Access Holdings Plc (ACCESSCORP) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Access Bank Plc. FY 2021 Investor and Analyst Presentation. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to Mr. Herbert Wigwe. Please go ahead, sir.

Thank you very much, Chris, and good afternoon, ladies and gentlemen. You are all welcome to Access Bank's Full Year 2021 Earnings Call. Let me start by thanking you all for dialing into the call. We have prepared a detailed presentation, highlighting all aspects of our business, which are shared with you right now. On the call with me today are Roosevelt Ogbonna, our Group Deputy Managing Director; Greg Jobome, our Executive Director in charge of Risk Management; Mr. Ade Bajomo, Executive Director in charge of IT & Operations; Victor Etuokwu, our Executive Director in charge of Business of Personal Banking; Hadiza Ambursa, our Executive Director of Commercial Banking and Seyi Kumapayi, who is our Executive Director in charge of African Subsidiaries and [indiscernible] our CFO. 2021 presented its small challenges in many respects. But Access Bank demonstrated a clear cost sustainable path to growth evidenced by increased profitability and dividend payment to our shareholders. During this call, I will briefly go over some of the key performance highlights, leaving ample time for a question-and-answer session. The presentation, obviously, is posted on our website, please pull it from there if you need to follow me. Looking at the macroeconomic environment, we experienced a GDP growth rate of 3.98%, coupled with the reduction in inflation rates to 15.6% in the fourth quarter, basically signaling the significant improvement in the economy. We also witnessed strong recovery in crude oil prices or treasury bill yields. A defining factor to 2021 was obviously the mutation and the evolution of the COVID-19 pandemic with accompanied economics of uncertainties. As we reflect over the last 12 months, there are less signals that we are now on the break of economic recovery, our [indiscernible] group made most of the targets set out at the start of the year with respect to our global network, our customer base and digital capacity. As of December 2021, we have well above 45 million unique customers, which is a testament to our increasing coverage and the great scale of our franchise. Our digital footprint is strong and emerging with over 2,921 ATMs spread across strategic locations and 74,000 point of sales terminals. We have widespread of branches in major cities and financial [ inclusion ] centers with 735 branches and about 95,000 agent locations. This reflects the share scale of our digital and physical presence in a way to remain closer and accessible to our customers. Our presence currently spans across [ 13 ] African countries, the U.K. and U.A.E with 3 representative offices in China, India and Lebanon. On our retail [indiscernible], our restrictions are reflective of our solid financial performance [indiscernible]. We received several [indiscernible] in 2021, some of which include Africa's Best Digital Bank, our standing leadership as far as green loans are concerned. And as far as environmental, social and corporate governance, we've always been -- which has always been at the heart of our business. We showed great diversity as far as our Board is concerned, our workforce or the work we've done with respect to sustainable financing with respect to the fight against COVID-19. We recently partnered with the International Finance Corporation and [ 2 degrees investing ] initiative in U.K. to determine our portfolio alignment to the 2-degree scenario. As you know, the 2-degree scenario is seen as a globally accepted limit of temperature growth to avoid significant and potentially catastrophic changes to the planet. Achieving a net zero target is important to us. Even outside of -- outside of Nigeria, and we are certainly target for ourselves that takes into consideration the reality of our operating environment. Coming to the group financial highlights. Our gross earnings grew by 27% year-on-year to NGN 971.9 billion during the period, compared to NGN 764 billion in the financial year ended 2021, which comprises basically 62% interest income and 38% noninterest income. The interest income was up by 23% year-on-year to NGN 601.7 billion. And the key contributors include, firstly a 32% year-on-year growth in income from investment securities, which rose to NGN 203.7 billion, compared to NGN 154 billion in the corresponding period in the previous year. And this is actually largely due to the large investment portfolio. There's also a 20% year-over-year growth in interest on loans and advances to customers to NGN 388.6 billion. For last year, -- the growth was NGN 332 billion, basically offsetting a 21% decline in interest income from cash and cash equivalents, basically taking it to [indiscernible]. But for the corresponding period last year, it was about [indiscernible]. Our noninterest income grew significantly. It grew by 34% to NGN 370 billion from NGN 275 billion in 2020, going [indiscernible] a significant increase in fees and commission income and other operating income. We saw a 27% increase in net trading income to NGN 145 billion from NGN 114 billion in the financial year 2020 on the back of efficient treasury activities. We also saw a 48% year-on-year increase in other operating income to NGN 65.9 billion. And this includes the Bargain purchase from acquisitions of about NGN 2.5 billion and recoveries from written off loans. There was also a 36% year-on-year increase in fees and commissions to NGN 159.2 billion, compared to NGN 116.7 billion, largely underlined by income from increased transaction velocity across all our channels and other key businesses and as well as [indiscernible]. We will continue to gain traction on our income from these lines as we extend our retail and loan offerings. On our retail banking business, we've seen our group has continued growth driven by a strong focus on consumer lending, payments, remittances, digitization of customer journeys and customer acquisition on a large scale. Access Bank digital, we are focused on generating sustainable revenues across all lines. Accordingly, you would have noticed that our [indiscernible] grew by 21% per annum over the last 3 years, while digital banking revenue increased by 36% per annum over the same period. We were deliberate in lending to investment grade names and locking in pricing for term deposits to take advantage of yield curve, so we also saw a decline in our margins. So our yield on assets declined by 41 basis points year-on-year, driven by decline in yields on global securities and lending to investment grade names. This decrease is covered by a marginal increase in our cost of funds which have basically led to a decline in our net interest margin. Our cost of funds increased by 11 basis points year-on-year. And this was coming from the fact that we felt to [indiscernible] optimize our low-cost deposit base despite the 35% increase in overall funding base of the institution. And of course, the deliberate efforts we took to basically lock in price. Our net interest margin, as a result, decreased by 54 basis points and closing at about 4.3%. Now as our loans continue to improve with moderation of cost of funds and increase lending to the retail, we expect to see an improvement in our net interest margin. Speaking to our cost profile. Operating cost was up 14%, close to about NGN 371 billion, compared to NGN 326 billion in the previous year, which is the inflation rate. The OpEx growth was mainly driven by the recent expansion in Zambia, Kenya, South Africa, Mozambique and Botswana, and of course, the new subsidiary we have in Guinea. The reality that if you look at the bank, specifically, the bank [indiscernible] did not grow by more than 2%. But the acquisitions that we made brought to these increased operating expenses from the various entities that we have [indiscernible] the revenues that are derived from those entities. And despite the increase in these absolute costs, our cost-to-income ratio [indiscernible] significant decline of 454 basis points year-on-year to 58.8%, compared to 63.4% in the corresponding period last year. Our cost of risk stood up 2% as a result of increase in impairment charges on loans in the period. Looking at our balance sheet, we continue to optimize our deposit mix by locking in price for time deposits and to take advantage of the yield curve. As of December 2021, customer deposits stood at NGN 6.96 trillion, which is basically a 24% year-to-date growth from NGN 5.59 trillion in December 2020. Our CASA deposits account for 58% of the total cost of our deposits reflecting our [indiscernible] presence leveraging on an innovative digital platforms and financial inclusion. Subsidiary deposits have also grown and now a totaled NGN 2.2 trillion, accounting for 20% of the group's total deposits from customers, with the main contributors being Ghana and U.K. Gross loans and advances stood at NGN 4.6 trillion as of December 2021, reflecting a 22% increase from NGN 3.8 trillion in December 2020. The growth witnessed was as a result of our deliberate efforts to increase our core loan growth whilst mitigating concentration risk. Our foreign currency exposure declined by 616 basis points year-on-year to 19.7% of the total portfolio in the year. So this basically declined from somewhat about 26% to about 19.7%. Our loan-to-funding ratio declined to 50.8% as of December 2021, compared to 54.2% in the corresponding period over the last year. And this just is as a result by increasing funding base to support the institution. The group's asset quality remains [indiscernible] as our NPL ratio declined at 4%. Same period last year, it was 4.3%. We have made significant improvement in the NPL coming from 10% at the [indiscernible]. We are not rationalized trade to assure that we've reached our desired target. At the bank level, the NPL [indiscernible]. The key sectors as well [indiscernible] general commerce about 17.1%, manufacturing 13.4% and other derived at 11%. We consider this level sustainable and do not expect any further [indiscernible] asset quality. Our capital adequacy ratio was at 24.5% on the Basel II basis, well above the regulatory minimum. The group's capital has [indiscernible] for Basel III compliance and [ it meets ] the capital requirements including capital conservation and Counter cyclical buffers. [indiscernible] implementation of the Basel III guidelines, capital adequacy stood at 24.5%. Our liquidity ratio was 51% remained well in excess of the regulatory minimum. Our subsidiaries have continued to grow and make an important contribution to the group. Subsidiaries' contribution to the group's PBT performance stood at 38% for the year ended -- sorry, at 38% compared to 28% in the corresponding period last year. And of course, recording total subsidiaries’ PBT of NGN 67.7 billion, compared to NGN 35.7 billion contributed in the same period of last year. Most of the subsidiaries recorded a decline in their cost-to-income ratios buttressing the impact of our effective cost management across the groups, including Guinea and South Africa, Botswana as well. These 3 countries and their first few months of operations, hence the high cost-to-income ratio you will probably see in Guinea, South Africa, and Botswana. But for all the [indiscernible]. Our financial inclusion continues to deploy resources to reach the [indiscernible] our agency banking network whilst leveraging digital technology. About NGN 14.4 trillion transaction values were recorded in the agency banking [indiscernible] agents. Now the decline of [indiscernible] year-on-year digital loans [ booked ] to NGN 3.8 million, compared to NGN 4.3 million in the same year last year. Now this is because of the implementation of more stringent eligibility requirements to mitigate [ delinquency ]. However, what we lost [indiscernible] by volume of transactions of our digital lending. Our digital lending also -- which comprise of our PayDay Loans, Small Ticket Personal Loans, Salary Advances and Device Financing. We've also seen an increase in the scale of velocity of transactions. Our digital lending value grew by 52% to NGN 160 billion, compared to NGN 105 billion in the financial year ended 2020. The transaction volume of our digital channels grew significantly by 34% to [ NGN 43.3 ] trillion, driven by the significant growth in our mobile and Internet banking and, of course, the deployment of our Access More app. Speaking to provide more bit on our strategy and corporate actions. Last year, we announced that we will be restructuring our business and transitioning into Holding Company structure. The new structure will allow us to capture all the opportunities that the modern financial [indiscernible]. Access HoldCo will consist of the Access Bank Group itself, the payment and switching services company, a consumer leading business as well as an agency banking company and an insurance brokerage company. We're happy to announce that we've achieved the final approval from the Central Bank of Nigeria and the cost structure for the [ whole group ]. Also, all the verticals now have the relevant approvals complete and are ready to run. According to plans, the [indiscernible] commence in the second quarter of 2022. We are -- through this organization, we will now have new revenue lines without taking additional risk for the enterprise and ensure diversification of earnings and support outside of Africa expansion. The payments company, which is basically [indiscernible] company fits perfectly with our 5-year corporate and strategic plan, our leverage of the strong suite of the bank's existing assets and the [ normal ] capital base that we have. With the lending [indiscernible] our consumer lending and agency banking business, which currently exists within the retail segment of the bank. With specialization, we will leverage on our digital -- on our digitalized channel support and seamless remittance of fees to grow our scale. Speaking to our Access Insurance Brokerage, here, we would adopt a dynamic and creative approach to assure -- provide value-added insurance broking business to our customers, our focus [indiscernible] focused on meeting customers’ insurance protection needs. We have completed the [ prerequisites and integrities ] steps in our transition journey. At this final stage, we are [indiscernible] and currently awaiting the final approval of the NGX, which we believe to come in end of this week. The HoldCo will play 4 key roles to deliver on our objectives and to protect the group assets, to act as a center of excellence, providing services to our subsidiaries. It will attract and develop our talent across the globe. And to steer the group, the banking group in terms of defining our vision, strategy and appetite. Talking about expansion strategy, it is broken into 4 clusters, the global financial gateways, essential trade hubs, key African markets and the Rest of Africa. Our strategy is deliberate and disciplined, focused on 5 key principles, basically becoming an aggregator in Africa, focusing on key markets to support digital trade, targeted scale of countries of presence, defining or diversifying our risk and earnings, build on partnerships with financial investors and DFIs. Our outlook and financial target for 2022. We remain committed to [ drive an ] effective and sustainable business growth by interspread networks to unveil our personalized Access HoldCo and all of our verticals. Also focused on improving our asset quality, increasing our transaction banking income by mitigating or migrating our customers to alternative channels and [indiscernible] of our flagship retail products. And also [indiscernible] costs, thereby enhancing liquidity and margins. We'll also enhance productivity across our branches more and more and staff and strong value for the [indiscernible] products. We would also ensure that in spite of the increase in inflationary environment, we will optimize costs by aggressively executing strategic cost savings initiatives. In view of the current market realities, our financial year 2022 guidance is as follows. Return on equity greater than 20%. NPL ratio less than 5%. Cost-to-income ratio less than 60%. Capital adequacy ratio greater than 20%. Loan-to-funding ratio greater than 65%. Cost of risk should be less than 1.5%. And liquidity ratio, 50% and growing. And of course, net interest margin should be not above 5%. We are confident in the momentum we've built, and we're excited about the next steps, following the strategic decision to restructure our business. which basically take us a step closer to become the world's [indiscernible] African bank. I want to thank you also very much. I will now put one of the lines for your questions.

