Thursday, August 31, 2017 11:40 AM / FBNQuest Research
Increase to our price target largely priced in
Access Bank’s (Access) Q2 2017 results were mixed but PAT was only 4% ahead of our forecast. As such, we have increased our 2017-18E EPS forecasts by c.5% on the back of an average increase of 19% to our noninterest income estimates. Management remains optimistic for H2 as far as non-interest income is concerned, citing the market’s growing acceptance of hedging products and increased fx liquidity.
We prefer to remain conservative with a quarterly run-rate of around N36bn for the balance of the year – well below the N48bn that the company delivered on this line in Q2 2017. The increase to our non-interest income forecasts is largely offset by higher opex forecasts (reflecting the surprise in Q2); other P&L items see limited changes, including loan loss provisions for which reassuring comments by management on potentially problematic loans (9mobile etc.) were adequate in our view.
Having rolled over to 2018, our new price target of N9.9 (10% higher) offers a modest 3% upside potential because of a strong ytd performance: +63.7% vs the ASI’s +32.6%. As such, we are lowering our recommendation to Neutral from Outperform.
Q2 earnings down y/y due to spike in opex
Access Bank’s Q2 2017 PBT declined marginally by -3% y/y to N20.8bn. Although pre-provision profits increased by 25% y/y driven by growth from both revenue lines, the non-interest income line which grew by 30% y/y was the stronger of the two lines.
However, funding income also grew healthily by 19% y/y. Despite the double-digit growth in pre-provision profits and an 8% y/y decline in loan loss provisions, a 45% y/y spike in opex proved significant and completely offset the positives from the these lines.
Further down the P&L, PAT fell by a much wider margin of-57% y/y, largely because of negative base effects in other comprehensive income (OCI) which came in at N7.7bn compared with around N30.7bn in Q2 2016. Sequentially, PBT was down by -33% q/q, mainly driven by spikes in opex and provision which were up by 34% q/q and 124% q/q respectively.
Funding income was also around 6% lower q/q. Compared with our forecasts, PBT missed by around 12%, mainly because of the negative surprise in opex. However, PAT beat by 4% because the bank had a positive result of N7.7bn on the OCI line (we had forecast zero OCI).
1. Access Bank Plc H1 2017 Conference Call & Earnings Presentation - The Key Takeaways
2. Access Bank Plc Q2 2017 Results – Net Interest Income Down by 5.7% QoQ
3. Access Bank Plc H1'17 Earnings - FX Trading Income Masks OPEX Pressure, PAT Up 17% YoY
4. Access Bank Plc H1-17 Results: Impressive Top Line Growth Dashed by Change in AMCON Levy Treatment
5. Access Bank Reports Q2 2017 Results as PBT Declined Marginally by -3% YoY to N20.8bn
6. ACCESS Declares N39.46 billion PAT in Q2 2017 Results; Proposes 25k Interim Dividend ,(SP:N10.24k)
7. ACCESS Board Approves Audited 2017 Half Year ResultsAccess Bank Plc Q1'17 Conference Call & Earnings Presentation - The Key Takeaways
8. ACCESS Declares N26.02 billion PAT in Q1 2017 Results,(SP:N6.40k)
9. Access Bank Plc holds 28th AGM, pays shareholders total dividend of 65k for 2016 FY
10. Access Bank Plc - Management to Continue Exploiting Opportunities in FX Derivatives
11. Access Bank Plc 2016 FY Conference Call & Earnings Presentation - The Key Takeaways
12. ACCESS declares N71.44 billion PAT in 2016 Audited Results; Proposes 40k Final Dividend,(SP:N6.48k)
13. Access Bank Posts N90.3bn Profit in 2016, Declares 40k Final Dividend
14. FO, Access Bank and Others Turn to the Bond Market
15. Access Bank Plc - Investment Case Still Strong Despite Raised OPEX
16. ACCESS declares N57.09 billion PAT in Q3 2016 Results,(SP:N5.70k)
17. Access Bank Plc Successfully Raises US$300m Eurobond
18. Access Bank Announces Exchange Offer and Minimum New Issue Yield
19. Access Bank Plc -Tapping the Eurobond Current
20. Access Bank to Raise New Euro Bond
21. Monetary Policy Committee Decision Review - Access Bank Plc
22. Access Bank Plc Announces the Retirement of Mr. Oritsedere Samuel Otubu as a Non-Executive Director
23. Access Bank Reiterating Outperform Rating After Strong Q2’16 Results
24. ACCESS BANK Half-Year Earnings Presentation: The key takeaways
25. Access Bank Plc Impressive Earnings Beat Estimates, PAT Up by 26% YoY