Access Holdings: A Tale of Woes – High Interest Expenses and Inefficient Cost Management

Access Holdings, one of Nigeria’s leading financial institutions, has been struggling to claim the industry profitability leadership despite its impressive gross earnings. The bank’s Q1 2025 results reveal a concerning trend – high interest expenses and inefficient cost management have been eating into its profitability.

The Interest Expense Burden

Access Holdings’ interest expenses have been on the rise, outpacing its interest income growth. In Q1 2025, the bank’s interest income surged by 58.62% to ₦964.57 billion, driven by higher yields on loans and investment securities. However, interest expenses also increased sharply by 71.32% to ₦760.47 billion, resulting in a 20.13% decline in net interest income to ₦220.21 billion.

This trend is concerning, as high interest expenses can erode a bank’s profitability. When interest expenses grow faster than interest income, it can lead to a decline in net interest income, ultimately affecting the bank’s bottom line.

Inefficient Cost Management

Access Holdings’ cost-to-income ratio (CIR) has been a major concern. Although the bank’s CIR improved significantly to 60.05% in Q1 2025 from 70.76% in Q1 2024, it still indicates that a significant portion of its revenue is being absorbed by operating expenses.

A high CIR can limit a bank’s ability to invest in growth initiatives and improve its profitability. It also suggests that the bank may not be optimizing its resources efficiently, which can impact its competitiveness in the market.

The Impact on Profitability

The combination of high interest expenses and inefficient cost management has impacted Access Holdings’ profitability. Despite its impressive gross earnings of ₦1.38 trillion in Q1 2025, the bank’s profit after tax (PAT) growth was muted.

The bank’s PAT rose by 14.73% to ₦182.75 billion, which is lower than expected given its strong revenue growth. This suggests that Access Holdings’ profitability is being constrained by its high interest expenses and operating costs.

Conclusion

Access Holdings’ inability to claim the industry profitability leadership can be attributed to its high interest expenses and inefficient cost management. To improve its profitability, the bank needs to focus on optimizing its funding costs, improving its asset-liability management, and implementing cost-saving initiatives.

By addressing these challenges, Access Holdings can improve its net interest income, reduce its operating expenses, and increase its profitability. Until then, the bank will continue to struggle to claim the industry profitability leadership.