Access Holdings Plc (ACCESSCORP) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Access Bank plc HY 2021 Investor and Analyst Conference Call. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Herbert Wigwe. Please go ahead, sir.

Thank you very much, Claudia, and good afternoon, ladies and gentlemen. You're all welcome to Access Bank's Half Year 2021 Earnings Call. Let me start by thanking you all for dialing in to our investor call. We have prepared a very detailed presentation, highlighting all assets of our business, which I'll be sharing with you right now. On the call with me today are Mr. Roosevelt Ogbonna, our Group Deputy Managing Director; Greg Jobome, our Executive Director, Internal Risk Management; Ade Bajomo, our Executive Director and General IT and Operations; Victor Etuokwu, our Executive Director and Head of Personal Banking; Chizoma Okoli, our Executive Director in charge of Business Banking; Hadiza Ambursa, Executive Director of Commercial Banking; Mr. Seyi Kumapayi, Executive Director, African subsidiary and a few other people that constitute our branch of management talent. So far, 2021 has presented its own challenges, but I'm pleased to report that Access Bank had a solid asset start with robust revenues, profitability, and increased distribution to our shareholders. I'll briefly go over some of the key performance highlights, after which we will allow more than enough time for a question-and-answer session with you. Looking at the macroeconomic environment. Over the last quarter, we experienced the highest GDP growth rate of 5.01%, signaling significant improvement in the economy, coupled with the reduction in inflation rate of 13.8%. We have also experienced strong recovery, improved oil prices and treasury bills. As we reflect over the last 18 months since the start of the pandemic, there are signals that we are beginning to see economic recovery. And I think that we believe that this is levels achieved our financial year 2021 target. As of June 2021, we have basically built up over 42 million unique customers and 50 million accounts. And this speaks to our increasing coverage and the scale of our franchise. Our digital footprint is strong and growing, with over 2,950 ATMs spread across the -- spread across strategic locations in the country. We also have about 63,675 points of sale equipment and about 10.7 million mobile different banking users. Our USSD subscribers also stood at about 6.5 million unique users. We had a wide spread of branches in major cities and financial institution centers with about 729 branches and about 75,231 agent locations. This reflects the sheer scale of our digital and physical presence in a bid to remain closer to our customers. Today, we are present in 11 African countries, in the U.K. and the UAE, with 3 strategic representative offices in China, India, and Lebanon. On issue of diversity, which is a recognition, which are important towards -- because of our sustainability efforts. General diversity remains an extremely important subject for us, as you know. Our employee mix is almost an equal distribution of 53% male to 47% female as of the end of the period. Our risk ratings are reflective of our strong financial performance with restricting cut by the rating of the sovereign, and we have maintained a risked weighted excess of [ 7 out of 4 big jobs ] because S&P downgraded Nigeria in 2020. We've also received several accolades in 2021 for some of the good job which the team has done. And some of these include Africa's Best Digital Bank from Euromoney, recognition for our strength in digital banking, deals executed in the [ agricultural ] space. And of course, the one that we are particularly and extremely proud of which are CSF Sustainability Award for the fifth time in a row, Access Bank was declared the winner of the Karlsruhe Award for Outstanding Business Sustainability Achievement. Karlsruh tends to be the gold standard of issues around sustainability is concerned. Speaking more on our sustainability efforts and ensuring Access Bank grows in a sustainable manner, we have lived and embraced ESG as part of our life, whether it is the diversity of our Board or our workforce or the work that we have done with respect to sustainable financing, and all of that is because it is at the core of what we do. We are also today the only climate lending bank for the continent. Now moving on quickly to our group financial highlights. Our gross earnings grew by 14% year-on-year to about NGN 450.6 billion year-period compared to about NGN 396.8 billion in the half in the corresponding period in 2021, comprising of 71% interest income at 21 -- 29% note interest income. Interest income was up by 30% year-on-year to NGN 319.7 billion as a result of the increasing yield environment. The key contributors include: one is the year-over-year growth in income from our investment securities book to NGN 132.2 billion compared to NGN 74 billion in the half-year of last financial year. And this was due to the improved yield environment and [ private] investment [ book ] we have grown, and a 10.9% yield in interest on loans and advances to customers. We grew to NGN 162.4 billion compared to NGN 167.3 billion in the corresponding period of last year. This briefly offset a 4% decline in interest income from cash and cash equivalents to NGN 45.2 billion. The decline was driven by downward pricing of business generally in the marketplace. Our noninterest income fell by 13% year-on-year to NGN 130.9 billion from NGN 150 billion in the corresponding period in 2020, and this was largely as a result of a significant drop in our net treasury income and other operating income. At the starting point, there was a 41% decline in our net trading income to NGN 40.7 billion from NGN 68 billion in the corresponding period in the last period, and this was a result of the net devaluation. And of course, secondly, there was a perpetual drop in other operating income to NGN 16 billion. Again, this was underlined by the reduction in recovery from retail loans -- from recent offloads. I mean, if you look at it properly, coming through the acquisition of Diamond, most of the bad loans that can be recovered and recovered. And so what we're now beginning to see the [ tapering ] off in terms of the recoveries. We also saw a 42% increase in commission royalties to NGN 73.7 billion compared to NGN 51.8 billion in the corresponding period of last year. And again, this is coming from the increase commercial velocity across our terminal and e-business, and also some credit-related fees and commissions. We will continue to gain traction on our income from this line as we extend our retail and loan offerings. Our retail banking business has seen consistent and continue to witness significant growth driven by strong consumer lending, payments, remittances, digitization of customer journeys, and customer acquisition on a large scale. We are focused on generating sustainable sales revenue across