Access Bank Plc Impressive Earnings Beat Estimates, PAT Up by 26% YoY


Saturday, August 20, 2016 8:12am/ Vetiva Research

Strong top line growth amidst cost containment, PAT up 26% y/y
ACCESS released H1’16 result showing impressive top and bottom line growth – 3% and 5% ahead of our estimates respectively. The result came in largely in line with the trend observed in Q1’16 with improved performance across most of the key line items. Whilst Interest Income was steady at N57 billion in Q2’16 (Vetiva estimate: N58 billion), a strong NonInterest Income (N37 billion), up 50% q/q ensured a 17% q/q growth in Gross Earnings.

Despite recording FX revaluation loss of N11 billion, NonInterest Income was spurred by fees and commission income from electronic channels, card products, and related services as a result of rise in the volume of card transactions. In line with recent trend, income from derivative instrument (N33 billion) continues to support earnings, following the $2 billion Forward and Swap contracts entered into by the bank in 2015 (with staggered maturity up to 2018).

Furthermore, despite an 11% q/q rise in Interest Expense (in line with the higher interest rate environment), the expense line remained contained y/y, down 14% to N44 billion. However, with a mild 10bps rise in NPL ratio to 1.9%, ACCESS recorded a N10.2 billion loan loss provision vs. our N6.5 billion estimate.

Despite inflationary pressure, Operating Expense came in flat y/y - 5% better than our estimate. Consequently, PBT rose 28% y/y to N50.0 billion – ahead of our N45.4 billion estimate. Overall, given an effective tax rate of 21% vs. our 17% estimate and prior year’s 20%, PAT (N39.5 billion) came in better than our N37.7 billion estimate; annualized EPS of N2.73 is tracking above Vetiva (N2.61) and Consensus (N2.10) estimates.

The Board of Directors have proposed interim dividend of N0.25 per share, translating to a dividend yield of 4.5%.

TP revised to N9.76 (Previous: N9.01)

We have updated our model and revised our forecast to reflect the positive earnings surprise. Whilst we note the FX revaluation loss recorded by the bank deviates from the trend observed across other banks (with most banks reporting revaluation gains), we highlight that this is largely due to the accounting treatment of the Swap transaction.

In line with Q2’16 spike, we raise our loan loss provision forecast to N24.5 billion (Previous: N20.4 billion) – translating to a 1.6% CoR. With a modest improvement in top line amidst contained cost, we anticipate an improvement in efficiency with a CIR 54% for FY’16 (Previous: 57%).

Overall, ACCESS trades at a discount to peers with 2016E P/E and P/B of 2.0x and 0.4x respectively.

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1.       Access Bank NPLs to Total Gross Loans Stand at 1.9% in H1'16 As Against 1.7% in 2015

2.      ACCESS declares N39.49 billion PAT in Q2 2016 Result Proposes 25kobo Interim Dividend SP N5.34k

3.      Inflation Rate to Accelerate to 17.2 in July 2016 - Access Bank

4.      Access Bank Plc to Submit Half Year Audited Financials Not Later Than 31st August 2016

5.      Access Bank anticipates the MPC will retain the existing FX policy regime

6.       Inflation to Moderate Downwards to 15.4% in June 2016 - Access Bank Plc

7.      Access Bank anticipates the MPC will retain the existing FX policy regime

8.     ACCESS Issues Release Over EFCC s Investigation

9.      ACCESS Records 4.9bn Loss in Other Comprehensive Income Line in Q1 2016 Results

10.  ACCESS declares N19.42 billion PAT in Q1 2016 Result,(SP:N4.51k)

11.   Takeaway from Access Bank Plc Conference Call - March 2016

12.  ACCESS: Fundamentals Support Significant Upside Potential

13.  ACCESS: NIR gains and lower taxes power 2015 earnings

14.  ACCESS Q4 2015 OPEX Grows by 41% YoY; Shares Rated Outperform

15.   ACCESS declares N65.87 billion PAT; Proposes 30kobo Dividend  in 2015 Audited Result,(SP:N4.51k)


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