How currency devaluation raised our loan portfolio – Wigwe, Access Bank MD
In modern monetary policy, currency devaluation is an official lowering of the value of a country’s currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency or currency basket, Wiki.
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.
Our overall performance underscores our commitment to the continued execution of our strategy; to generate sustainable economic returns while maximizing shareholder value. It further demonstrates our competence and ability to adapt to regulatory and market changes.
The outlook for the Nigerian banking sector was fairly positive mid-way through 2017. And while we acknowledge risks, I am confident that as a group, we are financially sound and will remain so through the course of 2018.
The year 2017 was pivotal for our bank as we concluded our five-year (2013-2017) corporate strategic plan to rank top three on a balance scorecard basis in the industry.
We achieved a significant level of success with respect to most of the indices as a result of our discipline, hard work and commitment to our strategic objectives.
This year, 2018, marks the continuation of our journey and will take us to our next destination – Africa’s Gateway to the World. This will be the year to redefine our market positioning, not only in Nigeria, but across our continent as we commence the implementation of our next five-year corporate strategy.
Our path to number one in Nigeria and the world’s most respected African Bank will be built on six elements:
Retail banking growth & wholesale banking consolidation, to dominate rising middle segment and capture growth in other deposit rich. transaction segments.
Digital led bank, with focus on enhancing consumer experience through automation of processes along the customer experience journey.
Customer focused bank, putting the customers first by providing them with positive experience coupled with tailored offerings at every point of contact.
Analytics driven insights and robust risk management, achieved by leveraging data driven insights from advanced analytics drive deeper customer understanding and make on-point decisions.
Global collaboration by identifying and pursuing opportunities particularly in trade. payments and correspondent banking.
Universal payments gateway, to be a global payments solutions provider and the dominant intermediary for payments across Africa by developing proprietary solutions and partnerships.
Now is the time for execution, for capitalising on the progress we have made and to seize the opportunities before us. I am certain with a clear commitment to our values, we will attain our goals.
Although economic uncertainties and changing regulation present challenges, I believe that we have the right strategy to build upon our current momentum and emerge as a leading institution. Indeed, the year ahead presents a defining opportunity for us to break new grounds
and move closer to our goal of becoming the world’s most respected African bank.
Though we have made significant progress in delivering on our growth objectives, more work lies ahead to ensure that we are well-positioned for longer-term value creation. This year, we will place greater emphasis on growing our retail franchise, cost discipline and proactive risk management as key drivers for enhanced bottom-line growth.
The strategies laid out for 2018 and beyond, will also see a combined focus on leveraging our enlarged corporate and retail customer base and our balance sheet a lot more efficiently to attain our objectives.
Our management team and employees have built an exceptional organization that is one of the most trusted and respected financial institutions in Nigeria. Their dedication, fortitude and perseverance made it possible.
Guided by our solid strategy, I believe that Access Bank is ready and well equipped to deliver sustainable long-term success and take the lead in 2018 and beyond.