online. All aspects of our business continues to grow or to show significant improvement because Access Bank is now more digital than ever before. Our retail commissions have increased by about 27% per annum over the last 3 years, while digital banking revenue increased by 63% over the same period. We are continuing to see resilient income with an improved margins. Our yield on assets increased by 50 basis points driven by the improved yield on government securities. This increase, coupled with the decline in our cost of cost of funds by 80 basis points level led us to create an optimal and low cost deposit base have helped us improve our net interest margin. Our net interest margin increased by 157 basis points to 6.4%, and our loan position improved with moderation of our cost of funds. We expect that with all of this moving into the rest of the year, we should begin to see better NII. Our operating expenses were up 9% year-on-year to NGN 189.8 billion compared to NGN 174.3 billion, and this was well below the inflation rate. The growth we have seen is driven by the recent acquisitions made over the past 12 months in Zambia, Kenya, South Africa, and Mozambique. But if you look at the bank's level, our operating expense was flat. And this is in spite of the increased regulatory costs and recovery from the upfront fees and premium as well as depreciation and amortization expenses. So our bank levels remains flat. But the increased acquisitions, which we have done, which are not present in the previous year, this issue, this slight increase in our operating expenses. Our cost-to-income ratio has shown increasing improvements with a slight decline of 570 basis points to 60.1% compared to 65.8% in the corresponding period of last year, while our cost of risk at 1.4% is in line with the bank guidance for the year. Looking at our balance sheet. We continue to grow and improve our deposit mix with deliberate low-cost deposit mobilization. As of June 2021, customer deposits close NGN 5.98 trillion, which is basically a 7% year-to-date growth from NGN 5.59 trillion in December 2020. Our CASA deposits -- our current savings account deposits account for 62% of the total customer deposits, reflecting our increased results presence, leveraging on our innovative digital platform and financial inclusion. Total savings accounts deposit closed at NGN 1.37 trillion as of the period end. And this basically is reflecting a good rate of 4% per annum over the last 4 years -- or last 3 years. Our subsidiaries customer deposits stood at NGN 1.73 trillion, accounting for 21% of the group's total deposits to customers, with the main contributors being Access Bank Ghana and Access Bank U.K. Our net loans and advances stood at NGN 3.99 trillion as of June 2021, which was up 10 -- 11% from 3.6% -- NGN 3.6 trillion in December 2020. The group weakness was a result of our delivery and increased core loan growth, while we get concentration risk. Our current currency exposure dropped by 390 basis points year-to-date to 22% of the total loan portfolio in the year. And this is because we have deliberately seek to mitigate our currency risk. The groups asset quality remains on the check as our NPL ratios stood at about 4.3% compared to the same -- in the same period of last year. Our provisions are the highest in the industry, driven by our conservative prospective figures. We are not particularly thrilled with our current NPL ratio or do that with the influence that we can see in the industry. And at the bank level, if you strip out Access Bank U.K. for instance, our NPL ratio is about 2.6%. So I think the results were affected by some of the increased provisions, which we have to take in Access U.K. coming from some of the stock-up trade issues that came out of COVID. The key sectors [ exposed ] by NPL ratio are: general commerce, manufacturing, and the real estate activities. We consider these levels sustainable and do not expect further deterioration in asset quality. Our capital adequacy ratio was about 21.3% of our adjusted impact basis based on the regulatory transition arrangements, while our liquidity ratio closed -- also closed up about 50.7%. And these are well in excess of the regulatory minimum that we set. Our subsidiaries have continued to grow and make significant contributions to the group. Subsidiaries' contribution to the group's performance stood at 36%, reporting total subsidiaries' activity of NGN 35.5 billion. The same period last year, what it basically turned out was about NGN 26.1 billion. The U.K. and Access Bank Ghana accounted for 86% of total half year 2021 subsidiaries' activity with a result of average equity of 17% up 26%, respectively. All our subsidiaries excluding Sierra Leone recorded a decline in their cost-to-income ratios year-on-year, buttressing the impact of our effective cost cutting measures across the group. With respect to financial inclusion and lending, we continue to deploy resources to reach all the banks and on bank to our agency bank back in network leveraging digital technology. We have about 5.6 trillion transactional values recorded from agency banking introductions from about 25,000 agents. Our financial value on our digital channels grew significantly by 52% year-on-year to net about NGN 20.9 trillion compared to NGN 13.7 trillion in the same period of last year. And this was driven by significant growth on our mobile banking with the deployment of Access more applications. In terms of our outlook and financial targets for 2021. We remain committed to driving an effective and sustainable business growth by transparent efforts to improve our asset quality, to increase transaction banking income by migrating our customers to alternative channels, and create strong awareness of our flagship retail products. We will intensify our local deposit drive to reduce funding costs, thereby enhancing our liquidity and margins and making us basically come to the same level of CASA to target [ funding ] ratios at some of our competitors. We will enhance productivity across our branches and staff and strike value from our existing accounts. And of course, reduce operating costs by aggressively executing strategic cost-saving initiatives. With market reality, -- our financial year 2021 guidance remain as follows: we will achieve a return on equity greater by 20%, our NPL ratio will remain far less than 5% that was given before, our cost-to-income ratio will fall to give product below 60%, our capital adequacy ratio shall remain greater than 20%, our loan-to-deposit ratio should be about 65%, our cost of risk again less than 1.5%, liquidity ratio should be about or slightly higher than 50%, and we will expect our net interest margins to be well above 5%. We are confident I the momentum that we built and are excited about delivering on our ambition of building the world with respect to African bank. Again, I want to thank you all so very much. I will now be opening our lines for questions. Thank you.

