Access Bank Plc Q3''18 Results - Lower Cost of Funds; Better Asset Quality Propel Earnings


Monday, October 29, 2018 / 08:59 AM / CardinalStone Research


Access Bank Plc (ACCESS) 9M’18 results – Gross earnings rose by 2.7% YoY to N374.9 billion,  in line with our estimate of N384.9 billion (-2.6% deviation). Profit before taxes, however, declined slightly by 3.6% YoY to N70.3 billion, also in line with our N70.8 billion projection. Although after tax earnings improved by 11.6% YoY, we highlight that this largely reflects the impact of a much lower effective tax rate during the period (9M’18—10.5%; 9M’17—22.6%). On a quarterly basis, after tax earnings impressed by 33.0% QoQ, supported by a 41.7% QoQ growth in non-interest income and a 57.4% decline in impairment charges during the quarter.  


Other highlights:

  • Interest income fell during the quarter (-3.6% QoQ) to N87.8 billion. Although the bank was able to grow loans during the quarter (+3.7% QtD; -1.0% YtD), this did not necessarily translate to an improvement in interest income from loans and advances which declined 4.0% QoQ. Similarly, a 22.2% decline in investment income further weighed on overall interest income as asset yield contracted to 11.4% (Q2’18—12.0%).  
  • Cost of funds declined by 20bps to 5.6% during the quarter. Notwithstanding, net interest income slipped 7.4% QoQ to N37.7 billion weighed by lower interest income (-3.6% QoQ), as NIM remained depressed at 4.9% (Q2’18 – 5.3%). 
  • Non-interest income improved 41.7% QoQ to N34.3 billion supported by the N4.2 billion in FX revaluation gains recorded during the quarter (compared to FX revaluation loss of N27.0 billion in Q2'18). In contrast, the bank recorded declines in fees and commission income (-8.2% QoQ) and trading gains (-54.1% QoQ) during the period. 
  • Operating expenses rose 5.2% during the quarter. Notwithstanding, efficiency improved as cost to income ratio declined by 3.6ppts to 64.6% (Q2’18—68.2%). Credit quality improved in Q3’18 as impairments charges declined further by 57.4% QoQ to N1.0 billion. Cumulative loan loss charges for the year represent a 34.9% decline compared to 9M’17. 
  • Net loans to customers declined by 1.0% YtD to N2.0 trillion, while deposits from customers and total assets improved by 10.2% YtD and 11.0% YtD to N2.5 trillion and N4.6 trillion respectively.


Analyst take: 

We think Access Bank’s Q3 performance is decent as the bank was able to bring down its cost of funds during the period (Q3’18—5.6%; Q2’18—5.8%). We also like the fact that the bank was able to grow loans (3.7% QtD) during the quarter in contrast to prevailing industry trend. Although we did not see this translate to improved interest income numbers, we are optimistic of a positive impact in the coming quarter. This should provide a slight uplift to the bank’s net interest margin which has been on the decline in the last five (5) consecutive quarters. Overall, annualized RoE improved to 17.7% during the period (H1’18—16.2%). Based on our last review, our target price for the counter is N10.64 which is a 33.0% upside to last close price of N8.00 (BUY). 


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.



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