[Operator Instructions] Our first question is from Tunde Ogunleye of SBG Securities.

Thank you for the conference call. I think my first question is on your income line, particularly when I look at your investment securities [indiscernible], I want to understand what portion of your investment securities do you have in special bills? And what is the total you have in CRM that you've been debited to find CRR? And just to look at the CRR trends, you have said that they've been like reduced CRR compliance from CBN enabled you to increase your investment [indiscernible] assets. That's on the first part. The second one is this seems to be a quite significant...

[indiscernible] what percentage or proportion we have in special bills?

And what do you have in CRR so far in terms of your total CRR that you've been debited by the CBN? So on the second part is to know what is driving the spike in interest on loans to financial institutions. I think that line item seems to be quite significant and also on your interest on loans to customers. I probably want to know if you reprice your loan book during the period and also by what percentage do you price your loan book. And the next question is on your foreign exchange income. I noticed that was again compared to the previous loss. And just looking at -- nobody is driving that gain. And then just looking at your cash flow from operation, I noticed you [indiscernible] cash flow from operation. So I would like to know what is driving that? And probably you could just walk us through in terms of the transaction of the -- or what is going on in the cash flow space? And on the back of that, I probably want to know the split between your CBN and non-CBN swap. And if you could [indiscernible] swap transaction with CBN. And the final part is on your effective tax rate. I noticed it was around 9.5% coming from 15.8% in previous period. And this is just different from what you've seen from your peers following the implementation of the new finance deal. So probably like nobody is driving that decline? And if you could also give us a guidance as to what your effective tax rate to be for 2022, [indiscernible]?

All right. We'll try [indiscernible] all the questions as we move on. All right. So the first one, which speak to our investment securities, what percentage is in special bills [indiscernible]. It's not so good that we have right now.

We can always [indiscernible] we have. It's not a significant part of our investment securities. I think our total investment [indiscernible] about NGN 2.2 trillion. Of that amount, I don't guess, but it's not a significant portion of book. We can always get those details and show again.

Okay. So did you ask about the repricing of our loan book, given the fact that most of our loan book is -- begin to investment grade names. We do not want to do as far as the pricing of those loans is concerned. The only thing you would have seen is the growing amount that you see from the retail book, but not a lot to alter the overall pricing of the book. Now you asked questions with respect to the FX income, the gain in this year compared to the loss in the corresponding period last year. Do you want to speak to it, [indiscernible]?

All right. So [indiscernible] to look at the gain on [indiscernible] essentially around what it is. I think total game, you have [indiscernible] seconds. I can speak to the numbers [indiscernible] net gain you have there is about NGN 101 billion. The way to look at this is this is coming essentially from the swap book that we have with [indiscernible]. I tie this to the other question you asked around what is our CBN, what portion of our swap is CBN related and what is it. The entire swap book is CBN related. In total, it's about NGN 2.2 billion as we speak today -- NGN [ 2.4 ] billion as we speak today. Again, as you see there is just an FX differential interest rates between the [indiscernible] has reached the deal closed and the spot rate at the point of which the transactions were booked. So a lot of these transactions are turn out for maximum period at top ones. If you want the exact details on each swap. I think we have for critical maturities; they are [indiscernible] in February, March, November and December. So we can share whatever details you want. But the exchange gain that you see there is a difference in the spot rates. On the day the transactions were booked on the [indiscernible] versus what the spot rate was on the [indiscernible] maturity. Now I think just to speak to a larger issue. As against at that interest -- that gain on a stand-alone basis, you have to look at it in comparison with -- yes, the gains or financial instruments at fair value. I think in that breakdown, we go to [indiscernible] I believe you will see that there is a loss of about NGN 130 billion in FX gains. Now when you take both together, the net is what you should be looking at is against looking at the gain on the standalone business.