[Operator Instructions] The first question comes from Tajudeen Ibrahim from Chapel Hill Denim.

Congratulations on your numbers. I just have one major question and it speaks to your plan and strategy around fintech. I know that we are seeing a lot of investments flow into fintech businesses. And most of these fintech businesses have enjoyed robust valuation in billions of dollars. And like you have a very robust customer base, even more robust than most of these fintech companies, and your valuation is nowhere close to where they are [ swinging ] deals in those segments. So it would be useful, in my view, if you can let us know what you think about the fintech business generally and what's probably in your plans?

Is there another question from Tajudeen?

That's all for now.

Okay. Maybe we should answer that and then we'll take the next question. Well, thank you very much, Taju. As you're aware, we will be evolving sometime next year into a holding company structure. And that will allow us to basically get into other non-bank financial sector [ vet ] accounts, if you like. We will come out with our own response to that whole industry from payment and all. But let me quickly say that we don't see fintechs. We see them as competitors, but we also will collaborate with them. So it's not something that we are worried excessively about. But we've also seen that they are attracting great valuations to the different points we -- that they're called on. But for us, what is more important is we will create real value at the time at which we are doing it. We have a head start in terms of the massive platform that we have. We already have [ 50 million ] customers who can basically create significant value of benefits from whatever was in that in whole space. And in our own case, it will be a real value. It would not be valuations based on flow or anything of this sort, or as we said, income. They will see the real value from day 1. So I think as you roll into that space sometime next year, you would then see Access Bank's response to that sector. And we are pleased with the participants and what they have been out there, but I think that we will basically help to redefine in that whole sector and making sure that from a compliance standpoint and how the regulators see that sector, that we don't reach we've done differently.

The next question comes from Toyosi Oni from Renaissance Capital.

