Wednesday, March 21, 2018 /05:54 PM /FBNQuest Research
Event: Access Bank reports Q4 2017 results
Implications: Likely
downward revisions to consensus PBT forecasts and negative reaction from the
market
Positives: Funding
income grew 28% y/y: opex declined by 21% y/y
Negatives: PBT
fell by 67% y/y due to a reduction in non-interest income and a spike in
provisions
This afternoon, Access Bank (Access) published its Q4
2017 results which showed that PBT declined by 67% y/y to N7.2bn. The key
drivers behind the marked drop in profitability were a -50% y/y reduction in
non-interest income and a 125% y/y spike in loan loss provisions. These
negatives completely offset funding income growth of 28% y/y and a 21% y/y
decrease in opex. Further down the P&L, the y/y contraction in PAT narrowed
to -9%, thanks to a positive result of N8.2bn in other comprehensive income
(OCI). Sequentially, PBT and PAT fell by -66% q/q and -57% q/q respectively.
Again the spike in provisions and a subdued non-interest income line were
primarily responsible.
Compared with our estimates, PBT missed by 57% because
of negative surprises in non-interest income and provisions. However, thanks to
the OCI gain, PAT was in line with our N13.3bn forecast. The bank’s PBT also
trailed consensus’ 2017 PBT forecast of N91.4bn.
On a fully year basis, PBT and PAT both fell by
around 11% y/y. Management has proposed a final dividend of N0.40 per
share, which is in line with our N0.42 DPS forecast. The dividend implies a
yield of 3.4%. Having paid an interim dividend of N0.25, the final
dividend brings the total dividend for 2017 to N0.65 per share, flat y/y. The
total dividend implies a payout ratio of 20.9%.
The y/y spike in provisions was due to due to
impairments taken on the bank’s 9mobile exposure while the positive surprise in
opex was largely due to over-accrued expenses as at 9M 2017. We appreciate the
view that fx swaps are a nice-to-have as far as the CBN’s gross reserves are
concerned, and therefore the product is probably here to stay. In addition,
given the painful lessons some corporates have learned as a result of the
devaluation of the last few years, the demand for hedges is not going to zero.
However, because fx swap income is more difficult to model or predict, the market
is likely to continue to ask for reassurance on the sustainability of this
income line within non-interest income after the scale of the negative surprise
in these Q4 results. We expect to see a negative reaction from the market and a
downward revision to consensus 2018E earnings forecasts.
We rate Access shares Neutral. Our estimates are under
review.
Access Bank Q4 2017 results: actual vs. FBNQuest Capital Research estimates (N
millions)
Source: NSE; FBNQuest Capital Estimates
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