Access Bank Plc: Impressive PAT growth in Q3-18

October 23, 2018/Cordros Report

ACCESS released its 9M-18 account late yesterday, showing 37% y/y and 33% q/q growth in EPS to NGN0.80 in Q3-18. In the 9-months period, PAT was up 12% y/y, at NGN62.91 billion.

  • Mixed performance across income lines: Gross earnings grew 3%, supported by a surge in trading income (+141%) as well as growth in interest income (+5% y/y). The uptick in interest income – the lowest of the three quarters so far this year — was driven by improved earnings on loans (+5.7%), amidst growth in total loans by 4.33%, vs. H1-2017 (YtD: +1.05%). Overall, annualized asset yield, by our estimates, inched lower by 96 bps q/q and -29 bps y/y to 12.01%.
  • Still elevated cost of funds: Interest expense in the quarter was largely driven by the higher interest paid on deposits from financial institutions – which was 2.34x bigger than in similar period last year. As a result, cost of funds printed at 6% (+41 bps y/y, +51 bps q/q) in the quarter. Together with the slower pace of growth in interest income, net interest income declined by 2% y/y in the quarter, for the first time this year, and NIM contracted by 70 bps y/y and 57 bps q/q to 5.38%. 
  • Flat NIR growth: Non-interest income (+0.35% y/y), on the other hand, was flattish in the quarter, following declines in net fees & commission income (-4% y/y) and forex income (-93% y/y). Over the 9-months period, gross fee and commission income increased by 12% y/y, with growth in credit related fees and commissions (+26% y/y) making the most contribution.
  • On asset quality, similar to the previous two quarters, impairment charges (-59% y/y) continued to decline, translating to a lower cost of risk (-68 bps to 0.54%) in the period, as against 0.7% in H1, and 1.7% in FY-17.
  • Lower Opex and tax charge boost bottom line: While pre-tax profit remained healthy at NGN24.43 billion (+17% y/y) in the quarter – supported by the 6% y/y drop in opex – a much lower tax charge (-71% y/y) gave further support to the 37% PAT growth posted. Similar to Q2, the effective tax rate in the quarter remained at a meagre 4.67% (Q2: 4.86%) in the quarter.

Comment: ACCESS’ Q3-18 result is impressive. Annualized, the NGN83.88 billion net profit reported as at 9M-18 is above Bloomberg consensus’ estimate for the full year by 7.8%, but lags our forecast by 2.25%. We expect a positive reaction from investors in today’s trading session. Our estimates are under review.

Income statement (N’bn) 9M-18 9M-17 y/y Q3-18 Q2-18 Q3-17 q/q y/y
Gross earnings         374.89          364.69 3%   122.09   252.81   118.36 -52% 3%
Interest income         274.50          245.87 12%     87.81     91.09     83.97 -4% 5%
Interest expense       (151.55)        (124.40) 22%   (50.16)   (50.45)   (45.54) -1% 10%
Net interest income         122.95          121.47 1%     37.65     40.64     38.43 -7% -2%
Net fee and commision income           43.19            38.43 12%     13.12     14.35     13.61 -9% -4%
Net trading income           75.10          (41.22) -282%     15.54     31.90   (37.58) -51% -141%
Other income           11.68              5.15 127%       1.42       5.04       0.93 -72% 52%
Foreign exchange income         (29.58)          116.46 -125%       4.20   (26.96)     57.43 -116% -93%
Non-interest income         100.39          118.81 -16%     34.27     24.32     34.40 41% 0%
Total operating income         223.34          240.29 -7%     71.93     64.97     72.83 11% -1%
Loan impairment charges           (8.35)          (12.82) -35%     (1.01)     (2.38)     (2.46) -57% -59%
Total operating expenses       (144.72)        (154.55) -6%   (46.49)   (44.18)   (49.50) 5% -6%
Profit before income tax           70.27            72.91 -4%     24.43     18.40     20.86 33% 17%
Income tax expense           (7.36)          (16.51) -55%     (1.14)     (0.89)     (3.93) 27% -71%
Profit after tax           62.91            56.40 12%     23.29     17.51     16.94 33% 37%

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