My first set of questions are around your margins. So I wanted to understand what drove the growth in interest income from financial assets at fair value OCI to NGN 72 billion in half year 2021 from NGN 22 billion last year? I also noticed that there was a 14% year-to-date growth in your term deposits. I wanted to ask what is driving this? And just on that line also, we saw a 40% spike in your interest expense quarter-on-quarter. I wanted to ask what was also driving this and what rates you're currently offering on your purchase funds. And then just to wrap up the questions on margins. Generally, across the industry, we've seen a decline in margins at the other banks. But Access [ booked ] this. I wanted to ask if you could speak to us on your strategy here and the trends you're seeing going into the rest of next year. And my next question is on asset quality. So we saw the growth in your impairments year-on-year. And if I heard correctly, you attributed this to the issues with Access Bank U.K. I wanted to ask on an update on the agro processing names that you alluded to your full year '20 call and ask how these are performing now or if this is what is driving the increase in impairments that we've seen against this reporting season. My next question is on your noninterest revenue. Could you please talk us through your trading gains because they do look a bit volatile, especially when we look at it on a year-on-year basis. So if you could just walk us through what's happening there and the trends that you expect going into next year. My last question is on strategy, and that sort of piggybacks on the questions that Tajudeen asked on fintech. So we saw that you increased your stake in e-Transact to 23% in this reporting period from about 5% before. I wanted to ask why. Is this in line with your HoldCo strategy? How are you looking at the payment space? And if you're able to just generally shed more color on what was driving that move from Access.

Thank you, Toyosi. I will get Seyi Kumapayi to speak on the issues around margins, the growth in interest income, the 14% growth in term deposits, and the 4% -- 40% spike in interest expense in last quarter and how it would play out in the rest of the year. Then I will get Greg Jobome to speak to issues of asset quality. Seyi would also speak in terms to trading income and suggested issues of volatility and then I will speak to the issue of strategy. So Seyi, you want to?

Yes. Thank you, Toyosi. I'll speak up on the issue of the interest income. So if you look at the breakdown of that portfolio, you see that investment securities accounted for about 79% of the group that you are looking at from NGN 74 billion in 2020 to about NGN 132 billion. And it's a combination of 2 factors. So between June 2020 and then June 2021, that portfolio grew about 40% or from about NGN 1.6 trillion to NGN 2.2 trillion. So that impact. The other factor is the yield on that portfolio. Based on our portfolio [indiscernible] of around 11%, even though the market was about near zero. So in December, if you look at how we arrange our portfolio, so it's a combination of fair value to P&L, fair value to -- and fair value to amortized cost. So the amortized cost. Now in December, we had about NGN 1 trillion of that in fair value to OCI. So clearly, that's where we resulted in the OCI about NGN 15 billion that you saw in 2020. As we move to the first half of the year, a lot of this instrument have matured, and that's what went through P&L that you saw and a growth in interest income. And if you also look at the other comprehensive income, you also see that the [indiscernible], which essentially what has happened is that following the majority of those deals, all right, they've gone into P&L and they have been reversed by [indiscernible]. So really, the combination of [ juvenile ] asset, the growth in that portfolio, and the yield on that portfolio, we had at Access Bank. In terms of margins, if you look at our margins, our margins grew from about, I think, 5% to about 6.4% in the -- for the half year. And clearly, it's coming from the significant yield that we've seen on this portfolio as well as the cost of funds. If you look at our cost of funds, our cost of funds has come down to about 2.9 at the end of July. So it's yield on assets, that's about 10.5% and the reduction in cost of funding was driving the margins that you see. How it's going to play out for the rest of the year? Clearly, we've seen pressure on funding costs, given what has happened to clearly those government securities in the market, and therefore, we expect that to deal at about 3.5 in terms of cost of funding and that -- that's where we expect that we'll be able to carry through. So we want to try and hold the margins at the level that it is this and in line with what we projected to keep this at about greater than 5%, more or less 6%. That's what we are looking at for the rest of the year. I will speak to the issue of trading income. Now if you look at our trading income portfolio, and as we -- you have to look at it as an aggregate. So between the derivative as well as the FX. So what is the outlook of that? When the transaction is like -- I mean when an instrument is active, what we basically find is that what the income on that is valuations. Now when that instrument matures, all right, it goes into [ FX ] if any. It become the spot transaction and therefore, whatever value the density or the delta on the derivative side. So you need to look at both of them to get -- way you look at the -- and what we've also done as part of -- in December, if you look at the financials, we also created and we also started to do some hedge accounting to take out some of the volatility coming through from evaluation or FX adjustment. So really, that's how you have to look at it. You have to look at the book. And together, the portfolio hasn't changed. We still have about USD 2.4 billion in swaps. It's just a question of timing when the instrument matures, when you wait the [ rollover ]. So that will create -- and you have to look at the full derivative [indiscernible] have to see what's happening there. In terms of what we see for the rest of the year, we don't expect to see much changes. We think that, that number will be between NGN 15 billion to NGN 20 billion on a quarter-on-quarter basis in terms of what you see on that line on the aggregate line on the trading side.