I hope that has answers that question...

So with respect to the tax, what you see is that our tax rate came down to [indiscernible]. We had significant deferred tax liabilities coming from capital allowance on assets. We believe that as we go to 2022, obviously on the back of the new Finance Act, we still have a significant amount of [indiscernible] to reduce the impact of that finance actually being that we will see between 200 and 300 basis points of that increase in our effective tax rate for 2022.

So the next question is from Konstantin Rozantsev of JPMorgan.

The first one I wanted to ask. So you mentioned the number that Access Bank has about $2.2 billion in swaps with the Central Bank of Nigeria. Could you please share some indication of where this number is for the banking system in aggregate from what you think? And the second question, from the recent trades in this FX swaps with the CBN that have been priced with the local banks, what is the forward [indiscernible] rate that the Central Bank provides to the local banks?

[indiscernible] the question. It's really not clear from this end. I do apologize.

Konstantin, we didn't hear you quite well. All we had initially was something referring to NGN 2.2 billion of the swaps, which we need to understand what the question was about. And also, with respect to the [indiscernible], I think the forward rates that the Central Bank is providing. I think is that what you asked?

Yes. What's the forward rate, FX rate in naira, that's provided in this spot?

Right now, what we -- so on the -- I think there are 2 things to take into consideration here. So when we do the [indiscernible] rates for equivalent periods, I think it changes based on the transaction. I think the last several transactions have gone at about [ 550 -- or 450, ] I beg your pardon, [ 450 plus, 451, 452, ] I can't remember the exact details. That's what the spot rate to the Central Bank that was at [ 410 ].

Okay. That is with respect to the traditional forward rates, but speaking to the [indiscernible], which is a separate discussion altogether, is basically a positive framework, which is basically aimed at making sure that we all support exports and grew exports over the next 2 years -- over the next 3 years [indiscernible]. What the Central Bank is doing is that it is provided various incentives starting from the fact that we should let us single-digit interest rates, 9% to institutions that will be providing non-oil exports. And of course, they will be also providing some cash incentives to support those exports that are generated from now on the basis of getting them to push -- the incentives basically to get them to push increased capacity for expansion over the next 3 years. What [indiscernible] does? [indiscernible] from the pricing existing towards [indiscernible], the forward pricing, the index typically gotten from the FMDQ, which basically [indiscernible] at the time is more [indiscernible] over the next 90 days, 180 days or 1 year.

Does that answer your question, Konstantin?

Yes, that's good. I think on my side, I wasn't exactly able to hear the entire response. But could you please share once again the number, what's the estimate of the volume of the FX swaps with the Central Bank for the entire system. Do you have the number in mind?

You probably need to dial in again, Konstantin because we're not hearing your questions that are coming. We [indiscernible].

All right. That's okay. I can come later on through an e-mail. That's okay.

Can you still hear me clearly?

We can hear you clearly.

Then the next question is from Mariana Villalba of William Blair.

Can you hear me?

Yes, we can.

Yes, we can.

Okay. My first question is about the net interest margin guidance throughout 2021. We've seen the NII line decline quite significantly on a quarter-to-quarter basis since 2Q mainly on higher interest expenses. So I was curious to hear your comments on how do you expect to improve net interest margin in the coming fiscal year? Will it be to a reshuffle in the composition of your deposit base? Or will there be any other line items? I understand that the pricing of loans to your point, mentioned earlier about most of their corporate clients being like blue-chip companies, there's not much to do in terms of low yields? Or will that additional NIM increase come from your investment book? And my second question is about your capital ratios under Basel III when you issued the [indiscernible] back in October, you reported then your pro forma estimated capital ratios under Basel III. So -- but now the numbers we have are only Basel II. So I was curious if you have an update to that capital ratio under Basel III estimate. And my third question is about the interest income line. I think someone asked that earlier. When I look at the September numbers, the interest income from loans and advances to banks was about NGN 11.4 billion, and that more than doubled coming December. So there seems to be a big gain in interest income from loans and advances to banks in the fourth quarter. Could you please explain what drove that significant increase and it seems to have been a one-off, but I was curious to hear about it what exactly it was.

Thank you, Mariana. I'll attend to answer some of the questions, and I'll get my colleagues to -- Greg and Seyi to support me. But [ in general ], theme is simple. What you would find about fourth quarter numbers referred to a consolidation of some of the subsidiaries that we brought in. Some of those markets do not have the nature of interest rate regimes that we have and having the NIMs at about 4%, et cetera [indiscernible] that in some of those markets, et cetera. What we do as we move on, we will find ourselves again also in Nigeria, increasing the retail book because at the end of the day, what we've seen is that not much can be done to the wholesale side of the balance sheet, once we continue to -- in our efforts to bring down the overall cost of funds. So the expectation is that we should be able to get our net interest margin to about -- greater than 5% if you like, in the cost of 2022. In fact, definitely it will be greater than 5% because we are now optimizing our balance sheets in those countries where we follow the [indiscernible] in Zambia or it's in Botswana or Mozambique, et cetera. So you're going to start seeing improving net interest margins because we have trying to also [indiscernible] cost of funds reduced [indiscernible] improving the overall collection ratios or [indiscernible] things that we can see [indiscernible] need a bit more. But in the context of Nigeria, we will increase our retail book a bit more, more that we are getting more and more familiar with and hopefully, thus be able to improve the overall NIM. And let Greg speak to the transitional issues as far as Basel II and Basel III are concerned and the impact on our capital ratios and we will provide the necessary guidance. Then Seyi will speak to the impact of the net interest income, I guess, at the -- in the fourth quarter like you said. Greg?

Thank you, Herbert. So basically, as you are aware, it's going through [indiscernible] minutes. So both the Basel II and the Basel III. So [indiscernible] Basel II. That's supposed to run for about 6 months. But I'm going to give you an idea of the numbers that we have. So we have only around 3 sectors of [indiscernible] Central Bank on this. So what you'll find is that our overall capital adequacy ratio at the group level is 24.5%, that's well ahead of the 17% minimal CAR requirement for the domestic, systemic [indiscernible] bank like ourselves. And in terms of Tier 1 that's at 19%, again, that's well ahead of the [ 10.25% ] minimum requirement from the [indiscernible]. So it's quite a robust standard at a minute. So we don't know right now how the regulatory is [ going to play ] at the end of the 6-month period, hence, its next month, if there's going to be an extension of the duration for the trial run or if regulator -- based on the impact analysis from all of the industry [indiscernible] accordingly.

[indiscernible], do you want to speak to the issue of the net interest income [indiscernible]?

