Access Bank 2019: Impressive Post-Merger Performance

September 9, 2019/InvestmentOne Report

·         Net interest income of N21.1billion, up 33.9% q/q; down 3.0% y/y     

·         Non-interest income of N2.2billion, down 74.3% q/q, up 6.3% y/y

·         Profit before tax of N8.4billion, up 25.5% q/q; up 15.7% y/y

·         Profit after tax of N7.7billion, up 30.4% q/q; up 18.2 y/y 

Access bank released its Q2/H1 2019 financial results on Friday – its first post-merger combined group audited results. Not surprisingly, quarter on quarter (q/q) performance was not as exciting as the year-on-year (y/y) performance.

On a sequential basis, PBT and PAT were down 35.7% and 46.8% respectively, owing largely to the 99.2% q/q decline in non-interest income to N364million and the 19.3% q/q increase in total expenses to N68.1billion. These were enough to offset the 73.0% q/q rise in net interest income and the 55.4% q/q decline in credit loss charges to N1.5billion. We note that this trend is unlike what we have seen among its peers, with GTB, FBNH, Zenith and UBA all posting a general rise in non-interest income and a decline in net interest income. However, we believe the shift to a net loss position on investment securities of N15.6billion, from a gain of N19.8billion in Q1 2019, coupled with a FX trading loss of N25.1billion in Q1 2019, contributed to the q/q decline in non-interest income. Consequently, profit before provisioning fell 4.8% to N98.7billion.

Topline story was broadly the same on a y/y basis despite the income statement consolidation in Q2 2019. Net interest income was up 81.9% y/y, while non-interest income was down 28.7% y/y to N47.1billion. However, PBT and PAT were up 61.7% and 59.1% y/y to N74.1billion and N63.0billion respectively. This was supported by the 33.5% y/y decline in credit loss charges and the rise in net interest income mentioned above, which were enough to offset the 25.5% y/y rise in total expenses.

Furthermore, net interest margin improved to 7.4% in H1 2019 from 5.4% in H1 2018, while cost of funds decreased 100bps y/y to 4.8%.

In terms of asset quality, absolute NPLs reduced drastically by N88.1billion q/q to N196.2billion, improving the bank’s NPLs ratio to 6.8% in Q2 2019, from 10.2% in Q1 2019. Net loans were up 33% YtD, albeit flat q/q. However, the bank’s cost of risk was up 20bps q/q to 0.7%.

Impressively, the bank was able to keep costs under wrap, with cost-to-income ratio down 120bps YtD to 61.0% (although up 810bps q/q – reflecting the income statement consolidation). Return on equity also strengthened to 23.5% in H1 2019 from 16.3% in H1 2018.

Finally, the bank declared an interim dividend of N0.25k, implying a dividend yield of 3.9%, based on Friday’s closing price.

ACCESS BANK PLC Q2/H1 2019 (YE: DEC) (N millions)

 
 

Q2 2019

Q/Q

H1 2019

Y/Y

Interest Income

162,120

46.3%

272,897

46.2%

Interest Expense

-63,812

18.3%

-117,750

16.1%

Net Interest Income

98,308

73.0%

155,146

81.9%

Non-interest income

364

-99.2%

47,150

-28.7%

Profit before provisions

98,672

-4.8%

202,296

33.6%

Loan Impairment charges

-1,505

-55.4%

-4,880

-33.5%

Total Opex

-68,152

23.6%

-123,301

25.5%

PBT

29,015

-35.7%

74,116

61.7%

Tax

-7,138

80.5%

-11,091

78.4%

Tax rate

24.6%

1583bps

15.0%

140bps

PAT

21,877

-46.8%

63,025

59.1%

Source: Company financials, Investment One Financial Services Research 

H1 2019 BANKS COMPARISON SHEET

NGN billion (unless stated otherwise)

FBNH

GTB

ZENITH

STANBIC

FIDELITY

UBA

ACCESS

Key Income Statement Figures

Gross Earnings

294.2

221.9

331.6

117.4

103.7

214.4

324.4

Net Interest Income

146.7

222.4

142.5

39.3

36.9

110.1

155.1

Non-interest Income

59.9

71.4

109.7

54.9

15.6

72.5

47.2

Total Expenses

-144.6

-69.8

-126.8

-50.1

-38.2

-109.6

-123.3

Loan Impairment Charges

-22.1

-2.2

-13.7

0.6

           5.5

-3.1

-4.9

Profit Before Tax

39.9

115.8

111.7

44.7

15.1

70.3

74.1

Y/Y PBT Growth

2.6%

5.6%

4.0%

-12.0%

15.7%

20.9%

61.7%

Dividend (Kobo per share)

nil

30

30

100

nil

25

25

EPS (kobo per share)

84

350

283

342

47

162

193

Key Balance Sheet Figures

Total Assets

5,670

3,598

5,899

1,619

1,568

5,102

6,489

Total Liabilities

5,109

2,995

5,079

1,346

1,383

4,560

5,905

Total Equity

561

603

820

264

184

543

584

Key Ratios

Net Interest Margin

7.7%

9.6%

8.6%

4.9%

5.8%

6.7%

7.6%

Cost of Fund

3.2%

2.3%

3.0%

5.2%

6.6%

4.4%

4.8%

Cost to Income

70.5%

37.6%

53.2%

53.2%

72.8%

60.0%

61.0%

NPL ratio

14.5%

6.7%

5.3%

3.9%

5.4%

5.6%

6.8%

Liquidity (bank level)

40.3%

47.3%

74.6%

n/a

34.8%

63.0%

49.7%

Cost of Risk

2.2%

0.2%

1.4%

0.2%

-0.2%

0.3%

0.7%

Capital adequacy ratio (bank level)

15.6%

23.5%

25.0%

27.3%

17.0%

20.0%

20.8%

ROE

11.6%

33.7%

21.7%

28.5%

13.5%

21.7%

23.5%

ROA

1.1%

5.8%

3.0%

4.5%

0.6%

2.3%

2.2%

Source: Company financials, Investment One Financial Services Research

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