Thank you. Greg, do you want to speak to the share of asset quality?

Thank you, Herbert. Yes. So basically, you are right. Quite a bit of the additional impairments in this period has come from the U.K. business as has been described earlier [indiscernible]. You know where we're coming from. We have the Diamond Group, 2019 came from 7 point -- 10.8% [ FDR ] ratio. We have steadily worked that down through a combination of a very proactive restructuring with net debt and cash flow support and also some write-offs. So through all of that process, we also did some conversions, which other customer did conversions. We have shown that we're able to manage the store in Naira rather than dollars. So all of that has meant a very steady reduction in our NPL ratio. You would have seen, if you look at Nigeria alone, like as I said, would have been probably 2.5%, 2.6%. Now the U.K. issue, so we have seen a one-off, COVID-related. The ceiling of that was reached. So there's not going to be anything additional coming out of that. The recovery process also this described on the last call, which is over a 12- to 18-month period. Some of the recoveries have already started [ trickling ] in. So we're seeing most of that basically, and we expect to see significant improvement in the U.K., the asset quality as we go forward, and therefore, in the definitely [ global ] group NPL ratio as well.

So first, in terms, like I mentioned initially, I mean, we are not excited by our current NPL ratio, even though it appears to be the lowest in the industry. But like Greg said, as a result, the issues in the U.K., we don't -- we wouldn't expect it to worsen. We expect that our NPL ratio should go down to the traditional 2.5% and lower. But speaking to your last question around our investment in e-Transact, let me quickly say that about 15 years ago, we took a position that we're going to be very active in the entire payments space. So not just e-Transact. We also have a strong presence in all the switches in the country. And it was a strategic decision we took at that time. Now again, in this last 5-year corporate strategic plan, we have set our share with the market the fact that we want to be known as Africa's gateway to the world, which means that we must also start taking a more serious look at either that full payment environment down to the switches and, if it is possible, coverage that has significant holdings to help drive strategy around that whole space. So e-Transact came to the market to raise money, I would say, to increase our stake. And that's when we add. So they are responsible to take it off a bit more on [ wheel ], so that we'll be more involved in driving strategy and making sure that we have a very, very strong presence as far as the whole payments industry is concerned.

The next question comes from Ronak Gadhia from EFG Hermes.

Mine, firstly, is just a follow-up to one of the answers from the previous questions. This is with regards to the asset yields. I think, Seyi, if I heard it correctly, I think mentioned that as of December, the bank was earning a yield of around 11% on the investment securities portfolio, whereas market yields were close to 0%. So if you could just highlight how that was achievable? And also on that, now that, that portfolio has been rolled over, if you look at the market-wide yield, yes, they have recovered from where they were in Q1, but this to probably in the single digits, maybe low single digits. So just trying to understand how the bank is still able to achieve such high yield. By my estimates, the yield that the bank achieved in 2Q was about 3%, which is much, much higher than current market rates. So just trying to understand how that is achievable. And then the second question is on your borrowings. On a quarter-on-quarter basis, we saw a pretty substantial increase. I think there was more than 50%. Interbank borrowings increased by about 50% or more. Just trying to understand why such a significant pickup because if you look at the liquidity ratio, the liquidity ratio is quite strong. The loan-to-deposit ratio is quite relatively low. So just trying to understand why the bank needed to reach that significant borrowing given the liquidity on the balance sheet.

Thank you, Ronak. Let me try to answer those questions very quickly. You -- I'm sure you appreciate that we have quite a significant swap book with the sovereign. And so the yield of the swap bills that we've given that matured were about 11%. Some of it have been rolled over. A signification portion of it was rolled over the first quarter, and the rest will roll over in the final quarter. And so those deals attract a bit more generous yields than you see in the [ 2017 loan credits ]. So this will build -- attract a bit more richer yield than normal. Now with respect to the borrowings that grew, those borrowings were lightly around trade that we used to support our large trade book, which is for some of the large multinational collab in the country that are basically trying to fulfill some of the big orders. So all you have seen there, in terms of borrowings, were largely trade-related, quite frankly. So that's basically what it is. What you also find is that as you have this borrowings come in, the obligors or rather the guys who are using this for the trade would tend to build -- start building of the Amara book, all right? So that we get bids from the Central Bank at all. So part of what you start seeing is a significant buildup in our current [ series ] balance as we move through the year and, of course, as we fulfill those orders to bid at the Central Bank. So that's what those borrowings were used for. Thank you very much for that. I don't know if that answers your question.

