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Access Bank Plc Records Slightly Weak Revenues in Q3 2017 Results

Proshare

Thursday, October 26, 2017 /2:36PM / FBNQuest Research 

Event
: Access Bank reports Q3 2017 results

Implications
: Muted reaction from the market likely

Positives
: Lower-than-expected loan loss provisions; significant OCI gains

Negatives:
 Slightly weak revenues 

Access Bank’s Q3 2017 results which have just been published show that PBT of N20.9bn was down -17% y/y due to growth in operating expenses and, to a lesser extent, loan loss provisions outpacing revenues. PAT of N31bn, however, posted solid growth of 31% y/y, thanks to translation gains (foreign subsidiaries) and fair value gains on AFS. Of the revenue lines, non-interest income growth continues to outpace funding income, the former growing by 10% y/y (though clearly slowing down vs Q2) vs the latter’s 1.3% y/y. Sequentially, PBT was flat: marked q/q declines in loan loss provisions and opex masked a -17.5% q/q decline in revenues. 

Compared with our estimates, although PBT missed slightly, by 5%, PAT was strongly ahead, by 76%, because we did not forecast any gains on the OCI line. Both revenue lines and opex surprised negatively by single digits but these were completely offset by the loan loss provisions coming in well below our expectations. 

We do not expect the market to react much to these numbers. The positives on the provisions and OCI lines are most likely going to be discounted because expectations that Q4 will throw up negative surprises on the former will remain (Q3 results are not audited). In addition, the underlying performance of the bank is slightly underwhelming looking at the revenue lines. 

Unless revenue growth begins to accelerate, we do not expect the shares to see meaningful gains going forward. This is not an Access-specific issue – it is sector wide for the most part. We continue to monitor yields on fixed income instruments which have been trending down. Further declines should precipitate less risk aversion and therefore increase the likelihood of loan growth. Though up slightly q/q, the loan book is still down -2% ytd. 

Our estimates are under review. We rate Access shares Neutral. We do not expect any meaningful change to consensus PBT estimates. 

Access Bank
Q3 2017 results: actual vs. FBNQuest Research estimates (N millions) 
Proshare Nigeria Pvt. Ltd.
Source: NSE; FBNQuest Estimates
 

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