I think what you should take into consideration, Mariana, is there's a bit of a cash drag in the fourth quarter. Just given the Eurobonds that we raised in that quarter, [indiscernible] location was done. What you find is that it impacted on the overall net interest margin of the institution. And I think Herbert spoke to the point around our subsidiaries last year, we onboarded the likes of Kenya, Botswana as well as South Africa. This interest income environment and the needs for those markets are not as healthy as you find in Nigeria. I mean there are stable markets, currencies are typically stable. So I guess what you might lose out from a new perspective, you gain in terms of how resilient the currencies are. So that itself had an impact. I think the last thing is, I think we stated this at our half year investor call, the conversions, which we have done from foreign currency exposures to naira. This is just to ensure that we need to gain foreign exchange devaluation impact on our balance sheet going into a pre-election year, we know what typically happens with the currencies, [indiscernible] are not well managed. I think in total, from 2020 to date, we've converted about $1.4 billion. Several of those are loans to make it interesting and attractive for this [indiscernible]. But we are to compare to local currency. We needed to keep the local currency loans at the same level that we're lending to them in USD. So you see that the impact of that came through Q-on-Q through our tail end of 2021 -- tail end of 2020, I beg your pardon. And then when you see play out the impact layout in the rest of 2021. So I mean that put us in [indiscernible] some sort. So the interest rate on the loan side, we couldn't aggressively increase because we're lending to the very top end of the market. And there were not willing to take any price movement in volume in interest rates. And then, of course, the deposit liability, overall deposit liability base grew and then there's a bit of drag that Eurobond provided. So those 3 things combined to give the impact of the need. But I think as [indiscernible] suggested, as we go into next year, 5% and above is not asking for 2 months. And the way this will be achieved as the retail loans for one, we will grow that not just in Nigeria, but across the bank's entire [ 13 ] country presence. In markets where we don't have a trade [indiscernible] interest rate limits have been lifted by the regulator. So I think we'll see a bit more margin coming through from the Kenyan loan portfolio. Botswana just against lending on the retail side. We're also doing corporate lending and other things to be trade related where we can get significant and healthier margins as against the margins that exist. The other thing to state in markets like Botswana is that a lot of their deposits is wholesale deposits, and it's very pricey. If you look at the strategy we deployed in Botswana, it's hard to [indiscernible] to generate retail deposit liability, which is cheaper. And to help expand the margin in that market and the same thing we're doing in South Africa. These banks on the deposit side, traditionally [indiscernible] in nature. They go afford to do that because of the structure of the market. We will see retail margin expansion in Botswana and in South Africa because of the deposit liability game we are playing there. In Kenya, however, it is just the [indiscernible] that the regulators are placed on the interest rate that will drive that. And I think the last one, as I said, is just the retail expansion as you see. On the interest income on loans to banks that is essentially the Access Bank UK and the trade lines that we have to several banks across the African market. The bulk of it is between Nigeria, Ghana, Kenya and [indiscernible]. And there, there are serving in several other parts of the continent, but a good 70%, 80% are in this markets that I just mentioned, between Nigeria, Ghana, Kenya and [indiscernible] where Access UK access correspondent banks, several banks in those markets and provide lending to support their trade business. That group continues to grow as Access Bank UK grows. I think at the last counter book was near $750 million, a growth of almost $200 million between last year and -- between 2020 and the 2021 financial year.

Thank you very much. Thank you, Mariana. If you work for that clarification, we'll share with you, but it goes to the heart of our strategy and the need to diversify our income and earnings and, of course, reduce risk which was what led to the [indiscernible] get them able to come back into a local currency from our foreign currency loans. But so you will see in terms of our foreign currency book, that ratio keeps coming down because we are extremely careful with our -- what to manage our exchange rate risk.

The next question is from Ngozi Odom of CardinalStone Partners.

Can you hear me?

Yes...

Okay. Thank you. So I wanted to ask, we saw some significant [indiscernible] in your full year 2021 numbers. Given the volatile nature of this source of income, can you give an insight to the bank strategy on building a more stable source of earnings? And also, should we expect a slowdown or ramp-up in derivative plays in the near term? Second question, as we [indiscernible] close to the end of the 2018, 2022 corporate strategy, what do you think will likely be a key strategic focus in this final year? And what segments of your business operation would this strategy be focused on? And speaking to the FX outlook, I just wanted to find out how you're responding to the likelihood of the complete holds in CBN FX sales to banks this year? Also, do you see a reversal in card-spending limits this year. Also, I wanted to have an insight on your outlook for your operating expenses and what it means for your cost-to-income ratio going forward? And then did you take any [indiscernible] your loan book? And how do you access your returns on your loan portfolio going forward? And okay, I think the last question on your tax has already been asked. So I wanted to ask lastly, your transition to the whole cost structure, how do you expect to build up your operations? Are you seeking any acquisitions to build on operations and leverage already existing structures?

Thank you very much, Ngozi Odom. I guess if you follow that history for given 6, 7, 8 years, this question around derivative income and trading income [indiscernible] every year. And if you look at the financials, except where there has been an increase or a major shift as far as exchange rates are concerned, this figure continues to recover. And just to let you know, we continue to test [indiscernible] and will continue to get our money back from time to time. So from a risk standpoint, all right, we are pulling Basel III rules, we still are reasonably comfortable recurring Nigeria risk. So in terms of looking at it as extraordinary income, my simple answer to you is that it is not extraordinary income. We could have [indiscernible] to leading several oil companies, and we've chosen to play it a bit differently because we believe in the strength of the [indiscernible] and its capacity to build that. So I don't think you will see a change as far as our best concerned. But [ is there ] need to continue to grow income from other sources, the assets, absolutely, yes. You would have noticed increased income coming from our retail business, from our digitized business from our CAR operations, et cetera. Each and every line as far as retail is concerned is increasing, all right, and that appears to be the best way to go. Now we also diversified outside of Nigeria. And when Roosevelt was speaking to Kenya, speaking to Botswana, speaking to South Africa, well, [indiscernible] as we get it right, all right, the follow-up coming from the commission income and fees, which is highly regulated in our market, is not that regulated [indiscernible]. So in terms of the bottom line and the contribution to the overall group, what you'll see is that we are taking those steps that would have shown continuously that our sustainable income [indiscernible] irrespective of what happens in the country from a regulatory standpoint. So that's how I'm going to answer the question around the derivative gain. All you need to do is going year-in-year-out over the past 5 years, 6 years. And I guess the [indiscernible] period. There's nothing extraordinary has been lot here for us to question the integrity of the numbers. Now speaking to the last year of this 5-year corporate strategic plan that ends December 2022, I think a lot of the work would be around consolidation, making sure that the subsidiaries begin to sweat properly in terms of their ROEs, making sure that we treat and make sure that they are in the appropriate risk profile, which they are doing, making sure that we continue to strengthen them probably in terms of the talents that are running those subsidiaries. Now as you look across our financials country to country, deal by deal, you will see things that have to do with budget consideration, which reflects the fact that some of these deals have been done on an equity accretive manner, on a capital accretive manner, assuming that we understand what we're doing. What is important is what happens on that acquisition and how we get the franchises to run a lot more profitability. So that is what is happening. You will see a lot of [ consolation ]. And then, of course, you will see some form of cost cutting, making sure that we can break down the overall cost of operations, not just for Nigeria, but across the entire [ budgets ]. One of the things you'd have seen coming into the financials in terms of the growth in the operating expenses is coming from the subsidiaries. And world ideas, let us start to normalize that cost [indiscernible] will speak to the issue around the estimated group in operating cost. My sense is that, that would tend to minimum inflation. We've always tried to bring it down [indiscernible] I'll give you a few examples of what is happening. The high [indiscernible] costs, whatever, you believe it or not. Now we are shutting our branches at 5:00 p.m. or I'm trying to make sure that, that cost, specific cost item to not disrupt our overall operating cost. From a people standpoint, we don't think that's an issue because we've basically been able to ensure that we keep the overall staffing costs down to where it is supposed to be. [indiscernible] within our control, the regulatory costs, I mean, the [indiscernible] upfront premium. It is a function of our [indiscernible] the idea is [indiscernible] of our cost-to-income ratio is still well below 60% as we have indicated. I think for last year, what we [indiscernible] I think it will get better, but you're trying to [indiscernible] the question, perhaps you [indiscernible] in 2022. Now [indiscernible]. And I think that over the next 60 days, you will see a ramp-up in the activities. We have, over time, show that as an institution to do understand [indiscernible] from a value accretive standpoint, so need to be a combination [indiscernible] manifest very, very quickly. I think you will see it happening -- coming from the month of May and June when each of these operating entities [indiscernible] them up already. So all that will be settling down, making sure we get the right accounting practice or accounting structure to make sure that we have captured the income [indiscernible]. And hopefully, [indiscernible] profitable as we move into the less -- the rest of the year. I don't think that answers your questions. [indiscernible], do you have anything to add?

