HIDES N211BN NEW BAD LOANS AND 68% COST TRAP
Access Holdings reported profit after tax of N266.71 billion for half year ended 30 June 2026, up 23.52 percent from N215.91 billion in H1 2025, while profit before tax was N414.13 billion up 29.18 percent from N320.57 billion. Gross earnings grew only 4.60 percent to N2.613 trillion from N2.498 trillion, interest income using effective interest rate grew only 1.43 percent to N1.973 trillion from N1.945 trillion, net interest income grew 1.52 percent to N999.58 billion from N984.63 billion, yet PAT grew 23.52 percent.
But the profit declared is raising a big question. The gap between revenue and profit is not revenue, it is provision that disappeared. Net impairment charge collapsed 70.0 percent from N230.07 billion to N69.00 billion, saving N161.06 billion, while total impaired loans and advances surged N210.9 billion or 57.27 percent to N579.12 billion from N368.21 billion, and impaired ratio to gross risk assets rose 66 basis points from 2.68 percent to 3.34 percent. You booked N161 billion less provision while N211 billion new bad loans entered the book. Coverage of charge to stock fell from 62.48 percent to 11.91 percent.
The H1 2026 results show a classic earnings-quality gap: gross earnings grew only 4.60% to N2.613trn and net interest income grew only 1.52% to N999.5bn, yet PBT jumped 29.18% to N414.13bn and PAT 23.52% to N266.7bn, not because Access sold more loans but because it booked N161.06bn less impairment, with the charge collapsing 70% from N230.07bn to N69.0bn, so of the N176bn rise in net interest after impairment, only N14.9bn came from real revenue and N161bn came from provision that disappeared, even as total impaired loans surged N210.9bn or 57.27% to N579.12bn and impaired ratio rose to 3.34%, cutting coverage from 62.48% to 11.91%, meaning profit growth was manufactured by under-provisioning a growing bad-loan pile rather than by core revenue expansion.
The second weakness is cost growing faster than core income and margin compression. Personnel expenses rose 26.0 percent to N288.80 billion from N229.20 billion, amortisation up 53.67 percent to N23.66 billion from N15.40 billion, depreciation up 4.6 percent to N53.21 billion, other operating expenses up 5.40 percent to N541.00 billion from N513.30 billion, total operating expenses up 12.11 percent to N906.70 billion from N808.77 billion. Interest expense rose 8.34 percent to N1.148 trillion from N1.059 trillion, faster than interest income growth 1.43 percent, so net interest margin annualized fell from 5.67 percent to 5.42 percent. Operating income totals N1.320 trillion versus N1.129 trillion prior year up 16.95 percent. Cost-to-income ratio is 68.65 percent H1 versus 71.61 percent H1 2025, improved 2.96pp, but versus FY2025 51.7 percent it is 16.95pp worse. Group reported H1 cost-to-income 65.2 percent versus 51.7 percent FY2025.
The third weakness is the HoldCo collapse. Company gross earnings fell 64.33 percent to N50.09 billion from N140.44 billion, company profit before tax fell 83.32 percent to N20.53 billion from N123.14 billion, profit after tax fell 87.91 percent to N14.71 billion from N121.69 billion, EPS 27 kobo versus 228 kobo down 88.16 percent. Other operating income company N28.32 billion versus N140.97 billion down 79.9 percent because dividend blocked by BOFIA.
The threats are immediate. Threat one is a provisioning cliff in H2 that will hit PAT harder. Impaired N579.12 billion at 3.34 percent, if ratio hits 5 percent on implied gross risk assets N17.34 trillion, impaired becomes N867 billion, another N288 billion. At 50 percent coverage you need N433 billion provision versus H1 charge annualized N138 billion, shortfall N295 billion, equal to 110 percent of H1 PAT N266.71 billion. Cost of risk annualized fell from 3.43 percent to 1.00 percent, unsustainably low while impaired rose 57 percent. Threat two is Q2 earnings crash hidden inside H1 PAT growth. Q1 PBT N272.21 billion disclosed, H1 N414.13 billion implies Q2 PBT N141.92 billion down 47.85 percent quarter-on-quarter, Q2 PAT implied N50.18 billion versus Q1 N216.54 billion down 76.8 percent. H1 PAT growth 23.52 percent was all Q1. Threat three is equity erosion despite PAT. Other comprehensive loss N110.79 billion includes unrealised foreign currency translation loss N106.36 billion, total comprehensive income N155.92 billion versus loss N24.44 billion prior year, but equity to assets fell 39 basis points to 8.27 percent from 8.66 percent, total equity N4.567 trillion versus N4.478 trillion up only 1.99 percent despite PAT N266.7 billion, because OCI wiped N110 billion and non-controlling interest total comprehensive loss N42.86 billion versus gain N37.95 billion, minus N80.8 billion swing.
