Thursday 24th August 2017 9:52AM/ Vetiva Research
o Strong FX income spurs top line growth
o OPEX pressure persists, up 38% y/y
o Loan book and deposits moderate, FY’17 forecast revised lower
o Board declares interim dividend of N0.25 per share
ACCESS released its H1’17 result reporting a strong 42% y/y growth in Gross Earnings (₦247 billion) – 12% ahead of our ₦220 billion estimate. In line with the trend observed in Q1’17, the impressive top line performance was supported by strong growth in both Interest and Non-Interest Income lines, up 43% y/y and 47% y/y respectively, with both beating Q1’17 run rates.
Notably, we highlight that whilst e-business income moderated significantly to ₦2.7 billion (H1’16: ₦18.8 billion), FX trading income rose to ₦59.0 billion vs. the loss of ₦11.1 billion recorded in H1’16. Similarly, Interest Expense rose markedly (a trend consistent across all other banks that have released so far), up 80% y/y and 21% ahead of our estimate. Nevertheless, Net Interest Income rose 21% y/y with NIM up 40bps to 6.7%. With NPL ratio contained at 2.5% and cost of risk at 1.0%, loan loss provision was flat y/y at ₦10.4 billion (Vetiva: ₦10.9 billion).
The key pressure point was however from Operating Expense – racing 38% y/y to ₦105.1 billion (Vetiva: ₦91.2 billion) following a 34% q/q rise. We highlight that the biggest rise came from Admin Expense which almost doubled over the period. Despite this, PBT rose 18% y/y to ₦52.0 billion – just in line with our estimate. However, with an effective tax rate of 24% vs. our estimate of 22%, PAT marginally missed our estimate, albeit up 17% y/y to ₦39.5 billion.
Estimates revised, TP revised higher to ₦9.66 (Previous: ₦9.60)
We revise our model to reflect the mild deviations across a few line items. Particularly, we cut our loan growth forecast to flat for FY’17 (Previous: 5%) as the bank continues to take a conservative stance. Also, we cut our deposit growth forecast to a 3% y/y decline (Previous: 5% growth) to reflect the H1’17 trend. Whilst we raise our Interest and Non-Interest forecast for the strong interest rate environment and the extraordinary FX gains respectively, we also revise our Interest Expense and Operating Expense in line with H1’17 run rates.
However, we maintain our loan loss expense estimate at ₦20.9 billion – translating to a CoR of 1.2%. Overall, our Target Price is little changed at ₦9.66 (Previous: ₦9.60). ACCESS trades at FY’17 P/E and P/B ratios of 3.6x and 0.6x respectively.
1. Access Bank Plc H1-17 Results: Impressive Top Line Growth Dashed by Change in AMCON Levy Treatment
2. Access Bank Reports Q2 2017 Results as PBT Declined Marginally by -3% YoY to N20.8bn
3. ACCESS Declares N39.46 billion PAT in Q2 2017 Results; Proposes 25k Interim Dividend ,(SP:N10.24k)
4. Access Bank Plc Q1'17 Conference Call & Earnings Presentation - The Key Takeaways
5. ACCESS Declares N26.02 billion PAT in Q1 2017 Results,(SP:N6.40k)
6. Access Bank Plc holds 28th AGM, pays shareholders total dividend of 65k for 2016 FY
7. Access Bank Plc - Management to Continue Exploiting Opportunities in FX Derivatives
8. Access Bank Plc 2016 FY Conference Call & Earnings Presentation - The Key Takeaways
9. ACCESS declares N71.44 billion PAT in 2016 Audited Results; Proposes 40k Final Dividend,(SP:N6.48k)
10. Access Bank Posts N90.3bn Profit in 2016, Declares 40k Final Dividend
11. FO, Access Bank and Others Turn to the Bond Market
12. Access Bank Plc - Investment Case Still Strong Despite Raised OPEX
13. ACCESS declares N57.09 billion PAT in Q3 2016 Results,(SP:N5.70k)
14. Access Bank Plc Successfully Raises US$300m Eurobond
15. Access Bank Announces Exchange Offer and Minimum New Issue Yield
16. Access Bank Plc -Tapping the Eurobond Current
17. Access Bank to Raise New Euro Bond
18. Monetary Policy Committee Decision Review - Access Bank Plc
19. Access Bank Plc Announces the Retirement of Mr. Oritsedere Samuel Otubu as a Non-Executive Director
20. Access Bank Reiterating Outperform Rating After Strong Q2’16 Results
21. ACCESS BANK Half-Year Earnings Presentation: The key takeaways
22. Access Bank Plc Impressive Earnings Beat Estimates, PAT Up by 26% YoY