September 15, 2020 / 12:22 PM / By FBNQuest Research / Header Image Credit: Independent
increase to our price target post rollover to 2021E
Access Bank (Access)
management reaffirmed its 2020E ROE guidance of 20-25%. Although its H1 2019
PAT - including other comprehensive income (OCI) - of N80.3bn implies an
annualised ROAE of 25.4%, we believe that the 2020E guidance may be optimistic.
The bank's Q2 PBT was flat y/y despite stellar growth in non-interest income -
mainly driven by derivatives. - which surprised positively relative to
our forecast. Consequently, we have raised our 2020-21E non-interest income
forecasts by c.40% on average.
The upgrades to our
non-interest income forecasts are offset by average reductions of c.14% to our
funding income forecasts which we have made to reflect the subdued interest
rate environment and a 200bp reduction in the NIM guidance to 6.0%. Despite
these revisions, our 2020E EPS forecast is c. 39% higher because of the OCI
gains. However, our 2021E EPS forecast is c.9% lower. Nonetheless, our new
price target of N11.0 is 9% higher because we have rolled over our valuation to
In contrast to most
banks, Access Bank's NPL ratio improved to 4.4% from 5.5% in Q1 due to a
combination of write-offs totaling N46bn, and loan growth of c.3% q/q. The bank
also restructured c.17% of its loan book. Access is trading on a P/B multiple
of 0.35x for 11.9% ROAE in 2021E, or at a 33% discount to the 0.5x multiple for
15.5% ROAE that the sector is trading on. Having sold-off by -32.5% ytd
vs.-4.7% ASI, our new price target implies a potential upside of 63% from
current levels. We reiterate our Outperform rating on the shares.
flat y/y due to spike in loan loss provisions
Bank's Q2 PBT was flat y/y at N28.0bn. Although pre-provision profits advanced
by 22% y/y, growth on this line was more than offset by a 424% y/y spike in
loan loss provisions. The growth in pre-provision profit was driven by a 180x
y/y expansion in non-interest income due to positive base effects in the
comparable quarter of 2019 (N65.9bn Q2 2020 vs N364m Q2 2019). This strong
performance was mainly underpinned by a N103bn gain on derivatives in H1 (vs.
-N1.8bn H1 2019). In contrast to the stellar performance of non-interest
income, funding income fell by -45% y/y.
down the P&L, PAT grew by 204% y/y, thanks to a positive result of N33.7bn
in OCI (vs. N3.4bn Q2 2019). Sequentially, PBT fell by 40% q/q due to y/y
reductions on both revenue lines. However, PAT advanced by 111% because of the
strong result in OCI.
- Key Takeaways from Access Bank H12020 Investors Conference Call
- ACCESS declares N61.03bn PAT in Q2 2020 Results; Proposes 25kobo
Interim Dividend, (SP:N6.40k)
- ACCESS Notifies of Delay in Filing of 2020 Audited Half Year Results
- Access Bank Signs $93.8m Syndicated Loan
- Access Bank Announces USD 162.5m Syndicated Loan Arranged By FMO
- ACCESS Completes Acquisition of
Transnational Bank Kenya Plc...
- ACCESS Notifies of Board Meeting Date and
Commencement of Closed Period...
- Access Bank Subsidiary In Exclusive Discussion
With Cavmont Capital Over a Pote...
- ACCESS Notifies of Dealing in 0.73m Volume of
Shares Worth N4.96m By Mr. Herbert...
- ACCESS Notifies of Dealing in 3.1m Volume of
Shares Worth N21.4m By Mr. Herbert ...
- Access and Ecobank Nominated for African Bank
and Banker of the Year Awards 2020...
- ACCESS Notifies of Resolutions Passed At Its
- Access Bank Plc Clarifies Media Report On
Closing Of Branches And Sacking Of Sta...
- Access Bank CEO s Statement on 1 Year
Anniversary of Merger With Diamond Bank...