On the card-spending limits. I think just given where the FX liquidity is, I think every bank has had to -- are just no different from us. I think at some point, it was $3,000 was down to [indiscernible] keep watching where [indiscernible] up. And if the FX liquidity situation doesn't change and customers are not willing to carry the FX risk, which we fully understand. Then [indiscernible] that will have to be adjusted even further down given where the market is -- it would have been -- there's a significant [indiscernible] today because we know how much profitable our card business is, we have the largest card network within the system. And then many customers who swear by the bank's international credit cards and our black cards. Now that income stream sadly is something we're losing because we just have to bring down the overall spending debits on the cards. But I want to speak to that issue a bit more. It's just [indiscernible] the fact that we as a country, we find people who go just because they are spending limits -- spend money indiscriminately. Several years ago [indiscernible]. The current -- the rates on the cards where we have basically the same kind of operation in the market. But I guess what has happened now is that even taken the limits to [indiscernible]. So the banks are [indiscernible] since we cannot -- we have to be careful with the pricing of the [indiscernible] to basically bring down that limit just because you have several [indiscernible]. So that's the point, we know it's going to minimize the revenues from it, but there's no increase in your open position [indiscernible] position just because you just want people to be spending your cards and people who are using those cards. So that limit actually is going to trend downwards, maybe towards [indiscernible] not careful over the next 60 days if we continue to see rapid spending by people on those cards.

On the complete halt of FX from the Central Bank, I think the view we take the Central Bank seriously, and then we take the [indiscernible] the Central Bank literally as well. So the guidance that we've gotten is done by December, the Central Bank [indiscernible] foreign exchange into the market. I think the other comment to that is this might come through as a short factor, what is important. It's meant to force businesses to start looking more seriously at the export side of things. So the [indiscernible] is focused on this. The Central Bank is willing to support local businesses that has their capacity. And on the back of that seek for export markets within the African continent and beyond.

Actually, the Central Bank governor has indicated that the first steps towards ensuring that [indiscernible] December, will happen from June. The idea is to get banks to basically focus on pushing non-oil exports. And the argument is very clear, I mean there are several [indiscernible] sources of dollars. And we need to basically [indiscernible] for us, all right, to make sure those dollars come in. The Central Bank in several countries exist right an intervention. Perhaps what this is going to do to all of us is to ensure that we [indiscernible] increase the amount of dollar growth into the economy. And if I look at what has happened since people start hearing about [indiscernible]. We still see an increase in [indiscernible] more and more. And I think with this new initiative by the Central Bank, what is likely to happen is that people will now start generating more export [indiscernible] through all official means will be captured officially, all right? And one idea is to boost the corporate reserves and mention that has increased FX liquidity. [indiscernible] part a little bit at the very beginning. But I think that that's the best way to go. And it's also going to make people to start think about manufacturing locally, all right, about adding value for the even exports and ensuring [indiscernible] because it's a lot more self-sustaining, all right, in terms of -- in terms of things that we produce and used in the country. I think it's one of the most important initiatives at the Central Bank has come up with.

The next question is from Damilola Olupona of Chapel Hill Danhem.

Right. I have a few questions. I just want to ask. First off, I would like you to comment on your expectations for the interest rate environment going into 2022. And what that will imply for cost of funds? And if you can also provide your 2022 cost of funds guidance. Secondly, I realize that -- I mean, in your 2021 financials, you grew your loans aggressively, which is fantastic. I just want to understand if that trend would go into 2022. And you said you're also going to grow your retail loans. I just want to understand the kind of NPLs you are seeing in your retail loan book at the moment? And secondly, in terms of cost of risk, I mean, I would imagine that the reason why we saw the slight jump in cost of risk in 2021 was because of the aggressive loan book growth. If that trend is sustained going into 2022, I mean the -- your guidance for cost of risk for 2022, is it not a bit too conservative. Those are my questions for now.

Okay. Let me start to try to address some of your questions. Now you asked about the first [indiscernible] interest rates going into 2022. I don't think the interest rate environment will change fundamentally. And I'll give you a simple example. On some of the international facilities, the Central Bank has requested that we maintain it at the current -- at the existing exchange rate -- sorry, the existing interest rate of around 5%. And of course, things that have to do with the return to reach 2,000 to 200 already, the expectation is that would lend that, what does that mean? It means that frankly, the existing interest rates are not expected to change, at least as far as managing corporates and all of that is concerned. Now for some of us, we do have an opportunity to actually bring down our cost of funding. Our cost of deposits as it is today, all right, is well below 2%. But the foreign currency deposits and of course the AT1 that we issued have made it [indiscernible] about 3.8%, that's the overall cost of funding. So what we're doing, all right, is to actually continue to post the low cost funds back all right, to make sure that the overall cost of funding on the balance sheet, all right, is brought down even more. I think we can take it to about 3% or slightly below 3% is good, which means that the cost of the deposits will be a lot, a lot, a lot lower. Okay. Now -- so that is my expectation. And therefore, if we do that, I will push our retail too. And I'll speak to the questions you raised about retail loans that should bring our overall NIM of higher than 5%. Now you are sticking to the cost of risk, and you said that it was coming from the overall rate to the loan book. It's not exactly true. What you will see is that coming from the acquisitions that we need, okay? We basically found ourselves take an increase provision to countries like Mozambique, Botswana, et cetera, [indiscernible]. And what that did was to basically increase our cost of risk to the bank to our P&L, all right, which basically got to about 2%. All right? And of course, if you look at the retail loans specifically in Botswana [indiscernible], overall, cost of risk [indiscernible] is about 7.8%. So that is what you would find. Now Access U.K. had to take some increased provision coming from the structured trade exposure. And it's also as a result of the increase in the loan book. And that is why you see some of that [indiscernible] said in the NPL ratio. But apart from that, I think that you will find that with respect to Nigeria, that NPR ratio, at that cost of risk is not significant. So by increasing, our exposure on the retail side, more to things that have to do with pay [indiscernible] small assets [indiscernible] financing and things like that, we should start finding the overall interest of loans growing. It many not grow that significantly, but we'll find that the overall -- once you can improve that up to [ NGN 100 million ] the overall impact on the NIM with the [indiscernible]. So our expectation is that quite frankly. We will see cost of risk that's perhaps below 0.5%. Given the [indiscernible] to the countries in South Africa and what we done in Access U.K. all right, and the fact we have a pretty good quality asset book. And of course, the nature of the retail loads, which will be given will be those that are basically payroll type or that is basically through artificial intelligence [indiscernible] to be a good quality, so that is what we intend to see. Now [indiscernible] in 2022, I guess to go against the tide and to ensure sustainable growth, we will see the same type of growth we saw in 2021 yet again in 2022, and that is the truth. Okay. Push a bit more detail. We will consolidate from the wholesale business that we've always done. And even though that is good to be from a strict interest standpoint, the [indiscernible] appear to have shifted, but the share velocity and making sure that the balance sheet appears [indiscernible] working, we should be able to see an improvement [indiscernible] we say. So that would be my goal, my whole [indiscernible] mission to it. My expectation is that this figure in terms of the NIM should move from 5% to something like from 4.5% or 4.4% should move closer to 6% in 2022. And that 1% growth or 1.5% is a very significant given the overall size of our balance sheet.

The next question is from Gloria Fadipe of CSL Stockbrokers.

Can you hear me?

Yes.

My question is around your subsidiaries. So the first is to get your view as to which of those 3 subsidiaries you are more enthusiastic about? That's being which of them do you think or believe will contribute more or good profits when they all begin to run actively. And to also get a view of your of the payment of it. So we've been seeing the outrageous valuation, some of these fintechs attracting. In your view, do you think these valuations are [indiscernible]? And how do you see competition within that space? And then what do you think your competitive advantage will be as a subsidiary of bank? And then finally, on the consumer lending business, just get a feel as to how the volumes are and what kind of NPLs are you seeing currently on that -- in that space?

I think on the subsidiary, [indiscernible] was speaking a bit more about it. You will see that the bigger parts like the U.K. and Ghana will always contribute more [indiscernible]. But always look at this for things as a portfolio and the fact that we are trying to -- our strategy is basically to ensure that there's connectivity and support the regional trade, for instance, in South Africa, and that will help us to do [indiscernible] that will be better than [indiscernible] each of the countries on the standalone basis. But I'll let [indiscernible] speak to that before we go to the other topic.

Right. Thank you. From a subsidiary contribution perspective, if you look at the P&L and balance to the subsidiaries, including [indiscernible] account for about 38% of PBT, roundabout 15% of assets and about 10% of deposit. How are we looking at this over in the next couple of years? And we expect that over the 5-year plan that we have, we are putting together, this should get to and roundabout -- PBT will still be around that, but the total asset will go to 35%. Just to pick up on the point I spoke about, first the [indiscernible] location without ensuring that you have regional integration by presence, it doesn't give you the benefit and [indiscernible] derive from expansion. And that's what you see if you look at South Africa, we are in four countries, including in South Africa, in Zambia, Mozambique, Botswana, and if you look [indiscernible] economy, we see around [indiscernible] going across those countries. And if you're there and you're serving clients, you tend to get a benefit of just spending 1 country and you will see the impact. So we are very deliberate on all [indiscernible] essentially, if you're looking at the key African centers, Kenya, Ghana to strengthen [indiscernible] from contribution standpoint, that would be the base of that contribution.

