Access Bank Plc. (3 months ended March 2015)
- Access Bank Plc (Access) released Q1 2015 unaudited results wherein gross earnings rose 34% YoY to N76.9 billion while PBT and PAT expanded 23% and 13% YoY to N16.5 billion and N13.7 billion respectively.
NIR momentum underpins strong operating performance
- In contrast with softening QoQ trends by banks thus far in Q1 15, Access reported 20% QoQ rise in gross earnings driven by a 63% QoQ rise in NIR to N30.4 billion with interest income rising 3% to N46.4 billion. Disaggregating the parts reveal growth across all components in particular other income which rose nearly tenfold QoQ, supported by fee (+49% QoQ) and trading (+21% QoQ). Strong trading income reflects gains in ‘derivative financial instruments’ which we suspect reflects USDNGN volatility earlier in the period.
- Despite flat QoQ movement in total earnings assets (N1.9 trillion), higher yield environment over Q1 15 resulted in 11% QoQ expansion in income from securities which overrode flat trend in income from loans to drive interest income higher over the quarter. (Q4 14: -6% QoQ)
Cutback in provisions overrides softening cost grip
- Despite flat trend in funding base (N1.8 trillion) and tamer interest income growth, interest expense tracked quicker (+8% QoQ to N22.8 billion) resulting in WACF rising 40bps QoQ to 5.1%. Breakdowns provided by Access reveal a 19% QoQ rise in interest expense on customer deposits which given negative deposit growth (-4% QoQ) suggests Access took on more expensive funding during the period.
- Operating expenses bucked subdued trend over 2014 (+3.4% YoY) rising 21% QoQ (+24% YoY) to N33.6 billion. The upswing emanated from 44% QoQ rise in other opex which muted soft trends in staff costs (-7% QoQ) and depreciation and amortization (-11% QoQ). Notwithstanding the cost pressures, gains in NIR helped drive CIR 300bps lower QoQ to 62%. Furthermore, provisioning shrank 18% QoQ to N3.9 billion resulting in annualized cost of risk rising 10bps to 1% from Q4 14.
- Overall, strong NIR gains percolated to bottom-line assisted by the reduced provisioning which resulted in PBT jumping 67% QoQ while a 10pps moderation in effective taxes from Q4 14 saw PAT expand a wider 89% QoQ. Correspondingly, PBT and PAT margins are both 600bps higher QoQ at 22% and 18% respectively.
Higher capital buffer post rights issue buoys outlook
- Over the rest of the year, as with banks which benefitted from FX income, the moderation in naira volatility following the implementation of the order based quote system should drive cutback in NIR in coming quarters. In addition, funding cost pressures and softening cost control (with the latter a key driver of 2014 earnings growth) suggests more modest earnings growth in coming quarters. Nonetheless, completion of N52 billion rights issue in March, which management notes was successful at FY 14 earnings call, provides headroom for loan book growth even as CAR improved from year end 2014 (+1.2pps to 19.6%). Access currently trades at P/E of 3.5x and P/B of 0.5x which are both at discount to peer averages with last trading price at 43% discount to our FVE (N9.8) implying a BUY recommendation.
- Source: ARM
Disclosure – This article was culled from ARM Research newsletter and was not solely written for Nairametrics. The author of this article wrote it themselves, and did not write this article on behalf of Nairametrics.
