Monday, March 06, 2017 4.01 PM /NSE
Implications: Limited changes to consensus 2017 estimates likely
Positives: Q4 2016 PBT up 25% y/y; slightly ahead of consensus
Negatives: Limited to OCI loss leading to PAT declining y/y and missing our forecast by 30%
Access Bank’s Q4 2016 results which have just been published by the NSE show strong PBT growth of 25% y/y to N18.3bn. However, PAT of N11.8bn declined -25% y/y due to a loss on the other comprehensive income line of –N2.6bn which widened by 28% y/y and challenging compararables on the tax line. The tax charge of N4.0bn in Q4 2016 compares with a tax rebate of N3.1bn in Q4 2015. Returning to the strong PBT result, this was driven by growth in both revenue lines (11% y/y for funding income and 49% y/y for non-interest income) outpacing growth in loan loss provisions (+260% y/y) and opex (15% y/y). Sequentially, both PBT and PAT were down on the Q3 results, by -17% q/q and -44% q/q respectively. The reason for the q/q declines was a jump in loan loss provisions in Q4. This q/q surge in provisions more than offset what was actually a relatively healthy q/q growth in revenue: profit before provisions grew 6% q/q, thanks to an impressive showing on the non-interest income line (+30% q/q). Funding income fell -14% q/q.
The PBT result beat our forecast by 43%, but we suspect that consensus was closer to the result. Profit before provisions beat our forecast by 12%, thanks to another solid quarter for non-interest income. Although loan loss provisions stand out in the results - given the triple digit y/y and q/q growth rates, this was expected as the table below shows. So was the growth in opex. While the PBT beat our forecast, PAT missed by 30% because of (a) the tax charge; we were expecting a reversal in tax charges in Q4, similar to 2015, and (b) the loss on the other comprehensive income line; we had forecasted zero here. Excluding the OCI line, the PAT was broadly in line with our expectations.
The bank proposed a final dividend of 40kobo, in addition to the 25kobo interim it has already paid. The final dividend implies a yield of around 6%. It is higher than our 30kobo estimate (which is the same as the 2015 final dividend). It appears consensus was looking for c.45kobo.
All in all, we find Access Bank’s results healthy. The underlying results were broadly in line with our expectations, even after tax. The capital adequacy of the bank is sound at 21.2%.
Although we have not seen the December NPL ratio figure, we expect it to be below 5% (it was 2.1% in Q3 2016). In this environment of heightened risk for the banking sector, we believe Access Bank should be trading higher than its current valuation. Although the shares are among the best performing ytd (following on from their strong performance in 2016 : +21% vs ASIs -6.2%), we expect to see further gains over the rest of the year. Our estimates are under review. We rate Access shares Outperform.
1. Access Bank Plc Appoints Dr. Gregory Ovie Jobomeas Executive Director Risk Management Division
2. Access Bank Plc Announces Closed Period and Board Meeting Date
3. Access Bank wins Triple Honours at the EMEA Finance African Banking Awards 2016
4. Access Bank is Bank of the Year Nigeria - The Banker Magazine
5. World Finance Names Access Bank as Best Sustainable Bank 2016
6. Access Bank Plc wins Bank of the Year 2016 Nigeria at 17th Annual Global Banking Awards