Okay. [indiscernible] spoke about how we see the demand space, the valuation in that space, what's our competitive edge and how do we think we will get the valuations of the existing players. Now we'll [indiscernible] to invest in the payment, but which we've already started. And our idea is that it's not just a valuation [indiscernible]. It's about adding value to our customers and then the valuation is secondary. Now we're not a [indiscernible] for, what we have said is we've created a top-up payment platform [indiscernible] of payments, whether it's online, it's your cards business, et cetera, et cetera, [indiscernible] across the entire [indiscernible] okay? So that's what we're going to be doing, and this is separate [indiscernible] has been doing it. Now the beauty of where we are today is the fact that we are present across these countries. And we do have the mergers, and we have the customers for the [indiscernible] customers across the entire project. So you cannot necessarily compare us to the existing players because they have the benefit of the bank, even as a separate company. And therefore, we're able to show that payments happen seamlessly, all right. Now we can onboard the existing merchants. For now, we're doing that amount of strategy [indiscernible] share that level of detail, particularly [indiscernible] like this. So in terms of how we will compete, I think quite frankly we have the technology, we have resources, we have people, all right? And we're setting up that platform, all right, that we basically compete [indiscernible] all of them and even better because of the existing customer business merchants that we have. It is all going to be subdued by the EBIT infrastructure of the period or the ending processes of the period. That's why it needs to be kept separate. Well, having strong [indiscernible] it will not be doing, it will [indiscernible] differently and separately. So that [indiscernible] also saving the larger market or [indiscernible] we get improved benefit. My view is that -- if I look [indiscernible], all right, this is not the first time we have institutions that are coming to [indiscernible] or fintechs existing. We had them in 1999 [indiscernible] by the way, some [indiscernible], all right? The benefits of where we are is that we have enough [indiscernible] because of our share presence and all of that to make it extremely, extremely profitable for anybody who chooses to invest to see the difference that come out of it [indiscernible] simply on the number of transactions that we are carried out. [indiscernible] model. The nature of the [indiscernible] split and don't know what valuation that we're going to have [indiscernible]. The idea now is have the proper company, make sure that it is profitable in real terms, okay? And it's covering and passing customers and preventing [indiscernible] across the entire continent. I would like Wigwe to speak to issues around consumer lending and the P&L, sorry, the NPL issues [indiscernible] this.

Okay. Thank you very much. What we saw last year was that NPL ratio in our books of about [ 5% ]. And the [indiscernible] this year is to assure that we'll have it below 5% at the end of the year. Now if you look [indiscernible] discuss the [indiscernible] portfolio. We saw a growth in the value. We saw reduction in number of transactions. That was due to 2 reasons mainly. First, as we said, we strengthened our [indiscernible] for lending. But secondly, we knew that coming out of COVID, in the midst of COVID, the size and number of employees [indiscernible] market have reduced [indiscernible] because of when we had [indiscernible] and have problems and [indiscernible]. So many of the employees could not really service this [indiscernible]. So what we saw was we reduced [indiscernible] the number of employees [indiscernible] or those that were well employed with good employers and were still able to manage and take room [indiscernible], and we improved the returns by do some [ riskless ] pricing. So you saw last year, the [indiscernible] reduction number count of loans. We have almost double in terms of net [indiscernible] of income made from that portfolio. This year, we are [indiscernible] a lot. Now post-COVID, most of [indiscernible] back to work. We see -- this seems to be a return to [indiscernible] to the payroll of most of the corporations, most of the [indiscernible]. And so we are hoping to have almost a doubling of the values of loan that we will give last year and the returns will be better. the NPLs will remain below 5%. That's what projected.

Thank you, victor. I hope that answers your question, Gloria. Anymore questions.

The next question is from Ope Ani of Coronation Asset Management.

Congrats on the results. A quick one on your asset quality. So on write-offs, right, you've written off -- I think over the last 3 years or from 2018 to 2020, write-offs were about NGN 88 billion a year on average. 2021 is about NGN 85 billion. On a standalone, this has to do with cleaning up the legacy loans from Diamond Bank. So the question is, are we done with these large write-offs? Or shall we expect this number to remain?

Okay. Thank you for that. Of course, you are right, we had to do some cleanups. So the write-off in sale about the [indiscernible] 2019, a solid trajectory and initial sharp rise to address those most [indiscernible] point of combination. And gradually, so it went up and then it came down again. There's a trend is emerging. And that trend is that more [indiscernible] less and less of the [indiscernible]. So we should see that trending down. But of course, don't forget we have a normal cost of business write-off process. Even before the last transaction, we're doing write-offs every year. So that's still expect to happen. So an organic [indiscernible] that will join [indiscernible] number of sales with the legacies to [indiscernible] facilities. So that's the kind of trajectory you will see. But of course, all of that is rapidly followed by recoveries. So you also see the pattern of recovery that literally as you're doing the write-off this because we'd like to add that [indiscernible] music. We bite the bullet up front so that we can find properly where it's required [indiscernible] classification, et cetera. We may be higher [indiscernible], and then we only take on those [indiscernible] amongst them. So that was [indiscernible] significant recoveries [indiscernible] in the year, in some years, that something [indiscernible] in this 2021 about NGN 48 billion coming out of those write-offs. So it's usually not a loss at the end of the day, before it was [indiscernible] and you should see those recoveries [indiscernible] time then and the write-offs I understand in the past. Does that answer your question?

Okay. Does that answer your question?

The next question is a follow-up from Tunde Ogunleye.

I think this first question -- the next question I have is related to your asset quality. I didn't quite get your guidance on your loan growth for 2022? And I'm particular about it because I want to know which factor...

[indiscernible] the growth for 2022. Is that what you said? The guidance for loan growth...

Yes. Yes, for 2022. And in which sector are you seeking to grow our loan book. And you -- and I mentioned intervention funds. So interventional loans, [indiscernible] what percentage of your loan book are currently intervention front. And also still on asset quality, probably you could shed more light on what is driving the NPL ratio in the transportation sector -- transportation and storage, oil and gas and [ ICT ] sector. Is this a sector-wide issue or is it related to a particular customer? Probably you could shed more light on that. I think the next question is on subsidiary . I would probably like to know -- subsidiary, I'd probably like to know the turnaround strategy for your Guinea and South African operations. It seems to be making loss. So at what point do you expect the subsidiary to start making profit? And also what is the strategy to bring down the high cost of income ratio in your Guinea, Mozambique, South African and Botswana operation. If you could also shed more light on that.

Okay. We'll attempt to answer that because you were [indiscernible] for the better part of it. Now if you want an expectation for loan growth in 2022. I think it's going to be closer to 10%, perhaps [indiscernible] given the share size of our balance sheet to grow by 10%, means you grew by north of [ NGN 0.5 trillion, ] if you like. That's all without the inflationary impact, devaluation into concentration, which is [indiscernible] in June. But I think we can achieve it most likely coming from other parts. I mean, Nigeria will do. But I think if we see growth in the U.K., South Africa with the stable currencies, you should be able to achieve that. Now the percentage of our [indiscernible] fund, lending is over 10% [indiscernible]. That's why we have -- you have to also understand that given our size and all of the expectations, natural expectations that come from the system in terms of support, whether it is with respect to supporting [indiscernible] infrastructure standpoint and all of that. So it's today [indiscernible] that's what we have. And I think that, that will reduce after [indiscernible], which will also reduce from the repayments that we're getting from them even [indiscernible] 3, 4, 5 years ago, et cetera. I think what you were asking with respect to our South African business is, where do we expect South Africa to grow past the corner. You have to understand that the entity we have in South Africa is a small entity. In those buckets, it will typically take about a couple of -- take a couple of years for you to breakeven. But I think that you may see a difference how we are going to breakeven in South Africa. I think 2023 should be an interesting year for us in South Africa [indiscernible] and then start to make money. We need to continue to support them because those markets are very sophisticated. And look at all the issues [indiscernible] even before you get retail deposits, not to talk about wholesale from government or pension funds, et cetera, et cetera. What we are using our world bank strategy and getting corporate [indiscernible] who are they suffer again to basically do business [indiscernible] irrespective of the [indiscernible] South Africa franchise. So you will see it's coming to [indiscernible] in 2023. And then, all right, hopefully, we will start seeing [indiscernible] coming to Nigeria. Now Botswana is an interesting market, a stable currency market. I think it's been profitable. And you will see a lot contributions coming from [indiscernible]. We are [indiscernible] clean up. I will [indiscernible] acquisition was done and that's why you saw [indiscernible] from Botswana. Our expectation is that these 2 countries will increase their contributions towards [indiscernible] Kenya, which is one of the very interesting market. It's the market where that had interest rate [indiscernible] taken out. We will scale up in Kenya whether through organically or inorganically. And the [indiscernible] estimation were not to do because it represents [indiscernible] trade, which is important [indiscernible] in the context of the continent. So I think all these countries, South Africa, Botswana, Kenya and Ghana, in the context of Africa will be the most in terms of the size of [indiscernible], what they will be providing in terms of profitability. So that's what I would you like to see, all right? And then of course, complemented by [indiscernible] contributions, perhaps more north of 35% in terms of contribution, both of the profitability and overall balance sheet size. We didn't [indiscernible] the other questions you were asking. If you want to call back to let us hear, we will be willing...

