Bank Plc (ACCESS)
9M’18 results – Gross earnings rose by 2.7% YoY to
in line with our estimate of N384.9 billion (-2.6% deviation).
Profit before taxes, however, declined slightly by 3.6% YoY to N70.3
billion, also in line with our N70.8 billion projection. Although
after tax earnings improved by 11.6% YoY, we highlight that this largely
reflects the impact of a much lower effective tax rate during the period
(9M’18—10.5%; 9M’17—22.6%). On a quarterly basis, after tax earnings
impressed by 33.0% QoQ, supported by a 41.7% QoQ growth in non-interest
income and a 57.4% decline in impairment charges during the quarter.
- Interest income fell during the quarter (-3.6% QoQ)
N87.8 billion. Although the bank was able to grow loans
during the quarter (+3.7% QtD; -1.0% YtD), this did not necessarily
translate to an improvement in interest income from loans and advances
which declined 4.0% QoQ. Similarly, a 22.2% decline in investment
income further weighed on overall interest income as asset yield
contracted to 11.4% (Q2’18—12.0%).
- Cost of funds declined by 20bps to 5.6% during the
quarter. Notwithstanding, net interest income slipped 7.4% QoQ to
billion weighed by lower interest income (-3.6% QoQ), as NIM remained
depressed at 4.9% (Q2’18 – 5.3%).
- Non-interest income improved 41.7% QoQ to
billion supported by the N4.2 billion in FX revaluation gains
recorded during the quarter (compared to FX revaluation loss of N27.0
billion in Q2'18). In contrast, the bank recorded declines in fees and
commission income (-8.2% QoQ) and trading gains (-54.1% QoQ) during
- Operating expenses rose 5.2% during the quarter.
Notwithstanding, efficiency improved as cost to income ratio declined
by 3.6ppts to 64.6% (Q2’18—68.2%). Credit quality improved in Q3’18 as
impairments charges declined further by 57.4% QoQ to
Cumulative loan loss charges for the year represent a 34.9% decline
compared to 9M’17.
- Net loans to customers declined by 1.0% YtD to
trillion, while deposits from customers and total assets improved by
10.2% YtD and 11.0% YtD to N2.5 trillion and N4.6
We think Access Bank’s Q3
performance is decent as the bank was able to bring down its cost of funds
during the period (Q3’18—5.6%; Q2’18—5.8%). We also like the fact that the
bank was able to grow loans (3.7% QtD) during the quarter in contrast to
prevailing industry trend. Although we did not see this translate to
improved interest income numbers, we are optimistic of a positive impact in
the coming quarter. This should provide a slight uplift to the bank’s net
interest margin which has been on the decline in the last five (5)
consecutive quarters. Overall, annualized RoE improved to 17.7% during the
period (H1’18—16.2%). Based on our last review, our target price for
the counter is
N10.64 which is a 33.0% upside to last close price of