It does. But just as a follow-up on the yield question. So you said partly that yield is because of the yields that you achieved on the swap portfolio. Going by what you mentioned earlier, the swap portfolio is about $2.4 billion. That's about NGN 1 trillion, give or take. The total investment portfolio at the end of the first half was about NGN 2.4 trillion. So even if you're achieving yields 11%, 12% on the [ onerous ] from the swap, I would imagine the yield and the rest of the portfolio would be quite low. And therefore, the overall yield should be much lower than 11%. So still struggling to understand how the bank overall achieved a yield of around 11% for the first 6 months and around 13% for the second quarter.

Well, it depends on how the bill -- the maturity of the bills that we're getting, all right? And for the first 6 months, in fact, in the past quarter, we had quite a lot of them actually rolled over, all right? And I think those initial bills were probably yielding about 13%, that kind of interest rates, all right? And so that is why you see it a bit elevated, all right? We are going to see the same kind of thing run through as we get towards the end of the second half of the year. So that's basically where it's coming from, all right? So it's about 13.5% that we'll be able to achieve as far as most of those deals are concerned.

The next question comes from Damilola Olupona from Chappell Hill Denim.

I have technical issues, so I did join the call very late, so pardon me if my questions are repetitive. First of all, I would like to seek clarity around your changes -- I mean the changes in -- I mean in the OCI. I can see that the changes in the fair value of financial instruments, you made a loss. That's coming from a profit of about NGN 5 billion reported in the prior year. So I don't know if you can shed more light on this? And then secondly, I also want to find out about the CDN's policy response to COVID. So I understand that last year, one of the key measures put in place was the CDN allowed banks to grant moratorium to troubled sector. How much of that has resulted in the lower NPLs you've reported? And I also noticed that your NPL books as well, you reported NPLs from the transport segment. I also saw some NPLs coming through from the downstream oil and gas sector as well. Can you just shed some light as to how your NPL has evolved on a quarter-on-quarter basis and the areas we should be looking at going forward?

Thank you very much, Damilola. Seyi will speak to the changes in OCI again. And then Greg, Chief Risk Officer, will address the questions with respect to the CDN policy response with respect to COVID and the transformation of our NPLs over the last quarter -- over the last 6 months.

Thank you, Damilola. Just to speak to the issue of OCI. So if you look at in December 2020, you will see a gain of about NGN 58 billion, essentially spoke to the amount of the portfolio that we are carrying OCI. Now what has happened also going to that is that those instruments are matured and on majority, all right, that income has moved to P&L and that the reversal of that from OCI. So it's just a movement where we were in December vis-a-vis that is that the FCR -- sorry, the fair-value to OCI portfolio where we are now given a lot of those instruments are matured. And so if you booked a gain in OCI, once the instrument matures, what you find is that it typically just goes back into P&L. And then it's [ reversed ] from the OCIs. So that's why you see that movement.

