August 19, 2016/Cordros Research

Access Bank Plc (ACCESS) released its half year 2016 earnings report earlier today. Annualized EPS was N3.22 significantly ahead of our estimate of N2.02 and consensus estimate of N2.09. Return on Average Equity was 25.43% significantly ahead of our 15.2% estimate. The bank also declared an interim dividend of N0.25 (HY’15: N0.25) with a closure date September 6, 2016 and a payment date of September 13, 2016.

Net interest income grew by an impressive 42.0% y/y. Interest income increased by 14% y/y driven by loan book expansion (+27.9% YTD). The surge in loan growth could be primarily attributed to the naira devaluation as it accounted for c.58% of the expansion. Interest expense also dropped 14% y/y mainly driven by an improvement in cost of funds, which declined by 10bps from Q1’16 and 170bps from H1’15. Net interest margin however weakened to 6.4% from 7.1% in Q1’16 following a lower asset yield.

Similar to most of its peers, ACCESS non-interest income performance was impacted significantly by the naira devaluation. Given the bank’s negative FCY position ACCESS reported a N15.2 billion foreign exchange revaluation loss however the bank also benefited from the devaluation; reporting a N33 billion gain from foreign exchange related swap transactions. Impairment charges jumped 15% y/y but spiked 225% q/q while NPLs increased marginally to 1.9% from 1.7% in FY’15.

Cost to income ratio improved to 53.7% from 57.9% as at Q1’16 driven by increased income as well cost containment (Opex: +0.5% y/y). Consequently, PBT jumped 27.9% y/y.