Access Bank Plc released its Q1 2020 earnings report showing an upward performance in topline supported by the collective growth in interest income and non-interest income. However, the growth in topline was unable to result in a sustained increase in bottom-line. The bank’s gross earnings grew by 31.85% from N160.12billion in Q1 2019 to N211.12 billion in Q1 2020, driven by a 19.04% spike in interest income from N110.77 billion in Q1 2019 to N131.86 billion, as a result of the 46.44% increase in interest on loans and advances to customers and 67.74% increase in the cash and balances with the bank. Also, enhancing the gross earnings growth was the 57.92% rise in non-interest income, majorly due to the enhancement in trading gains from investment securities.
Also, interest expense advanced by 10.60% to N59.65 billion, resulting from the growth in interest expense on borrowed funds (114.03%) and deposit from financial institutions by (28.21%). However, interest expense on customers deposit and debt securities issued dropped by 0.86% and 22.67% respectively. Consequently, net interest income inched up by 27.05% to N72.21 billion from N56.83 in the corresponding period of 2019.
The rise of 319.54%, 181.40% and 75.98% in trading gains from investment securities, other operating income and fees and commission led to impressive growth in non-interest income from N46.78 billion to N72.98 billion in Q1 2020. However, in the period, the bank recorded a foreign exchange loss of N54.71 billion. The positive growth amongst the respective non-interest income lines was driven by the bank’s strengthened drive in its e-business services, derivative instruments gains, bad debt recovery, and disposal income on property plant and equipment.
The Bank recorded a 63.77% increase in operating expenses from N55.14 billion in Q1 2019 to N90.31 billion due to the rise in AMCOM fees and administrative expense. Meanwhile, the cost to income ratio settled at 61.11% in Q1 2020 from 55.01% in Q1 2019. while operating income grew by 36.27%. Profit before tax (PBT) increased by 2.64% from N45.10 billion to N46.29 billion in Q1 2020. Overall, profit after tax settled lower by 0.53% to N40.92 billion from N41.14 billion in Q1 2019.
Net loans and advances in the period under review increased by 2.61% to N3.14 trillion from N3.06 trillion in FY 2019. Total assets expanded by 1.87% to N7.28 trillion from N7.14 trillion in FY 2019 Also, customer deposits rose by 4.70% to N4.45 trillion from N4.25 trillion in FY 2019. Our blended target price is N13.87. We recommend a BUY at the current market price, as the stock trade’s at a discount to our fair value estimate.