Monday, April 25, 2016 12:37PM/ FBNQuest Research
Event: Access Bank reports Q1 2016 results
Implications: Slight positive reaction by the market likely
Positives: Positive surprises in loan loss provisions and opex leading to PBT growing 37% y/y
Negatives: -N4.9bn in other comprehensive income loss led to PAT coming in -5% down y/y
Access Bank’s Q1 2016 results which were published this morning show that while PBT of N22.6bn grew strongly by 37% y/y, PAT declined by -5% y/y to N14.8bn. The decline in PAT was purely due to a significant loss on the other comprehensive income line of N4.9bn.
This N4.9bn loss relates to fair value loss on some available for sale securities (we suspect tbills/FBN bonds), similar to what we saw for another tier 1 bank recently. Base effects did not help: in Q1 2015, Access had booked a gain on the OCI line of N2.1bn.
Returning to the PBT, there were two key drivers behind the growth recorded: funding income grew 47% y/y and loan loss provisions were down -38% y/y. The funding income growth and loan loss provisions decline more than offset a -19% y/y decline in non-interest income and opex growth of 2.4% y/y. Relative to Q4 2015 results, PBT was up 54% q/q while PAT fell -6% q/q.
Compared with our estimates, PBT beat by 27% but the PAT was in line because we forecast zero on the other comprehensive income line. The better-than-expected PBT result was driven by provisions and opex surprising positively. The former was about half of what we had forecast while opex was 3.6% below our forecast.
The actual revenue performance (i.e. profit before provisions) was only slightly (1.7%) ahead of our expectations. Again, funding income was the better performer of the two income lines, exceeding our forecast by 11%; non-interest income missed our forecast by 9%.
Given the tough macro/operating environment, it is encouraging to see that Access turned in a healthy funding income result. However, the fact that non-interest income was visibly weak will attract just as much attention as the former.
As for loan loss provisions surprising positively, we would expect the market to be a little cautious on this, especially given that this line is a major contributor to the positive surprise (relative to expectations). Concerns that asset quality issues will grow through the remainder of the year are unlikely to dissipate, despite these results.
As such, we do not expect to see any significant revisions to earnings, particularly as it concerns the loan loss provisions line. As for the OCI loss, while we would put more attention on the underlying results than below-the-line items, given the magnitude, we expect it to weigh on sentiment.
All in all, we find the results encouraging and expect a slightly positive reaction from the market. Our estimates are under review. We rate Access shares Outperform.
Access Bank Q1 2016 results vs. FBNQuest estimates