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Quick take: Post-merger synergies coming to fruition 

Access Bank recently released the first post-merger audited H1 2019 financial report for the combined entity following the merger with Diamond Bank.

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Access Bank recently released the first post-merger audited H1 2019 financial report for the combined entity following the merger with Diamond Bank. The results was broadly impressive as the Group recorded double-digit growth across major income lines whilst maintaining a robust balance sheet with total assets of the combined entity printing N6.5trn  (N4.9trn in Dec 2018) while total equity grew to N583.8bn  (N482.6bn  in Dec 2018).

Interest Income grew strongly, up 46% y/y and 46% q/q while Interest Expense was up 16% y/y and 18% q/q. Despite the sturdy growth in Customer Deposits (up 63% YTD), cost of funds decreased 100bps y/y to 4.8% from 5.8% in H1 2018- we believe this reflects the effectiveness of management’s drive in sourcing low-cost deposits. The improved funding cost along with the increase in yield on assets (up 120bps y/y to 13.4% from 12.2% in H1 2018) bolstered the expansion in NIMs (7.6% in H1 2019 from 5.6% in H1 2018).

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Net Fee and Commission Income grew remarkably, up 25% y/y and 87% q/q. The growth in Fee and Commission Income was buoyed by channels and other e-business income (up 50% y/y), commission on virtual products (up 126% y/y), account maintenance fees (up 97% y/y).  We attribute the double-digit growth recorded in the major income lines  to the digitization strategy of the group.

However, Other Income (Net gains on investment securities, Net foreign exchange gain/loss and other operating income) fell sharply, down 73% y/y and 171% q/q. The marked decline in Other Income was due to the fall in Net gains on investment securities (N4.1bn in H1 2019 compared to N59.6bn in H1 2018), on the back of the decline in gains from derivative instruments and fair value gain on equity investment.

[READ ALSO: Quick Take: Real Estate and Animal feeds segments drag UACN’s earnings]

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The bank’s OPEX was up 26% y/y and 24% q/q. The rise in OPEX was however offset by the higher increase in Operating Income (+35% y/y). Consequently, H1 2019 cost to income ratio (CIR ex provisions) improved to 61.0% compared to 64.9% in H1 2018.

Non-performing loans (NPL) ratio stood at 6.4% in H1 2019, an improvement from 10% reported for Q1 2019.  Management noted that asset quality is expected to show improvement going into the future as they strive to hit and surpass the standard built in the industry prior to the merger.   Cost of risk however increased slightly to 0.7% in H1 2019 from 0.6% in H1 2018 due to an increase in Impairment Charge (N9.7bn in H1 2019 vs N6.9bn in H1 2018).

[READ ALSO: CCNN beats prediction, records net profit of NGN5.7bn in FY 2018]

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Capital Adequacy (CAR) remained adequate at 20.8%, reflecting full impact of the IFRS implementation as risk-weighted assets increased by 12%. Similarly, Liquidity ratios of 49.7% in H1 2019 (H1 2018: 43.2%), remained well above regulatory requirement of 30%.

Overall, PBT was up 62% y/y but down 36% q/q. The quarterly decline in PBT was due to the sharp fall in Other Income (down 171% q/q). Net Profits however grew 59% y/y to N63.0bn, owing to a higher effective tax rate of 15.0% in H1 2019 compared to 13.6% in H1 2018. Annualized ROAE printed 23.5% in H1 2019 (H1 2018; 16.3%).

The bank declared an interim dividend of N0.25.

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We have a Buy rating on Access Bank with a target price of N10.32/s.

The bank will be holding a conference on 09 September 2019 at 2pm Lagos time to discuss the results. Dial in details are below;

Nigeria +234 1 903 0040

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South Africa +27 10 201 6700

United Kingdom Toll Free +44 333 300 1417

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United States of America Toll Free +1 508 924 4325

[READ ALSO: Zenith Bank Records Improved Half Year 2019 Results, with Interim Dividend of 30 Kobo Per Share]

 

Patricia
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CBN adds Maize importation to “41 banned list”

Dealers are to return their forms on or before Wednesday, July 15, 2020.

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CBN Bans Maize Importation

The Central Bank of Nigeria (CBN) has directed all authorised dealers to immediately discontinue the processing of Forms M for maize/corn importation into the country. This directive is contained in a notice that was addressed to authorised dealers and signed by Dr O.S Nnaji, CBN’s Director in charge of Trade and Exchange Department.

