Wednesday, April 07, 2014 5:30 PM / Cardinal Stone
Access Bank Plc (ACCESS), released its FY'13 results on the Nigerian Stock Exchange (NSE) today, reporting an 8% decline in EPS to
N1.59 (EPS from continuing operations - N1.64). The bank also announced a dividend of N0.35 (dividend yield of 4.5%) and intends to close its books 17th of April 2014. Please find our initial thoughts on the numbers;
Gross earnings came in flat YoY, buoyed by growth in non-interest income: Gross earnings was flat YoY, coming in at
N206.8 billion, 5% ahead of our estimate. Gross earnings was largely kept afloat by the growth in non-interest income, similar to the pattern seen as at Q3'13, as interest income came in 12% lower YoY, at N145.9 billion. Hence, the 48% YoY increase in non-interest income minimised the impact of the decline in interest income on gross earnings. We believe the decline in interest income is largely due to a contraction in asset yield as the company recorded a significant growth in its risk assets, with a 33% YoY growth in net loans to N810.8 billion. On a QoQ basis, non-interest income was also the driver of 4% QoQ growth in top-line, as the bank booked an 87% QoQ growth in fee and commission income.
Strain on interest expense as cost of funds increase: Contrary to the decline in interest income, interest expense rose by 12% YoY, with the highest spike seen in Q2 (14% QoQ increase). The increase in interest expense aligns with our expectation of higher interest expense, from increased competition for private sector deposits following the public sector deposit CRR policy. We note that Access Bank's deposit base was flat as at Q3 (whilst asset base contracted by 3%), and therefore laud the bank's aggressive push in Q4 to grow deposits and the resultant 5% FY growth in balance sheet size. We adjudge the aggressive push for deposits in Q4 (7% QoQ increase) as mainly contributory to the rise in interest expense during the period. Reported interest expense largely aligns with estimate (just 3% lower).
Uptick in CIR, impairment write-backfalls QoQ: Impairment write backs came down to
N6.2 billion by FY'13 from N8.7 billion booked as at Q3'13, as the bank recorded impairment charges of about N2.5 billion in Q4'13. We estimate that the bank's cost to income (CIR) rose to 73% in FY'13 from 60% in FY'12, as total OPEX grew 18% YoY. We consider the increase in AMCON charge (to 0.5% from 0.3% of total assets) as mainly contributory to the growth in OPEX during the period as personnel expenses actually declined 4%. In addition, part of the YoY increase in OPEX likely stemmed from some one-off charges (claim expense by WAPIC, depreciation adjustments, professional fees and branding costs) incurred by the bank in the course of the year.
Earnings decline 8% YoY, ROAE berths at 18.9%: Access Bank's after tax earnings came in at
N36.3 billion, declining 8% YoY and falling slightly behind of our estimate of N39.5 billion but ahead of consensus estimate of N36 billion by 1%. This brings the bank's ROAE and EPS for FY'13 to 18.9% and N1.59 respectively.
Current depressed prices still present upside: Whilst Access Bank's top and bottom-line FY'13 earnings run-rate fall within allowable deviation from our estimates, we may be reviewing the company's FY'14 earnings following the FY'13 results conference call by the company's management. As at our last report, our FY'14 TP for ACCESS stands at
N8.88, which, relative to current price of N7.70, presents a 15% upside. Thus, we retain a BUY rating on the counter. Based on the annualised number, ACCESS is trading at a forward P/E and P/BV of 6.2x and 0.8x.
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