Okay. And with respect to the forbearances, I think we've shared this to everyone in previous calls. So the Central Bank's policy was very much aligned to the global standards that IFRS 9 treatment as well, which is that NIM should not stay migrated just because of the COVID impacts on that. So [ CBN ] actually adopted that implicitly. So what that means is that from an Access Bank perspective, these names that were given forbearance were only names that were in Stage 1 and a few names that were in Stage 2. So no names are the challenge. Pre-COVID is included in our forbearance book. So that conservative treatment means that there is no expectation that any of them will go to NPL, other than in the ordinary cost of the evolution of the lives as borrowers on the cash flows of the sector on an ongoing basis. So just to repeat, there is no expectation that out of forbearance, there will be assumed migration to Stage 3. And the reason for that, as I said, is hard were selected. In the case of Access Bank, the focus were names that were performing and their online performance. Now these sections were the things that drove the selection. So not so much [ individual ] [indiscernible] sector. Their pre-COVID was still [ productive ] because it will be heavily impacted by COVID. Therefore, that will be in that forecast. It is performing [indiscernible] potentially could be affected. But as it turns out, for Nigeria, we did -- where that is done reasonably well so far and many businesses, strong market traction, soon after the lockdown were a bit short-lived. So many of them are paid in the collection of COVID bearing of the drug towards repayment. So really, they have not given us the cost for contract. Like I said, can any of them become NPL in the future? Of course, but not being the ordinary cost of business as you would expect, or not expect they're under kind of [indiscernible] [ evolution ] from that. Now in terms of our overall FPL trajectory and the different sectors. Over the last few years, as we did the Diamond Bank transaction, it has been driven largely by the practice that we took, ensuring that more and more of our borrowers are in naira as opposed to dollars because that is what has happened. A lot of the people right now that I see, they would have been struggling with a significant loads of naira equivalent if we just carry at a very, very steep [ simple development ] naira. Therefore, those proactive actions have really helped us. The same thing that we did even in the last crisis, 2015 presented the same case. So our loan book at about 22% is foreign currency, means that it is reasonably protected well into the future against currency shocks. Now it's not deliberately, and it's one of the reasons why the NPLs remain where they are, relatively low. Now with respect to the sector movements you will see now, there are more around names that had challenges pre-COVID and pre all of this, 1 or 2 from the old Diamond Bank, which was not a debt. So you would see a few impairment in 1 or 2 sectors. Like the ones that you mentioned, one downstream. There's one in real estate. There's one in [ shop ]. All of those are pre-COVID names, which are now trading in the cost of business. So nothing to do with the current market and current trajectory end of COVID.

Thank you very much. I hope that answers your questions.

Yes. It does.

We have no further questions on the audio line at the moment. Herbert, can I hand over to you for questions from the webcast?

Yes, please.

Okay. You may proceed with questions from the webcast, sir.

