose from N85.3 billion to N155.1 billion. Income from investment securities topped fees income which was N37.5billion net while Net income from fees rose from N30 billion to N37.5 billion
Pre-tax profits also rose from N45.8 billion to N74 billion. This is believed to be impressive considering the fact that Diamond Bank’s pre-tax profits in the half-year of 2018 was a paltry N2.9 billion.
Meanwhile, the report shows that Access Bank like most Nigerian banks still relies on government securities. The bank had invested about N1.1 trillion in treasury bills alone up from N677 billion the year before.
The bank earned about N60 billion from securities investment up from N28 billion a year earlier. Out of Access Bank’s N5.5 trillion in investable assets about N2.8 trillion was lent out as external loans. Meanwhile, the acquisition of Diamond Bank increased Access Bank’s allowance for credit losses from N88.1 billion at the end of last year to N219.3 billion by half-year.
The merger between Access Bank and Diamond Bank was expected to provide positive synergies for shareholders. And it apparently met the expectation as in the first half of 2019, value-added in quantum was about N48.5 billion year on year. Also, 40% of the N148 billion (2018 H1: N103 billion) value-added in the half-year was retained as profits for shareholders.
Despite these positives, it is believed that shareholders will want to look for the most important metrics. Earnings per share at the end of the first half of the year was N1.93 up from N1.38 same period last year. Return on Average Equity was also 11.7% during the period compared to 8.1% at the end of June 2018.