October 28, 2016/Cordros Research

This afternoon, Access Bank Plc (ACCESS) released its nine-month earnings result for the period ended September 30, 2016. EPS declined to N1.98 from N2.01, despite a 19% y/y increase in PAT; mainly because of the impact of a higher number of shares outstanding following last year’s Rights Issue. PBT increased by 19.2% y/y but declined by 19.8% q/q while return on average equity fell slightly to 18.8%, from 19.8% as at H1’16. ACCESS’ reported PBT and RoAE outperformed both consensus and our estimates for the period.

Net interest income grew by 40.1% y/y and 12.0% q/q respectively. Asset yield climbed to 11.0%, from 10.6% as at H1’16 to push interest income higher by 21.2% q/q. Cost of funds increased to 4.0%, from 3.6% as at H1’16, driving the first quarterly expansion in interest expense (+34.6% q/q) since Q3’15. Net interest margin increased to 6.5% from 6.2% as at H1’16 but was still below the 7.0% management guidance. 

Non-interest income fell by 9.1% y/y but declined 15.8% q/q as losses from ‘net foreign exchange income’ was once again an earnings drag.

Impairment charges increased by 6.8% y/y but declined 72.8% q/q, resulting in an improvement in cost of risk to 0.9%, from 1.1% as at H1’16. However, ACCESS recorded an increase in the ratio of non-performing loans to 2.1% from 1.9% as at H1’16. Operating expenses increased by 8.2% y/y and 26.6% q/q, pushing cost-to-income ratio to 57.7%, which is higher than management’s guidance of 55.0%.

Net loans and customer deposits increased by 31.9% and 24.7% YTD respectively up from 27.9% and 17.1% as at H1’16. The bank’s capital adequacy ratio held up at 19.0%.