Access poised for growth despite half-year dip in profit, says analyst Loop Jamaica

Black Immigrant Daily News

Despite recording a double-digit dip in net profits for the six months ending September 2022, publicly listed microfinance company Access Financial Services (AFS) seems poised for growth, according to development economist and financial analyst Dr Chris Stokes. Access disclosed a less than favourable half-year drop of 26 per cent in net profit after tax. However, Stokes says the company appears to be making the right moves.

“The indication that some substantial investment in IT infrastructure will be made and that the strategy of geographic and business segment diversification will be deepened suggests a repositioning of the firm for continued growth,” said Stokes. “As we move into what I expect to be a sustained period of interest rates higher than what they have been in recent years, AFS’ first line of defence is its governance structure and risk management practices. In other words, the systems and leadership to navigate what may come. The other tangible factors such as profitability, capitalization and liquidity give the company elbow room to arm itself for present and future challenges.”

Access’ unaudited financial statement published on November 1 this year reported a seven per cent increase in operating revenue over the same six-month period in 2021, in line with what the company said was a growing loan portfolio. However, the report said operating costs had increased by 14 per cent, due to increases in staff costs, non-recurring debt financing expenses and loans written off.

“Debt financing will become more expensive and continued write-offs in the consumer loan business may be expected to accelerate consistent with what we have seen in other financial institutions. We learned from Scotiabank in the 1990’s financial crisis that loan policy matters, and that when one must choose between balance sheet growth and containing loan risk, the latter will prove better sooner or later. We will have to see how disciplined AFS is in this regard,” Stokes opined, adding that the new licensing requirement for microlenders could work in favour of Access, which became the first in the micro sector to get central bank approval in July this year.

Pointing to the triple B rating the company received from regional credit ratings agency Caribbean Information and Credit Rating Services (CariCRIS), Stokes said the rating was considered adequate and indicates that Access Financial has moderate credit risk.

In a release on November 3, CariCRIS said the outlook for Access was stable, noting its assessment was “based on our expectation that over the next 12 to 15 months, AFS will continue to record good financial performance and maintain all its key credit drivers including good asset quality as well as adequate capitalization and liquidity metrics.”

With total assets of $6.31 billion as at September 30, 2022, representing an 11 per cent increase over the same period in 2021, Access Financial Services remains among the leading lenders in the microfinance sector. During the quarter, the company raised $2.05 billion in corporate bonds to replace existing debt and provide financing for loan disbursements and IT capital expenditures.

NewsAmericasNow.com