In the notice which was made available to the public earlier today, the CBN noted four main reasons for the directive to discontinue maize importation, The reasons are:

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  • To increase local production
  • To stimulate a rapid economic recovery
  • To safeguard rural livelihoods
  • To increase jobs

In line with this development, all the authorised dealers have been told to return all the Forms M they have already registered for the purpose of importing maize. They are to return the forms on or before Wednesday, July 15, 2020. The notice by the CBN said:

“As part of efforts by the Central Bank of Nigeria to increase local production, stimulate a rapid economic recovery, safeguard rural livelihoods, and increase jobs which were lost as a result of the ongoing COVID-19 pandemic, Authorised Dealers are hereby directed to discontinue the processing of Forms M for the importation of Maize/Corn with immediate effect. 

“Accordingly, all Authorised Dealers are hereby requested to submit the list of Forms M already registered for the importation of Maize/Corn using the attached format on or before the close of business on Wednesday July 15, 2020. Please ensure strict compliance.”

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What this means: Recall that in June 2015, the CBN issued a circular containing a list of 41 imported goods and services that were banned from accessing Nigeria’s official Foreign Exchange Market. A Nairametrics report at the time had noted that the ban was another hard-line position taken by the apex bank to keep control of the demand of the dollar to as low as it possibly can.

Over the years, the CBN has been modifying this list by including more items. The addition of maize/corn, which is a widely-consumed staple food in the country, is the latest modification.

It should be noted that cereals (which include maize and other assorted grains) make up Nigeria’s top ten imports. In 2019 alone, the country spent about $1.3 billion on cereals importation, according to World’s Top Export.

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You may see a copy of the CBN notice along with ‘the attached format’ by clicking here.

Patricia
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CITN issues rejoinder to ICAN’s claim over court case

The rebuttal claims that there are some ‘critical misinterpretations’ contained in ICAN’s claims concerning the judgment.

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The Chartered Institute of Taxation of Nigeria (CITN) has issued a rebuttal to the “critical misrepresentations” that are supposedly contained in a notice to members sent out by the Institute of Chartered Accountants of Nigeria (ICAN) over a court case, as reported by Nairametrics.

Recall that ICAN had informed its members that Justice S. A. Onigbanjo of the High Court of Lagos State ruled in their favour by striking out “Suit No. LD/3288GCM/19 – CITN VS ICAN” which was filed by CITN. In the suit, CITN had, among other things, prayed the court to restrain ICAN members from filing tax returns with the Federal Inland Revenue Service (FIRS) unless they have a CITN license.

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CITN’s position: Now, in its rebuttal to ICAN’s claims concerning the court case, a copy of which was sent to Nairametrics, CITN clarified the following points:

  1. The Ruling of the Hon. Justice S. A. Onigbanjo of the 2/7/2020 in LD/3288GCM/19 did not invalidate the MOU and TOS because it did NOT address the issues in the substantive suit, itself. However, since ICAN has resiled from the MoU and ToS it freely entered with CITN, the CITN will not stop ICAN from walking away.
  2. The Judge only struck out the suit based on the Preliminary Objection of ICAN to the effect that the suit was an abuse of court process because the issues in it were the same as the issues in FHC/L/CS/125/2019 – ICAN VS FIRS & 1 OTHER which was earlier decided in favour of CITN.  However, the issues in the two suits are completely different and distinct as has now been explicitly admitted by ICAN in its Notice under reference when it said: “The earlier ruling at the Federal High Court in Suit No. FHC/L/CS/125/2019 did not make pronouncement on the memorandum and terms of settlement between ICAN and CITN.”ICAN having admitted  that the judgment in FHC/L/CS/125/2019 did not make any pronouncement on the MOU and TOS (and this is a fact), how then could issues in that suit be the same as those in LD/3288GCM/2019 (decided by Justice Onigbanjo) which only asked for judicial pronouncement on the MOU and TOS?
  3. Regulation 5 of the Tax Administration (Self-Assessment) Regulations, 2011, was categorically annulled by the Hon. Justice Liman in the judgment delivered in FHC/L/CS/125/2019 on 21/11/2019.  None of the lawyers to the parties (including ICAN) can deny hearing the annulment of Regulation 5 during delivery of the judgment. It is unfortunate that ICAN is jumping the gun in a case with a pending post-judgment application.
  4. In the judgment delivered in FHC/L/CS/1480/2018 – CHIEF IGBAROOLA & OTHERS VS FIRS & OTHERS on 21/5/2019, the Hon. Justice A. O. Faji, declared: “CITN Act is thus superior to ICAN Act on the issue of tax practice.  The Self-Assessment Regulations being in conflict with the CITN Act is null and void.  The Plaintiffs cannot practice as tax agents without first being members of the 2nd Defendant.”
  5. In the Court of Appeal judgement of 2013 between ICAN v. CITN, it was held that the power to regulate and control the tax profession, to the exclusion of any other body, in Nigeria lies with CITN.
  6. It is, therefore, now firmly settled from all the relevant judgements at the Lagos High Court, Federal High Court and the Court of Appeal, which have all upheld the primacy of the CITN Charter, that no member of ICAN can practice taxation without first being a member of CITN.
  7. For the avoidance of doubt, no ICAN member, who is not registered with CITN, has been permitted by any law or court decision to practice taxation. The law has made it clear about the professional body that can regulate tax profession in Nigeria and CITN reserves the right to invoke the relevant provisions against any person that violates the provisions of its charter.

