Access Bank Q4 2019 Results Review: Maintaining Outperform Rating


Wednesday, March 11, 2020 / 09:53 AM / FBNQuest Research / Header Image Credit: The Trent


4% cut to our 2020E EPS and price target

Access Bank's (Access) Q4 2019 PBT missed our forecast by 56% due to negative surprises in non-interest income and loan loss provisions. The negative surprise in non-interest income was underpinned by a net fx loss of -N83.9bn in 2019 (vs. -N23.8bn 2018) due to unwinding of derivative contracts most of which came through in Q4, and a decline in gains on fair valuation of equity investments.


Consequently, we have cut our 2020E EPS forecasts by c.4% and our price target by a similar margin to N16.0. On its conference call, management provided a 2020E NIM guidance of 8.0% (up +140bps y/y). It is also positive that prevailing macro-economic headwinds are likely to be supportive of demand for derivative products and by extension non-interest income. Regardless of management's optimistic outlook, our forecasts and assumptions are more conservative. Following the negative surprise in non-interest income, we have cut our 2020E forecast for the line by-25%. We have also cut our 2020E NIM forecast by c.120bps in view of the low interest rate environment.


As such, our 2020E funding income forecast is up by a mere c.5% and implies a growth of 4% relative to 2019. On the back of these revisions, we forecast a 2020E PBT growth of 10% y/y, implying an ROAE of16.7%, much lower than management's 20-25% guidance. On a relative basis, the shares are trading on a 2020E P/B multiple of 0.4x for 17.1% ROAE in 2021E. These compare with the 0.5x average multiple for 17.2% ROAE that our universe of stocks is trading on. Our new price target implies a potential upside of 132% from current levels. As such, we retain our Outperform rating on the shares.


Q4 PBT down -63% y/y

GTB's Q4 PBT grew by c.19% y/y, driven by an 18% y/y increase in pre-provision profits and a -46% y/y reduction in loan loss provisions. Of the two revenue lines that contributed to pre-provision profit growth, the non-interest income line which grew by 26% y/y was the stronger.


However, funding income also grew by 13% y/y. PAT grew by 19% y/y, thanks to a positive result of N4.2bn in other comprehensive income (OCI). Sequentially, PBT increased by 11% q/q, driven by similar growth in pre-provision profits. However, PAT advanced by 26% q/q because of the positive result in OCI.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

Related News

  1. Access Bank Plc FY'19 Audited Result - FX Losses Stills Earnings Momentum
  2. ACCESS Declares N97.5bn PAT in 2019 Audited Results, Proposes N0.40k Final Div. (SP:N8.50k)
  3. ACCESS Notifies of Change in Registered Head Office Address
  4. ACCESS to List Its N15bn 15.50% Fixed Rate Unsecured Climate-Credential Green Bond on LuxSE
  5. Access Bank Announces Commencement of Closed Period; Scheduled Board Meeting For February 10, 2020
  6. ACCESS Notifies of Dealing In 13.83m Volume of Shares By An Insider
  7. ACCESS Notifies of Dealing In 4.67m Volume of Shares By An Insider
  8. ACCESS Notifies of Dealing In 15.53m Volume of Shares By An Insider
  9. ACCESS Notifies of Dealing In 28.86m Volume of Shares By An Insider
  10. ACCESS Secures Regulatory Approvals To Acquire Kenya-based Transnational Bank Plc
  11. ACCESS Notifies of Dealing In 55.6m Volume of Shares By An Insider

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.
Related News