November 24, 2021/Proshare
by FBNQuest Research
5% average cut to our FY ’21-22f EPS forecasts
Access Bank’s Q3 2021 PBT of NGN38bn was in line with our forecast. However, Q3 EPS missed by -8% because of a negative result of -NGN888m in other comprehensive income (OCI). On an annualised basis, Access’ 9M PAT (ex-OCI) of NGN122bn implies an ROAE of 21.3%, above the bank’s 20% guidance. However, including OCI, the bank’s annualised ROAE falls to 11.8%. Relative to our forecasts, the trends on the revenue lines were mixed. While funding income missed by c.-26% because of elevated funding costs, non-interest income surprised positively relative to our forecast. Consequently, we have cut our FY ’21f-22f funding income forecasts by c. 10% on average, and increased our non-interest forecasts by 24% on average. We have also raised our loan loss provisions and opex forecasts by around 7% and 4% on average respectively.
These revisions underpin the 5% average cut to our FY ’21f-22f EPS forecasts. Our new price target of NGN16.1 is also -3% lower. Our new forecasts translate to FY ’21 PBT growth of 23% y/y to NGN155bn and ROAE (post-OCI) of 11.1% (17.0% ROAE pre-OCI). Despite a slew of acquisitions, Access’ financial soundness and asset quality indicators are robust. Its capital adequacy ratio of 22% is among the best in the sector and well above the regulatory minimum of 15%.
Although its NPL ratio of 4.4% was up by 10bps q/q, it is below the regulatory threshold of 5%. Access Bank trades on a ’21f P/B multiple of 0.41x for an ROAE of 14.8% in FY ’22f, or a 27% discount to the 0.56x (for 14.4% ROAE) average for our universe of bank stocks. Our new price target implies a potential upside of 74% from current levels. In addition, our FY ’21 dividend forecast of NGN0.76 implies a healthy dividend yield of 8.2%. As such, we keep our Outperform rating on the shares.
PAT down -15% y/y due to spike in opex
Access’ Q3 PBT and PAT declined by -11% and -15% y/y to NGN38bn and NGN35bn respectively, due to a 40% y/y rise in opex. Although pre-provision profits were up by 12% y/y, while loan loss provisions fell by -42% y/y, the spike in opex was more significant. The increase in pre-provision profit was underpinned by a 30% y/y rise in non-interest income.
In contrast, funding income declined by -3% y/y. Despite the decline in earnings, total comprehensive income expanded by 66% y/y to NGN28bn due to a -96% y/y reduction in the negative result in other comprehensive income. Sequentially, PBT and PAT were flat q/q. However, total comprehensive income improved markedly to NGN28bn compared with -NGN1.9bn in Q2 ’21.