In the banking industry, size and resources are often seen as key drivers of success. Typically, world-class banks boast strong reputations, technological advancements, and deep pockets, enabling them to attract top talent, command significant market share, and maintain extensive distribution networks. However, Access Bank, despite being the largest bank in Nigeria with substantial financial assets continues to underperform its peers with smaller asset bases. This paradox highlights a crucial lesson: having more resources doesn’t necessarily translate to better performance. The real differentiator lies in the ability to leverage resources effectively, not just accumulate them.
As of the 2024 financial year, Access Bank’s total assets stood at N41.50 trillion, funded by a combination of sources including N3.76 trillion in total equity, N9.31 trillion in deposits from financial institutions, and N22.53 trillion in customer deposits, along with other funding sources. This significant resource base underscores the bank’s substantial financial capacity.
The above hummugus volume of assets placed Access Bank above other tier 1 banks with a big gap between them . Zenith Bank another tier 1 had a Total Assets were N29.958 trillion while Guaranty Trust Bank had a Total Assets stood at. N14.796 trillion within the same financial year .
The above disparity in the Asset bases of two banks relative to Aceess Bank was driven by the wide gap in their customer deposits and shareholders funds , two key sources of the fundings of their assets .
At the end of the 2024 financial year, Access Holdings’ customer deposits totaled approximately ₦32 trillion. This represents an increase of ₦12 trillion (61%) compared to the previous year. The total deposit amount was driven by strong growth in customer deposits. At the end of the 2024 financial year, Zenith Bank’s customer deposits totaled N22 trillion. This represents a 45% increase from N15 trillion at the end of the previous year. GTCO’s total deposit as of June 2024 stood at N10.55 trillion, representing a 39.8% growth from N7.55 trillion in December 2023
Zenith Bank’s shareholders’ fund: stood at N4.029 trillion while GTCO shareholders’ fund was N2.712 trillion . With N3.76trillion shareholders fund , Access Bank could be said to be at a vantage point relative to both Zenith and GTCO , at least in terms deposit volume controlling more than the total deposit of the two ;though slightly below Zenith regarding its shareholders equity .
The size or market share advantage gained by Access Bank may not be farfetched . Its acquisition spree in the last few years has helped it ti gather enough muscles to increase its customer base to fund its asset base beyond expectation of its rivals and its overall stakeholders. Access Bank Plc has been actively engaged in acquisition exercises, primarily focused on expanding its footprint and diversifying its operations in Africa. Recent notable acquisitions include the acquisition of Standard Chartered Bank’s subsidiaries in Angola and Sierra Leone, and the acquisition of Bidvest Bank in South Africa. These acquisitions aim to strengthen Access Bank’s position as a leading financial institution in the African market.
.With this , Access Bank , indeed , was at a vantage position to fund its assets more heavily than its rivals, banking on its bigger financial resource power. In the 2024 financial year, it deployed N11.3trn as its investment securities and N11.5 trn as loans and advances while its Cash and balances stood at N5.2trn
For Zenith Bank approximately N10trn went to Loans and advances ; investment securities received N5, 09 trn while Cash and balances with central banks got N5.9trn and
Treasury bills N2.7trn .In the case of GTCO, Loans and advances to customers received N2.8trn and its nvestment securities got N2.5trn
That Access Bank is better placed to outperform its rivals is further confirmed by its capability to deploy bigger assets to the core banking businesses where the biggest profitability is conerred .For instance , the importance of loan portfolio derives from the functions lending performs for banks is ,no doubt ,very critical for the survival and success of each player .
Loan is the highest earning asset in the balance sheet ; it contributes materially to the achievement and fulfillment of the objectives of profitability by providing higher return than other financial assets ; it helps the bank management to satisfy the legal and regulatory objectives of the monetary authorities ;‘it is a key element in the creation and maintenance of depositor relationships ,particularly with the business firms ; it is a vehicle through which management attempts to satisfy the credit needs of the community or the credit markets the bank serves or intends to serve
However ; the success achieved by each player is not only a function of the amount allocated to that sector alone but more of how each could lend safely and profitably. Sequel to this ;all the technical training a banker receives is heavily geared towards lending . When it is said that one is a good or an astute banker ,what ,in fact , is meant is that one is a shrewd lender . –one who lends money safely and profitably..This is where the battle is won and lost .
Unfortunately, this is one of the critical areas where Access Bank loses the battle to its rivals despite its hummugus asset base relative to the others in the industry. At the end of the 2024 financial year its rivals proved once again that a big head with dull brain cannot lead the profitability battle .
Access Holdings Plc has released its 2024 full-year audited accounts, reporting a pre-tax profit of N867. 019 billion, up from N729. 001 billion a year earlier. Access Holdings Plc reported a profit after tax of N642.22 billion for the 2024 financial year. This represents a 3.7% increase compared to the N619.32 billion recorded in the previous year.
At the year 2024, Guaranty Trust Holding Company Plc (GTCO) reported a profit before tax of ₦1.266 trillion and a profit after tax of ₦1.018 trillion. This represents a significant increase from the previous year’s profit before tax of ₦609.3 billion and profit after tax of ₦539.7 billion. the end of the 2024 financial year, Zenith Bank’s profit before tax was N1.33 trillion and its profit after tax was N1.03 trillion. These figures represent an increase of 67% and 53% respectively compared to the previous year.
Ironically, Access Bank saw a significant increase in gross earnings, rising to N4.878 trillion from N2.594 trillion in the previous year. the 2024 financial year, Zenith Bank’s gross earnings surged by 86% to N3.97 trillion.Guaranty Trust Holding Company Plc (GTCO) reported gross earnings of N2.15 trillion at the end of 2024. This represents an 81.3% increase compared to the previous year.
competing for market instead of competencies.
NII is generated from lending activity and interest-bearing assets, the “net” return is this interest income minus the cost of funding the loans.
NII is sensitive to both credit risk and market risk. Market risk is essentially interest-rate risk for loans and deposits. Interest-rate risk will be driven by the maturity structure of the loan book, as well as the match (or mismatch) between the maturity of the loans against the maturity of the funding. This is known as the interest-rate gap.Fees and Commissions Banks generate fee income as a result of the provision of services to customers. Fee income is very popular with bank senior management because it is less volatile and not susceptible to market risk like trading income or NII. There is also no credit risk because the fees are often paid up front. There are other benefits as well, such as the opportunity to build up a diversified customer base for this additional range of services
Trading Income
Banks generate trading income through trading activity in financial products such as equities (shares), bonds and derivative instruments. This includes acting as a dealer or market-maker in these products, as well as taking proprietary positions for speculative purposes.
Banks generate trading income through trading activity in financial products such as equities (shares), bonds and derivative instruments. Trading income is the most volatile income source for a bank. It also carries relatively high market risk, as well as not inconsiderable credit risk. Many banks, although by no means all, use the value-at-risk (VaR) methodology to measure the risk arising from trading activity, which gives a statistical measure of expected losses to the trading portfolio under certain selected market scenarios.
But what is the value of a big head with brain ?