This comes from [ Ubas Gordu ]. Speaking to the bank assets to revenue ratio, are there any plans for the bank to cut down on its physical branches going to multiple branches in the same location since the acquisition of Diamond Bank? And I think straight answer is that we are currently at what we refer to as an efficient level of branches and that we're not cutting down much more. Our customer engagement has been both physical and digital. Given the share size of Nigeria and the customers that we intend to speak to, we think that there is an optimal number of branches to be had at this particular point in time, and I think we have that number. The rest of what we do shall be done virtually -- or sorry, digitally in terms of reaching customers and engaging them. The next question is from Tunde Abidoye. Could you please elaborate on the drivers of NPLs for general commerce, which have climbed rapidly to 34.8% from 15.9% at the end of December 2020? You also appear to have decreased specific provisioning coverage for Stage 2 -- Stage 3 loans, for example -- which fell from approximately 6% from 12% as of December. Could you add some color to this. Again, the general commerce is as a result of the ForEx jobs to mid-sized companies and trading companies from devaluation. The provision is very robust with a coverage of about 56% across stages. And for the Stage 3, I think we have as much as 106%. The provision is also done in the first half is about NGN 57 billion, which is, I think, probably about half of what we did in the previous year, or perhaps a bit more. And basically, this was a counterpart, a result of the coverage -- these are the coverage ratios. [ Abdullah ]. My question is about your target of revenue from the subsidiaries for the next 3 years, people can share. Abdullah, I think over the next 5 years, our expectation is that we should be generating about 35% to 40% of our revenues from subsidiaries. And this is going to be very significant. And I'm talking of not just within Africa. I'm talking of outside of Africa to the U.K. and its subsidiaries. Now if you imagine the size of the parent, it means that the subsidiaries have to do extremely well, all right, for them to be able to provide this level of contribution. Jerry Nnebue asked a series of questions. Your interest income, or the present compared to that of other banks, can you please throw more light? I think Seyi has spent a lot of time on that. What did you do differently? And how much of that came from Access Bank Nigeria operations? We attributed the 41% decline in net trading income to NAV devaluation for you as we said further. Do this relates to the unwinding of swap positions? What is your current swap position? I think we have spoken to that. How would you Access the traction from your Pan-African exposure? The argument is that you are very aggressive on that front and there was -- may take longer to materialize. Are you able to see the fruits already? What's the update on HoldCo? And then what's your view on the proposed [indiscernible] implications for your digital payments business? Okay. I think the first 2 questions have been addressed largely. With respect to HoldCo, we will shed a bit more information with you as we get to the end of the financial year, but it will be some time in the second half of next year. We also -- with respect to [indiscernible], we see very significant opportunities. And our regulatory is taking a welcome lead and joined several operations in launching a Central Bank digital currency. We see clearly that for the Nigeria population that have readily accepted our cryptocurrency in recent years, which came with significant volatility risk, limited payment applications, and lack of transparency that they will basically like this initiative. The either of the 3 is a stable coin on the regulated market, which gives significant credibility. It's targeted at retail and mass market that will provide low cost payments, too. But just like [ cash ], it does have its own risks. And in terms of the implication for bank, it depends on how the Central Bank basically comes out as far as its rules are concerned and what you can use it for, and the access to which it is going to be applied. But like we said, it's very early days yet. I think over the next 6 months, to be clearer, what the regulators have been made. We have our own views as to how it should be structured. If we just take it out from the more developed markets, but we will work with the regulators to make sure that what we do is optimal and is appropriate for developing markets. Then we have from [ Ayo ], dividend projection full year 2021. [ Ayo ], dividend policy is very clear. It is a residual dividend policy. We try to make sure that we achieve specific dividend yields. And I think for our financial bank yield, we try to make sure that we also had sufficient retentions to cover our CapEx. That's actually the first rule of that the dividend yield and then we'll take it from there. So I think given what we've just done now, which is a [ telecom ] or dividend, we will basically run our models to check what needs to happen in terms of retentions. The capital adequacy requirement is already a critical point for us to make sure that at all points in time, we have more than enough capital to support the business we are doing from an [ high class ] standpoint, particularly given the nature of our institutional side of our institutional relevance to the Nigerian market. So all of those things is significant to institution. So I'm not in a position to share with you right now the specific dividends that we're looking at with respect to this financial year. Average duration of the USD loan book and how does it compare to average duration of our USD deposits. Let me just say that in terms of duration and if you spend time to understand how we bridge money in the bank, our average admission is somewhere -- I know it's somewhere between [ 3 or 5 years ] outstanding. So in terms of duration, I will say it's about 2.5 years to 3 years, particularly given the fact that we risk some money, even though it's for trade framework for that period in the more recent past. So I think about 2.5 to 3 years will be actually proper duration, although it's slightly less. But that's the kind of number that we currently see. Next question. Let's see. I don't see any more questions. Okay. Wale Okunrinboye just asked a couple of questions. It speaks to the traded numbers, I think, which we've addressed. It speaks to the NIM outlook for 2021 and asked about higher rates or cheaper funding cost. And then the third question, it speaks to -- it raises fines and penalties. Can we comment on the FX infractions of fines. There is something about [ valid value ] in FX rules between 2015 and 2020 and the fines on that for remittances, what was the issue. And then what are the plans for our pension cost of the business. Are we okay with our current market share? I think the first 2 questions were addressed. The NIM was it did [ tipped ] and the simple reason -- I mean, apart from the fact that we brought in our cost of funds and all of that, was just as we said in the call on the presentation, we were able to make sure that there was conversion of foreign currency rules to local currency rules at interest-neutral pricing. The idea is just to make sure that we don't find ourselves in the situation where we carry significant currency risk as far as our loan book is concerned. On the CDN FX infractions, some of them had to do with things that we have from Diamond. Secondly, we also have a few situations of people using their cards, all right, and being charged pricing that was beyond the nominal CDN rate. And the idea was to make sure that people don't go and use their cards indiscriminately or to basically withdraw dollars offshore and sell in the local market and all of that. So we try to make it a bit more expensive, but that was the principal reason why these fines did come. Our pension cost of the business, I think, we will continue to grow. We are okay with it. In terms of the current position. As you know, we have, in terms of Diamonds, will be repositioned and it will grow. We will push the market share as far as we can possibly do. But it is growing and becoming more and more profitable. Tunde from FBNQuest. Access Bank didn't expect to start operations in half year 2021. It has started operations. And our expectation is to actually break even this year, certainly. This totally is very good news. We are aware that the fact that there is a little security issue out there in that country as of this particularly point in time, but it could happen in any West African country, by the way. But I think as far as Access Bank Ghana is concerned, they started in a good news, and I think they will actually breakeven this year. That speaks to all the questions that have been raised. Let me once again thank everybody who has been on this call for joining us. And we look forward to our later call, which I think comes at the end of our financial year. Thank you very much, and have a wonderful day. Bye-bye.

Thank you very much, sir. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.