The backstory: The disagreement between ICAN and CITN dates back to 2015 following a misinterpretation of a Memorandum of Understanding (MoU) and Terms of Settlement (ToS) between the two organisations. Due to the disagreement, CITN took legal actions in a bid to basically make the MoU and ToS binding on ICAN members.


You may read CITN’s full rejoinder by clicking here and follow up on ICAN’s notice to its members here.

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Patricia
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UPDATED: Court rules ICAN members do not need CITN license to file tax returns

The suit, which was filed some years ago by CITN, was basically struck out for lacking merit.

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ICAN

Justice S. A. Onigbanjo of the High Court of Lagos State has ruled that members of the Institute of Chartered Accountants of Nigeria (ICAN) do not need to be licensed by the Chartered Institute of Taxation of Nigeria (CITN) before they can file tax returns.

The ruling on July 2nd followed a suit filed by CITN trying to restrain ICAN members from filing tax returns for their clients unless they have a practicing CITN license.

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A notice to ICAN members regarding this development, as seen by Nairametrics, noted that Justice Onigbanjo struck out the suit after describing it as “an abuse of court process and an embarrassment to the judiciary.”

The backstory: Nairametrics understands that the disagreement between ICAN and CITN stemmed from the misinterpretation of a 2015 Memorandum of Understanding (MoU) and Terms of Settlement (ToS) between the two organisations. Consequently, CITN had filed a suit before the High Court of Lagos State, seeking the following:

  • A declaration that the Memorandum of Understanding and Terms of Service both dated February 12, 2015 between the CITN and ICAN are valid, subsisting, and binding on the CITN and ICAN.
  • An injunction restraining ICAN whether by its agents, privies, assigns, or whosoever called, from repudiating, resiling from or acting in any manner or doing anything that is inconsistent with, contrary to or is a violation of the Memorandum of Understanding and the Terms of Settlement dated February 12, 2015, between the CITN and ICAN.
  • Determine whether the Memorandum of Understanding and Terms of Settlement both dated February 12, 2015 between the CITN and ICAN are valid, subsisting, and binding on CITN and the ICAN.

However, last week’s ruling by Justice S. A. Onigbanjo which, by the way, was delivered virtually due to COVID-19, has made it impossible for the CITN to implement the terms of the 2015 MoU and ToS. The ruling also aligned with ICAN’s earlier objection to the MoU and ToS.

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The status quo: In view of this development, ICAN has informed its members that they do not need to obtain any license from the CITN before they can file tax returns for their clients with the Federal Inland Revenue Service, FIRS.

ICAN members were also informed that an earlier ruling by the Federal High Court on the case does not affect the status quo. This is because “the earlier ruling by the Federal High Court in Suit No. FHC/L/CS/125/2019 did not make pronouncement on the memorandum and terms of settlement between ICAN and CITN.” More so, regulation 5 of the FIRS Act was not reflected in the earlier judgment of the Federal High Court.

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