Why did strengths fail to neutralize better? Strength one is fee transformation, net fee income N359.13 billion versus N237.65 billion up 51.11 percent, gross fee N435.08 billion versus N317.52 billion up 37.02 percent while fee expense fell 4.91 percent to N75.94 billion, fee margin to gross earnings rose from 9.51 percent to 13.74 percent, plus other income up 64.47 percent to N149.04 billion and bargain purchase gain N27.27 billion. That strength should have covered cost, but personnel up 26 percent and amortisation up 53 percent ate it, and FX plus hedge losses N185.9 billion wiped it. Strength two is balance sheet growth and liquidity, total assets N55.24 trillion versus N51.70 trillion December up 6.83 percent, customer deposits N37.30 trillion versus N34.56 trillion up 7.94 percent or N2.744 trillion, financial institutions deposits N4.256 trillion versus N3.732 trillion up 14.05 percent, total deposits N41.56 trillion up 8.53 percent, cash N7.11 trillion versus N6.22 trillion up 14.20 percent, investment securities N18.13 trillion versus N16.30 trillion up 11.24 percent, loans to customers N14.13 trillion versus N13.34 trillion up 5.94 percent. LDR customers 37.89 percent versus 38.60 percent, very low. That liquidity strength should deploy to loans at 5.42 percent NIM, but loans to banks fell 7.37 percent to N2.686 trillion, loans to customers grew only N792 billion versus deposits growth N3.268 trillion, excess N2.475 trillion sits in cash yielding near zero, compressing NIM. Strength three is capital and international scale, equity attributable N4.171 trillion versus N4.031 trillion up 3.47 percent, retained earnings N2.018 trillion versus N1.836 trillion up 9.88 percent. Pensions ROE 57.8 percent managing N4.6 trillion and insurance brokers 114.2 percent per Proshare, and 82.2 percent of banking PBT outside Nigeria in nine months. Yet ROE annualized fell to 11.79 percent versus 18.4 percent FY2025 down 6.61pp, ROA 0.997 percent below 1 percent, equity to assets down, P/B 0.38 times at N28.60, market prices BOFIA ban.
Opportunities are clear but unexploited in H1. If cost-to-income returns from 68.65 percent to FY2025 51.7 percent on H1 operating income N1.320 trillion, saving N223.8 billion equals 83.9 percent of H1 PAT N266.71 billion. If LDR rises from 37.89 percent to 55 percent on deposits N37.30 trillion, extra N6.37 trillion at 5.42 percent NIM equals N345 billion extra NII annualized, 129 percent of H1 PAT. If cost of risk stays at 1.00 percent versus 3.43 percent historical, annual saving N334 billion, 125 percent of H1 PAT. If BOFIA six recalls complete, dividend capacity returns. Until then, H1 PAT up 23.52 percent hides N211 billion new impaired loans, N223 billion excess cost and 88 percent HoldCo PAT collapse.
Critical Performance Indices – H1 2026
Index H1 2026 H1 2025 Change
Gross earnings N2,613.88bn N2,498.98bn +4.60%
Net interest income N999.58bn N984.63bn +1.52%
Impairment charge N69.00bn N230.07bn -70.0%
Impaired loans stock N579.12bn N368.21bn +57.27%
Impaired ratio 3.34% 2.68% +66bps
Cost of risk annualized 1.00% 3.43% -243bps unsustainable
Net fee income N359.13bn N237.65bn +51.11%
Operating expenses N906.70bn N808.77bn +12.11%
Cost-to-income H1 68.65% 71.61% vs FY2025 51.7% +16.95pp
PBT N414.13bn N320.57bn +29.18%
PAT N266.71bn N215.91bn +23.52%
Total assets N55.24trn N51.70trn Dec +6.83% YTD
Customer deposits N37.30trn N34.56trn Dec +7.94%
Loans to customers N14.13trn N13.34trn Dec +5.94%
LDR customers 37.89% 38.60% Dec Under-lending
Equity / Assets 8.27% 8.66% Dec -39bps leverage up
ROE annualized 11.79% 9.64% H1 2025 vs 18.4% FY2025 -6.6pp vs FY
ROA annualized 0.997% 0.85% <1%
Company PAT N14.71bn N121.69bn -87.91%
Q2 implied PAT N50.18bn – -76.8% vs Q1 N216.54bn