Yes. So the question is -- sorry, I just wanted to confirm the loan growth guidance. Is this specific guidance you mentioned?

[indiscernible] 7.5% to 10%.

Okay. The next question was just what's driving the high NPL ratio in the transport sector and the oil and gas sector. I know the [indiscernible] downstream. I don't know if this is an industry-wide issue or is related to a particular customer?

What [indiscernible] gas sector?

The high NPL, the NPL we saw, so the NPL in this sector has moved from -- it used to be 0.7%, that moved to 7.3%. And also in terms of transport [indiscernible] it moved from 0.5% to 9.8%. So I just wanted to know what is driving that -- what's driving that increase? Is it related to a particular customer? Or it's just a sector-wide issue?

Okay. Greg will speak to that. Thank you.

Thank you. So what you find on that table, so that's the contribution of each set of NPL. So that's not the NPL ratio. So that's simply [indiscernible] so general commerce is #1, a 17% share of the NPL group. And the next one is 13.4% manufacturing, et cetera, all the way down to oil and gas upstream. So while you see this variation between 2020 and 2021, there was significant write-off of oil and gas services NIM in 2021. So that loan that was removed, meant [indiscernible] distribution, contribution among the remaining sectors. But basically, in terms of the NPL ratios, you look more to the right, if you still have the chart in front of you. So that's where you have a better sense of ratios. So the highest there, you find this in agri from 11% to 14%, that's a very small part of the loan book for now, about 1-point-something percent, still quite small. So overall, it hasn't started making a big impact. The others that has gone down sharply. So you see manufacturing coming down sharply from 26% down to 13%. You will see transportation [indiscernible] due to state to the combination. We see a few new entities that have come on trend. And therefore, that first point of impact, just like I said earlier on, which is one of those sectors moving up a little bit, but those are not long-term positions. So this chart on the left shows the contribution and the chart on the right shows the ratios within this sector NPL ratio. So the oil and gas, for example, is down to about 0.6% upstream, 1% NPL ratio services. So that was oil and gas services. It was 11% last year. So significant improvement in the key sectors that make a big contribution to the loan book and that is a big benefit of diversification and all the actions we taken over the past year. In some cases, the improvement is coming from new loans booked in those sectors. So that increases the base, obviously, looks better, and a few other write-offs for that improvement. If you see general commerce has come down from 7.7 to 5.9, so that's an improvement, noted by write-offs and a few new loans [indiscernible]. So that gives you our own [indiscernible] 4%, and that's an improvement from the 4.3% that we had last year. And at the bank level is well below that at 2%. So there's actually been a reduction as far as [indiscernible] is concerned. So the impact of sales is coming more from the subsidiaries. I haven't mentioned there on about the U.K. as well. So the [indiscernible] impacts are also [indiscernible] from the U.K., a bit from Botswana as it relates to the sector, some of the retail loans we see. So that's a [indiscernible]. So more retail [indiscernible] stabilize, integrate that fully and they begin to grow [indiscernible] as very clearly explained. We see the base of the [indiscernible] and therefore, those ratios are going to trend down.

Okay. Next question?

Next question is a follow up from [indiscernible].

So I just wanted to ask during -- Okay. So I just wanted to find out, we saw that in some of your peers actually alluded to the fact that we were able to take some loan repricing opportunities over the course of last year. So I just wanted to know was that similar to your case? Were you able to take in loan repricing opportunities during the year?

Okay. It was a bit tricky for us because I think it was Roosevelt who explained some of the drag that we had. We decided to concentrate on repricing or rather on [indiscernible] loan book to investment-grade mix. We've also made sure that some of these clients who had dollar exposures had converted into local currency because we do not want to see any [indiscernible] the ratio of that book, and we have to basically give the concessionary interest rate. It is better to be safe, all right, than in the future [indiscernible]. So for those 2 reasons, we could not check price and those [indiscernible] fully impact many repricing, could not have the same. We did some repricing, but that [indiscernible] trickier for us to do, to get the benefits of that repricing. The only place where we're going to see some benefits now will be for us to increase the size of the retail lending, all right, [indiscernible], all right? And hopefully, that [indiscernible] improved profitability as far as our net interest margin. So that [indiscernible] submission of what happened last year.

We have no further questions in the question -- on the conference call at the moment. Do you have any questions on the webcast you would like to address?

These are questions coming on the -- can you explain what's driving the decrease of CET1 capital ratio of 14.7%. Greg, do you want to speak to that? What's our targeted CET for going forward?

Thank you, Herbert. So the Basel III kicked in for November of 2021. So our first return to Central Bank on this was in the first week of December. So what you have as at the end of the year is at the group level, 14.7% CET1 and the regulatory minimum is 12.5%. So it's a clear [indiscernible]. Now our internal guidance on that is at 12.75% minimum.

However, [indiscernible], as we move into the future, [indiscernible] is the fact that given our potential policy which out strips, first of all, the investments which we carry out on subsidiaries, which is [indiscernible] more. Greg [indiscernible] in terms of CET1, but I think that's quite [indiscernible] perhaps [ 25 ] basis points every year on industrial as we go into the future. There's a question from [indiscernible] Securities. Are you -- can you explain the modification [indiscernible]? So you want to go to that?

Yes, yes. Thank you, Herbert. So what you see here is that any time you change a interest rate or tenure on any particular, you would have to do a key deal of [indiscernible] and compare it to the [indiscernible] of initial loan. So that's differential, that gives you this modification [indiscernible] loss or gain [indiscernible]. I just mentioned 2 ways tenure and the pricing on [indiscernible].

Okay. The set full [indiscernible] been observed. [indiscernible]. Question from Toyosi of Renaissance Capital. We see that you can -- we made significant investments in [indiscernible] compared to other regions, results in Access [indiscernible] retail strategy, [indiscernible] corresponding banking strategy. Can you explain on your strategy in Botswana? And what [indiscernible]? Toyosi, Botswana is a very similar country. It has the best risk rating today in the continent, bank [indiscernible] is one of the larger banks in the context of Botswana. If you look at our regional play as the cross-border trades that happened between South Africa and Botswana, it is extremely, extremely significant. The Southern African region is the largest from an economic standpoint in the continent, all right? And so the strategy of our [indiscernible] whether it's South Africa, Mozambique, South Africa, Zambia is to make sure that, that region would basically get both trades that get close to [indiscernible] billion of an annual basis, [indiscernible] basically capture all right and [indiscernible]. So Botswana [indiscernible] linked to South Africa and the idea is for to support, one the regional [indiscernible] that happened there; 2, to support the [indiscernible] a couple. It's for [indiscernible] wait. They have to call before that. They need [indiscernible] between [indiscernible] and brand, et cetera, et cetera. And so it's important for us to [indiscernible]. The fees are not as regulated as you find in this market. the ROEs of the leading bank out there is [indiscernible] given in real terms. In other words, we made back a very [indiscernible]. Our insurance brokerage, how much initial capital will be injected? Not significant at all because that business does not require a lot of capital. And I think that the share size of the business that we do in the context of Access banking loan is good to make sure that it is reasonably profitable for the bank. It's not too much. It is not the money for the capital that we involved because there's no capitalized [indiscernible] to sell our institutions that will be captured in without any [indiscernible]. Now the recent approvals of [ PSB ] licenses for a number of telcos, some of which you have established relationships [indiscernible] competition and how are you responding here? And my answer to you is simple. The [ PSB ] helps the GSM player as a financial inclusion tool and all of that. I think, yes, what would happen is that there will be a lot more of [indiscernible]. But of course, this [ PSBs ] also require banks, where money is going to be kept. So we'll continue to cooperate to compete [indiscernible] a market where you find that [indiscernible] licenses. This is meant [indiscernible]. If you [indiscernible], we are coming up with more nimble, better cost that will enable us compete in this ever-changing environment. The fourth point to compare for [indiscernible]. Okay, for fintech payments are switching, when do you go live on this? I think this is a live soon when the final stage of getting of the switcher lasers. We've gone through the approvals and principle. So I think we are right on track as far as that is concerned. My expectation is that you will see line by the end of June, sorry, end of June. Questions from [indiscernible] Robinson [indiscernible]. Maybe you speak -- talk about the [indiscernible] loan book? Also, what is your current liquidity FX, in particular? So Greg, I want you to speak to that.

