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


Thursday, March 17, 2016 03:35PM /FBNQuest Research

Event: Access Bank reports Q4 2015 results

Implications: Market likely to respond positively; upgrades to consensus 2016 earnings forecasts on the cards

Positives: Strong double-digit y/y growth on key revenue and profit lines

Negatives: Opex grew 41% y/y, 8% q/q in Q4 2015, came in 26% higher than we were expecting

This afternoon, Access Bank reported Q4 2015 results which showed that PBT of N14.7bn grew 43% y/y while PAT of N15.7bn grew at a slower rate of 23% y/y because of base effects stemming from trends on the other comprehensive income (OCI) line. In Q4 2014, Access had reported a N5.3bn gain on the OCI line compared with a loss of –N2bn in Q4 2015. This result in Q4 2015 more than offset the positive impact of a tax rebate of N3bn.

The strong y/y growth in PBT was driven by both revenue lines – funding income grew 23% y/y while non-interest income grew 45% y/y. In addition to revenue growth, Access also reported a marked fall in loan loss provisions, of -43% y/y to N2.7bn, very similar to what it reported in Q3; this provisions charge implies a cost of risk in this quarter of around 1%.

The one negative in the results was opex which grew materially, by 41% y/y to N39.4bn. Relative to Q3 2015 results, PBT was down sharply, by -31% q/q while PAT was down only slightly, by -3% q/q. While funding income grew 6% q/q, non-interest income was weaker q/q by -17%.

The q/q decline in PBT can be put down to base effects, given very strong results in the previous quarter(s) on this line. Nonetheless, compared with our estimates, the overall picture across the board was very strong. PBT and PAT beat our forecasts by 54% and 92% respectively.

Both revenue lines surpassed our expectations and loan loss provisions were half of what we had modelled. Only opex surprised negatively, coming in 26% higher than our forecast. We believe consensus forecasts were close to our estimates.

The bank proposed a final dividend of 30kobo. The implied yield is 7%. Although this is the lowest among the banks that have reported 2015 results so far (and the only one with the yield coming in below 10%), we do not expect this to overshadow the strong set of underlying results.

We expect the market’s attention to be on the non-interest income line, given how much it has boosted Access Bank’s results through 2015 due to fx swap gains. Although the impact is gradually waning, it is still significant.

However, we note that the unwinding of the positions does not necessarily imply a significant fall off in revenue is imminent since the freed-up funds would be channeled into boosting funding income. Asset quality will also come into focus, despite the positive surprise in Q4, given the extent of the deterioration in the macro environment.

We expect the market to discount any bullish talk/outlook from management because, historically, Access’s asset quality ratios have not been as good as the larger tier 1 banks. That said, given the extent of the positive surprise in the Q4 results, we expect to see some upgrades to consensus earnings forecasts.

Our estimates are under review. We rate Access shares Outperform.

Conference call details: yet to be circulated.

Access Bank Q4 2015  results vs. FBNQuest estimates

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