Access Bank Plc - NIM Improvement Supports Earnings


Friday, September 06, 2019    / 12:42PM / by CardinalStone Research  / Header Image Credit: Technology Mirror


Access Bank Plc (ACCESS TP: N8.74 - BUY) has reported a 40.7% YoY increase in EPS to N1.90 in its audited H1'19 results. The company also proposed an interim dividend of N0.25 per share which translates to a dividend yield of 3.9% on current market price. Below are some of the highlights from the result:


Some positives: 

Interest income grew 46.2% YoY, supported by a 138.2% YoY increase in interest income from investment securities. Interest income from loans and advances also advanced 14.9% YoY during the period 

Net interest income rose 81.9% YoY as net interest margin improved to 7.4% from 6.2% in FY'18. This also reflects the impact of the integration of cheaper deposits on overall interest expenses as cost of funds declined to 4.8% in H1'19 from 5.5% in FY'18 

Net fees and commission income improved 24.8% YoY, supported by a 119.2% increase in transaction and e-business related fees and commissions, as well as a 96.5% increase in account maintenance charges 

Despite the 25.5% YoY increase in operating expenses, cost-to-income ratio improved to 61.0% from 64.9% in H1'18 

Impairment charges declined 33.5% YoY during the review period, supported by credit writebacks which amounted to N4.9 billion (H1'18 writebacks: N450.0 million). Consequently, cost of risk improved to 0.3% in H1'19 from 0.7% in FY'18 

Credit quality also improved during period as NPL ratio declined to 6.4% from 10.0% as at Q1'19. This reflects a 34.1% decline in absolute NPLs to N196.3 billion from N297.7 billion following the integration Diamond Bank's assets. We believe that a majority of these loans were likely restructured given flattish gross loan growth post integration 

Capital adequacy at 20.8% (reflecting full IFRS 9 impact), liquidity ratio at 49.7% and loan-to-deposit ratio at 65.6% (Bank only: 61.4%) are in line with the relevant regulatory guidelines.


Some concerns: 

Notwithstanding the improvement in fee income, overall non-interest income weakened (28.7% YoY) owing to much lower gains on investment securities (H1'19: N4.1 billion; H1'18: N59.6 billion). Key drivers were derivative losses of N1.8 billion (vs H1'18 gain of N33.4 billion) and much lower gain of equity investments of N5.9 billion (vs H1'18 gain of N25.7 billion). 

Visit  Access Bank Plc IR Page in Proshare MARKETS


Graph - One Year Share Price Movement 

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