Okay. So on the Stage 2 loans, I have seen a very steady and remote improvements. Currently, we're about 9.2%, Stage 2 loans, that's a share of the total loan book. It's coming down from about 12.6% here [indiscernible] and higher in 2019 at a point of combination. So good steady improvement coming from all the actions that we took with respect to those names. The [indiscernible] were converted to Naira is the payments and a few migrations out of Stage 2 into Stage 1 based on [indiscernible] in line with principles. So a very good remarkable improvement in that book. I want to keep it that way. You find that this compares very well amongst our peers in the market.

Then another question from Toyosi. How are you positioning your [indiscernible] business for the incoming competition from [indiscernible]?

So I'll speak to that, and I'll take the last question, CapEx liquidity [indiscernible]. So on the liquidity side, we've seen our liquidity ratio [indiscernible]. Foreign exchange liquidity is actually a lot more robust. We -- there's one thing we see in the bank is to have it [indiscernible] prices in USD, which is not a functional [indiscernible]. So it's not for [ 50 ] at any point. Loan-to-deposit ratio in our dollar book is a maximum of 50, and we've always operated well below that. The excess of the overflow is invested in [indiscernible] as well as part of what you see in the [indiscernible] with the Central Bank. So that is a testament on with the [indiscernible]. We try to call that the majority of the [indiscernible] so that the both of them mature in first half of the year, at least near 14% of matures at first half of the year. And the second one, [indiscernible] about 15% to 16% matures in the second half of the year. And we've kept all our maturities of the 4 to 12 months against what we used to do in the past of north of 18 to 24 months. So that's going to sell [indiscernible]. So [indiscernible] I think we're [indiscernible]. I don't think we can [indiscernible] addressing. We [indiscernible] chase ourselves in the market. I think what we have to do is get the market and compete effectively. There are significant banks in that market today, who are -- from whom we have gained in market share. If you look at our [ DRC ] business is growing every year for the last 5 years, organically. There are opportunities in the market as well to look for [indiscernible] inorganically. When we find those plays that the mix, we grow scale for size. But I think, as against, the larger banks or the larger banks in the market, the top 3 banks, who [indiscernible] market share to more aggressive and they move the banks like ourselves. I'm not sure we have a lot to be afraid of. They should be worried about us and [indiscernible] and using leveraging in that scale to continue to grow market share within the context of the DRC market. So I think [indiscernible] Kenyan bank. It just makes the competition a lot more interesting. And it gets also focus on creating value within the Kenyan market, which the [indiscernible] market, which will be better for the customers that we are selling in that market.

Thank you very much. Again, question from Wale. Thank you for your congratulations. Where do we see Access Bank over the next 20 years from an equity or the equity shareholder returns perspective? Well, we are about to share with the market soon 5-year corporate strategic plan and perhaps a 10-year corporate strategic plan. We do have [indiscernible] years and then updated as we were. But there's nothing we've said in the past 20 years that were not achieved. There is no reason why we will not be the largest bank in the continent, provided and showing that there's a greater interregional trade over the next 10 years. It will definitely happen like that. Now from an equity shareholder returns perspective, one of the things we've done over time is to try [indiscernible] better actually is to start communicating a bit more and better with the analyst for them to have a clearer picture of where our enterprise is headed. From a risk standpoint, we think that there will be [indiscernible], what we're looking for and the nature of returns we have, we think that in real terms, we'll be [indiscernible] financial services in the continent. But I think this is the subject of a larger presentation, which we will share with the market, very shortly. But I think [indiscernible] will be communicated sometime within the next 30 days. Thank you very much, Wale. Any more questions? I hear there's one more question.

We have no further questions on the conference call, sir.

All right, so we declared EPS for naira, our dividend per share remains under NGN 1. Really [indiscernible] always says they are investing for the future. If your share price does not rise strongly, shareholders are not getting a good deal. How do you able to deal with the issue? And how [indiscernible] the future? What proportion of [indiscernible] composition is tied to share price? Okay, let me answer this to you. We don't have any compensation despite the share price movement. And I just talked to this point a few minutes ago, where we need to comment on its clarity to the market. In some of our larger institutions that existed before we came [indiscernible] things we're doing, perhaps not subject to the big risk of exchange rates that [indiscernible] now weaken such franchises in the context of their global competitiveness. So we are building an institution that is not just a [indiscernible] institution, that will become a global institution. And what part of the things we're doing is that we are also investing in the most [indiscernible] with Nigeria, [indiscernible] Africa, et cetera, et cetera. So it's an intensive struggle to the dividend per share and the amount that is being reinvested. Now our expectation is that now that we've finished and digested all of Diamond bank, and we are seeing increasing contributions coming from different subsidiaries [indiscernible] start paying a bit more dividend to the [indiscernible] become available. We will have to communicate with the market a bit more, all right, for people to have a clear picture of where we're headed and what we're doing. And I expect, like I said, that will happen -- and start happening from the next [indiscernible]. But in terms of our strategy, it's [indiscernible]. And I think that it is one that we believe in, we need to keep reinvesting in the future. If [indiscernible] country, one day, you will wake up [indiscernible] be running, only to remain at the same spot. Our U.K business remains in [indiscernible] profitable. Our business in Botswana, which is [indiscernible] will grow. Our South African business will grow. It's also the most stable currency. And I think that as U.K. expands, one day perhaps you [indiscernible] of our revenues coming from [indiscernible] from stronger currency countries [indiscernible] ensure that our business is sustainable in the very, very long term. So I think that was a clarity to us. We can't have a compensation strategy [indiscernible] share price comment [indiscernible] that will be actually dysfunctional, almost illegal [indiscernible] if you get [indiscernible]. So we don't have [indiscernible] fundamentals, how we continue to grow our profitability [indiscernible] and hopefully as the market other side what we're doing, it will be reflected in the share price.

Just to add that it's not NGN 1, it's not under NGN 1 anymore. So we give in the second year and the final dividend [indiscernible] takes the dividend payout to NGN 1.

And half year by the time actually [indiscernible] better and keeps getting better. But we are being careful with ensuring that we have a different policy that we are sustainable in the very long term.

I think I talked about [indiscernible]. The reason why that is important as well is we have a divesture on that base for shareholders who are not looking for dividend return. The long-term investors that are buying investors. So they are willing to wait for the share price to reflate and reflect the fundamentals of the institution, particularly since the institution is still in the growth phase. Just follow the [indiscernible] capital, we should generate return on capital and use that to investors against take it out as dividend. And then going back into the same market to try risk capital [indiscernible] down growth and expansion. So that's strategy we keep maintaining and we understand that they are set of shareholders who are income shareholders and are waiting to see the dividend payout on an annual basis or in a semiannual business, and that's something we have to keep managing. Growth is important as Herbert has said, particularly growth in safer markets with stabler currencies than what we experienced in [indiscernible].

Any more questions? Okay. We want to thank you also very much for joining us on this call. And we look forward to the next period when we shall share half year results with you. Thank you very much, and have a good day.

Thank you very much, sir. Ladies and gentlemen, that then concludes this event, and you may now disconnect.