However, following surge in opex, PBT (+4.04%
y/y, 21.06% shy of our estimate) grew marginally, while PAT (-0.08% y/y, 27.27%
below our estimate) declined slightly, resulting in EPS of N1.38 (below our
estimate of N1.88). Consistent with its dividend payment, ACCESS is proposing
an interim dividend of N0.25 (same as previous year) – translating to a payout
ratio of 18.33% and a dividend yield of 2.44%.
The growth in interest income, broadly in line
with our expectation (with variance of 2.27%), was driven by improved yields on
earning assets (+280 bps to 13.10%); loans and advances to customers (+33.48%
y/y), and investment securities – available for sale (+64.64% y/y), held for
trading (+307.11% y/y), and held for maturity (+14.45% y/y), given ACCESS'
large portfolio of fixed income securities, in line with other banks' results
released so far.
Accordingly, net interest margin expanded 40 bps
y/y to 6.70%, despite a more-than-expected surge in interest expense (79.88%
y/y, 28.31% above our estimate), driven by the elevated interest charges on
customers deposit (63.68% y/y), interbank placements (+107.92% y/y), and debt
securities issue (+181.02% y/y) – reflecting the impact of the premium on the
USD112 million refinancing of its Eurobond and an additional N59 billion
commercial paper issued in H1-17.
ACCESS recorded a marginal (+1.48% y/y) growth
in credit loss provisioning in H1-17, with cost of risk contracting by 10 bps
y/y to 1.00%, despite NPL expanding by 60 bps to 2.50%. The provisioning came
ahead of our estimate by 20.26%, a development we attribute to the additional
collective impairment charge (+56.10% y/y), recognized during the period.
Specifically, on the performance in Q2-17, gross
earnings grew double-digit by 12.69% q/q (+39.08% y/y), 4.46% above our
estimate, while PBT and PAT declined by 33.23% q/q (-24.06% y/y) and 48.35% q/q
(-33.03% y/y), respectively. The q/q growth in gross earnings broadly reflects
the impressive yield on interest earning assets and surge in foreign exchange
trading income (+146.09% q/q) during the period, while the bottom-line
contraction was due to opex increasing by 34.42% q/q (+69.41% y/y), which more
than offset the growth in NIR of 31.41% q/q (+29.62% y/y)
In line with industry peers, ACCESS recorded a
surge in opex (rose 50.215 y/y and 14.09% above our estimate, stemming from a
one-off charge of AMCON levy (as against amortization over the full year) impact
on other opex (+65.62% y/y), elevated personnel costs (+25.72%y/y), and
depreciation expense (+27.11% y/y). As a result, cost-to-income ratio expanded
901 bps y/y to 62.73%, above our estimate of 55.26%, despite a 28.65% y/y
growth in operating income.
Given that the marginal contraction in PAT was
driven by a one-off charge on the opex line, which we expect to moderate in
H2-17, we believe management is still on course to deliver on its 2017F ROE of
20.0% (vs. 17.4% in FY-16) and net interest margin of 7.0% (vs. 6.2% in FY-16).
Also, given the run rate in interest income
(supported by its sizeable fixed income portfolio and quality loan book) and
the significant foreign exchange trading gain booked in H1-17, we believe
ACCESS is poised to outperform in 2017F. Based on our last TP of N12.19, we
have a BUY recommendation on the stock.