ACCESS: Strong Q3 results despite macro headwinds

Proshare

Monday, October 26, 2015 09:13AM / FBN Capital Research              

Raising 2015E EPS by 12.4%:

A significant positive surprise on the non-interest income line for the third consecutive quarter by Access Bank (Access) has led us to increase our 2015E EPS forecast by 12.4%

Although management expects a softer Q4 vs a 9M quarterly average of N34bn in non-interest income, we expect at least N20bn in Q4. The increase to our non-interest income forecast more than offsets our decision to raise our opex forecast by 6% because of the negative trend we saw in the Q3 results.

Management will need to show more evidence that it will get a grip on the surging opex (9M +38% y/y) to convince us that the cost-to-income ratio can improve beyond 60%. For 2016E, we have kept our EPS forecast broadly unchanged on the back of a more subdued outlook for loan growth, leading to an -11% cut to our funding income estimate.

This unchanged EPS forecast explains why we have kept our price target at N7.1. We believe concerns around asset quality are among the major factors weighing on
Access shares (-24% ytd vs ASI’s -13.4%). We think these concerns are overblown. Our model already incorporates a conservative cost of risk assumption of at least 1.5% going forward (vs 1.0% guidance for 2015E).

Q3 2015 PBT up strongly y/y:
Access Bank’s Q3 2015 PBT and PAT grew by 45% y/y and 44% y/y to N21.3bn and N16.2bn respectively, driven by non-interest income (+114% y/y), similar to what we saw in Q2 (gains on fx swaps were the key driver in Q2). To a lesser extent, a -23% y/y decline in loan loss provisions also helped.

In contrast to the performance in non-interest income, funding income was up by a mere 2% y/y. Although interest income grew by 17% y/y, the growth on this line was almost completely offset by a 37% y/y growth in interest expense.

Sequentially, both profit before provisions and PBT were down by -5% q/q and -6% q/q respectively, because non-interest income declined by -16% q/q, purely down to base effects. 

Compared with our estimates, PBT and PAT beat our forecasts by 67% and 55% respectively, mainly because of non-interest income surprised positively (by 42%), and to a lesser extent, loan loss provisions were almost half of what we were expecting.

Related NEWS

1.       ACCESS Loans to Customers Grows by 9.2% in Q3’15

2.      ACCESS Records Growth in PBT and PAT; Analyst Rates Shares a BUY

3.      Analyst Rates ACCESS Shares Outperform on Q3’15 Results; OPEX up by 50% YoY

4.      ACCESS Records 5.9% Growth in Net Interest Margin as PBT improves by 43% in Q3’15

5.      ACCESS declares N48.09 bln PAT as Earnings Grows by 42% in Q3'15 result,(SP:N4.95k)

6.      ACCESS declares 25kobo Interim Dividend as Profit Grows by 39% in Q2'15 result, (SP: N4.07k)

7.      ACCESS Records 44% Growth in PBT as Capital Adequacy Ratio improves to 19% in Q2’15

8.     Access Bank Plc Announces the result of the Rights Issue

 

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