Access Bank Plc: Stronger asset yield comes to the rescue

Access Bank Plc: Stronger asset yield comes to the rescue

Must Read

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...

Top 10 Most Expensive Universities In Nigeria

For many Nigerians, high-quality higher education is a luxury. There are many private universities who are known not only...

Midea Showrooms And Stores In Nigeria

If you’ve been wondering where Midea showroom and stores are in Nigeria below is a list of Showrooms and...
- Advertisement -
- Advertisement -

ACCESS recently released its H1’19 audited results; its maiden audit postmerger. Gross earnings increased by 28% y/y and 3% q/q to ₦324.4 billion in H1’19 (H1 2018: ₦253.0 billion), with interest income contributing 84%. Interest Income grew by 46% y/y to ₦257.9 billion from ₦186.7 billion in H1’18. The bank realized a Yield on Asset (YoA) of 13.4% from 12.2% in H1’18. On the other hand, Non-Interest Income decreased by 22% y/y to ₦51.5 billion from ₦66.1 billion in H1’18. These results deviated considerably from our topline estimates, with Q2’19 Interest Income 38.9% higher than expected, while Q2’19 Non-interest Income underperformed significantly due to a net Foreign Exchange loss. That said, PBT for the period was up 62% y/y to ₦74.1 billion (Q2’19: ₦29.0, billion down 36% q/q) but 10.0% below our estimate, while PAT increased by 59% to ₦63.0 billion (Q2’19: ₦21.9 billion, down 47% q/q) 16% behind our estimate. The bank recorded Q2’19 EPS growth of 40% y/y to ₦1.90 with an annualized Return on Average Equity (ROAE) of 23.5% (FY’18: 19.17%) and a Return on Average Asset (ROAA) of 2.2% (FY’18: 2.5%) for the quarter.

Improved Interest income cushions Foreign exchange loss

In Q2’19, ACCESS garnered Interest Income of ₦162.1 billion (Q1’19: ₦110.8 billion), as the bank realized a 138% y/y surge in Interest Income from investment securities along with a 15% y/y rise in interest income from loans. Net Interest Income also came in strong at ₦98.3 billion during the quarter (up 82% y/y and 73% q/q) with NIM improving by 200bps y/y to 7.6% due to the bank’s success in containing interest expense growth to
16% y/y and 18% q/q (Cost of Funds decreased 100bps y/y to 4.8% from 5.8% in H1’18). However, the bank realized a ₦25.1 billion loss in Q2’19 from foreign exchange trading, revaluation losses and derivative instruments. This loss eroded the ₦6.2 billion realized in Q1’19 and overshadowed the impressive q/q growth of 68% in Net Fee Income (Q2’19
– ₦26.2 billion), thereby limiting non-interest income to just ₦2.1 billion for Q2’19.

Read:  Konga makes list of top 20 brands to watch in 2020
Read:  Access Bank Record N95 Billion Profit For 2018

Furthermore, Earnings were also dragged by a 21% q/q growth in Opex to ₦69.9 billion tracked 12% ahead of our estimate. Operating income of ₦100.4 billion however missed our Q2’19 estimate by 3.7%, though the 36% y/y growth in H1’19 offset the Opex growth of 30% y/y to improve cost-income ratio to 61% from 65% in H1’18.

Restructuring, recoveries improve post-merger asset quality

ACCESS has expanded total assets by 31% since FY’18 to ₦6.4 trillion with liabilities (customer deposits) of ₦4.2 trillion up 63% YTD, expanding faster than core assets (loans and advances up 34% YTD to ₦2.9 trillion) during the period. Asset quality (measured by NPLs) has improved since Q1’19 (10.0%) to 6.4% in H1’19, albeit above the H1’18 (Pre-merger) figure of 4.7% – loan restructuring and a few recoveries have reduced NPLs by just over ₦100 billion post-merger. The banks LDR of 66% remains well above the CBN floor of 60%, while its CAR remains adequate at 20.8% flat y/y.

Read:  Nigeria Stock Exchange Suspends Trading in Diamond Bank Shares

TP revised to ₦12.43 (Previous: ₦8.42)

We have adjusted our estimates to reflect the higher interest income realized in H1’19 and trimmed our FY’19 non-interest expectations. Our new topline estimates for interest income and non-interest income are ₦507 billion (Previous: ₦396 billion) and ₦190 billion (Previous: ₦222 billion) respectively. Operating income is adjusted slightly higher to ₦444 billion from ₦418 billion while our FY’19 PAT figure has increased to ₦155.1 billion (Previous: ₦126.5 billion). As of September 9, ACCESS shares traded at a P/B multiple of 0.4x, a 50% discount to peer average of 0.8x. The bank is on track to surpass its FY’18 ROAE of 19.7% with a H1’19 annualized ROAE return of 23.5%. Overall, we revise our 12-month Target Price to ₦12.43 from ₦8.42, following an upward revision in our 2019 ROAE estimate, and FY’19 dividend forecast to ₦1.08/share.

Vetiva Research

- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

Latest News

Zenith Bank FY 2019 Financial Statement: Fear the Bank’s Staff more than the Yahoo Boys

The Board of Zenith Bank PLC, on Friday, 21st February 2020 released the bank’s audited full financial statement for...

Chemical and Allied Paints Plc: Unconvincing results but fundamentals remain strong

Chemical and Allied Paints Plc (CAP Plc) recorded revenue growth for the third year running since it reported a revenue decline in 2016 (the...

What do 8,000 consumers in 22 countries think about the future of payments?

From biometrics to neobanks, Visa report explores how people like to pay Consumers have an abundance of options when it comes to choosing how they...

Third Winner Of Konga Travel Rolls Royce Promo Emerges

Konga Travel and Tours, which was recently named Most Innovative Agency by the global airline, Virgin Atlantic, has disclosed the identity of the third...

Barcelona Could Leapfrog Real Madrid at The Top of LaLiga Santander This Weekend While The Battle Heats Up At The Bottom

Expect more twists and turns this weekend in both the title race and battle at the bottom as the 2019/20 LaLiga campaign continues to...
%d bloggers like this: