Access Bank Plc (ACCESS.NL): Impressive performance across income lines in Q4 18

Access Bank Plc (ACCESS.NL): Impressive performance across income lines in Q4 18

Access Bank Plc (Access) full-year 2018 earnings released this morning showed EPS expansion of 53.2% YoY to N3.28 following material decline in loan-loss provision (-57% YoY to N14.7 billion) and increase in net interest income (+6.2% YoY to N173.6 billion). On the latter, we reckon that despite 19.1% YoY growth in interest income (with assets yield expanding 4bps YoY to 12.5%), the single-digit growth in net interest income was due to a faster increase in interest expense by 32% YoY (with related cost of fund expanding 46bps YoY) which pressured moderation in Net Interest Margin (NIMs) to 5.7% (-47bps YoY).

On asset quality, Access recorded 230bps YoY contraction in Non-Performing Loans (NPL) ratio to 2.5% (compared to GTB and Zenith of 7.3% and 5% respectively). Accordingly, the impact reflected in the lower provisioning during the year, with cost of risk contracting 100bps YoY to 0.7%. Elsewhere, we reckon that the bank Non-Interest Revenue (NIR) remained resilient during the year declining by 0.7% YoY (relative to our estimate 15% YoY decline) to N138.2 billion due to strong performance in net trading income over Q4 18, which more than outweighed declines in fee income (-49% YoY) and foreign exchange loss of N39.5 billion on the Other Income line.

The bank declared a final dividend of N0.25 which in addition to interim of N0.25 brings total payout to N0.50. The final dividend translates to a dividend yield of 4.2% on current pricing.

Impressive performance across income lines in Q4 18. Access Q4 standalone numbers was impressive with sturdy performance across income lines resulting in 38% QoQ growth in EPS to N1.11. The strong performance stemmed from double-digit growth in net interest income by 34% and NIR growth of 10% QoQ, both of which more than outweighed the surprise additional N6.3 billion loan loss provision during the period and higher operating expense (+6% QoQ). On NIM, the gains stemmed largely from growth in interest income of 21% QoQ following recovery in interest on investment securities (+94% QoQ) and strong outing on interest on cash and interbank lending (+255% QoQ) both of which offset decline on interest on loans (-11.3% QoQ) to support 226bps QoQ expansion in assets yield. On the other hand, funding cost over the quarter expanded +18bps QoQ to 5.3% with interest expense rising 11.2% QoQ. Accordingly, the stronger expansion in assets yield necessitated expansion in NIM by 252bps QoQ to 6.9%. For Interest expense, the QoQ increase emanated from growth in interest on interbank placements (+76% QoQ to N16.5 billion) and customers deposit (+2% QoQ to N30.4 billion).

The stock currently trades at a current P/B of 0.34x which is at a discount to peers of 0.76x. Our last communicated FVE on ACCESS is N11.80, however, we have a HOLD rating on the stock. We will revisit our numbers after further analysis and discussion with management.

The bank will be holding a teleconference call on Today, March 15, 2019 at 2pm Lagos Time (1pm London/ 3pm Johannesburg/ 9am New York) with its senior management. Click here for the presentation and here for registration link.

For the full report, send a mail to [email protected]

The post Access Bank Plc (ACCESS.NL): Impressive performance across income lines in Q4 18 appeared first on Realising Ambitions.

Share on social

Facebook
Twitter
LinkedIn

Copyright © Asset & Resource Management Holding Company (ARM) Limited. All Rights Reserved. Information on this website is provided “as is” without warranty of any kind, either express or implied, including, but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. Some jurisdictions do not allow the exclusion of implied warranties, so the above exclusion may not apply to you.

ARM does not accept cash and will never ask you to make payments to a personal bank account on its behalf, nor ask you for personal account details, card details or passwords to your account. The acceptable means of payment are cheques, bank transfers, USSD & online.