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Access Bank Plc Records Strong Double Digit Revenue Growth in Q1 2017

Proshare

Thursday, April 27, 2017/ 4:18 PM / FBNQuest Research

Event: Access Bank reports Q1 2017 results
Implications
: Consensus earnings estimates likely to move up
Positives
: Strongly double-digit revenue growth
Negatives:
 No obvious negatives

Access Bank’s Q1 2017 results which have just been published came in strong. PBT of N31bn grew 38% y/y while PAT grew much faster (+66% y/y) to N25bn, thanks to a marked reduction (-65% y/y) of the losses on the other comprehensive income line. Both revenue lines contributed to the PBT growth: funding income grew 23% y/y while non-interest income grew 48% y/y, such that pre-provision profits increased by 34% y/y.


Although both loan loss provisions and opex were also up by more than 30%, the magnitude of the growth in revenues proved significant. Sequentially, the changes stood out even more. PBT grew by 70% q/q while PAT was up by 108% q/q. The main driver behind the strong q/q earnings growth was a significant reduction in loan loss provisions (-67% q/q). This reduction more than offset a -10% q/q fall in non-interest income.

Compared with our estimates, the results were well ahead of expectations: PBT and PAT beat by 78% and 72% respectively. Again, the revenue lines were the main drivers. Funding income beat by 21% while non-interest income was ahead by 32%. As such profit before provisions came in 26% ahead of our forecast. Slight positive and negative surprises on the loan loss provisions and opex lines offset each other.

After a subdued Q4 2016 (once one-off gains are stripped out), the Q1 2017 results are very encouraging, especially with both revenue lines contributing. Similar to the results of other banks which have reported Q1 results, margin expansion has been a key driver behind the positive surprises we are seeing in banks’ results, and mainly from the fixed income portfolio. Note that Access Bank’s loan book also declined slightly q/q.

On the back of these results, we would expect consensus forecasts for 2017 (PBT of N88bn) to move up such that consensus estimates start to move towards management’s guidance of 20% ROAE for 2017. The shares are up 12.4% ytd, 16.7% ahead of the ASI. Our estimates are under review. We rate Access shares Outperform.

Access Bank
Q1 2017 results: actual vs. FBNQuest Research estimates (N millions)

 

Q1 2017

 

Actual

Y/y

Q/q

FBN   Quest est.

Actual vs FBN Quest est. (%)

Interest income

79,333

43.1%

20.1%

68,389

16.0%

Interest expense

-36,596

75.8%

9.9%

-32,963

11.0%

Net interest income

42,737

23.4%

30.4%

35,427

20.6%

Other income

36,481

47.5%

-10.1%

27,626

32.1%

Profit before provisions

79,218

33.5%

8.0%

63,052

25.6%

Provisions

-3,197

33.3%

-66.8%

-3,521

-9.2%

Operating expenses

-44,813

30.4%

-1.3%

-42,022

6.6%

PBT

31,208

38.2%

70.2%

17,509

78.2%

Tax

-5,189

64.0%

30.0%

-2,802

85.2%

-Tax rate

16.6%

 

 

16.0%

 

Discontd. Ops.

0

n/a

n/a

0

n/a

Profit before comp. income

26,019

34.0%

81.4%

14,708

76.9%

Other comprehensive income

-1,726

-65.1%

-32.7%

0

n/a

PAT before min. int.

24,293

67.8%

106.2%

14,708

65.2%

Minority interest

211

-29.1%

n/a

-465

n/a

PAT after min. int.

24,504

65.8%

107.6%

14,243

72.0%

Source: NSE; FBNQuest Estimates

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4.      Access Bank Plc: Can Lightning Strike Thrice?

5.      Access Bank Plc 2016 FY Conference Call & Earnings Presentation - The Key Takeaways

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