Culled—Proshare
27/4/2017/FBNQuest Research
Event: Access Bank reports Q1 2017 results
Implications: Consensus earnings estimates likely to move up
Positives: Strongly double-digit revenue growth
Negatives: No obvious negatives
Access Bank’s Q1 2017 results which have just been published came in strong. PBT of N31bn grew 38% y/y while PAT grew much faster (+66% y/y) to N25bn, thanks to a marked reduction (-65% y/y) of the losses on the other comprehensive income line. Both revenue lines contributed to the PBT growth: funding income grew 23% y/y while non-interest income grew 48% y/y, such that pre-provision profits increased by 34% y/y.
Although both loan loss provisions and opex were also up by more than 30%, the magnitude of the growth in revenues proved significant. Sequentially, the changes stood out even more. PBT grew by 70% q/q while PAT was up by 108% q/q. The main driver behind the strong q/q earnings growth was a significant reduction in loan loss provisions (-67% q/q). This reduction more than offset a -10% q/q fall in non-interest income.
Compared with our estimates, the results were well ahead of expectations: PBT and PAT beat by 78% and 72% respectively. Again, the revenue lines were the main drivers. Funding income beat by 21% while non-interest income was ahead by 32%. As such profit before provisions came in 26% ahead of our forecast. Slight positive and negative surprises on the loan loss provisions and opex lines offset each other.
After a subdued Q4 2016 (once one-off gains are stripped out), the Q1 2017 results are very encouraging, especially with both revenue lines contributing. Similar to the results of other banks which have reported Q1 results, margin expansion has been a key driver behind the positive surprises we are seeing in banks’ results, and mainly from the fixed income portfolio. Note that Access Bank’s loan book also declined slightly q/q.
On the back of these results, we would expect consensus forecasts for 2017 (PBT of N88bn) to move up such that consensus estimates start to move towards management’s guidance of 20% ROAE for 2017. The shares are up 12.4% ytd, 16.7% ahead of the ASI. Our estimates are under review. We rate Access shares Outperform.
Access Bank Q1 2017 results: actual vs. FBNQuest Research estimates (N millions)
| Q1 2017 | |||||
| Actual | Y/y | Q/q | FBN Quest est. | Actual vs FBN Quest est. (%) | |
| Interest income | 79,333 | 43.1% | 20.1% | 68,389 | 16.0% |
| Interest expense | -36,596 | 75.8% | 9.9% | -32,963 | 11.0% |
| Net interest income | 42,737 | 23.4% | 30.4% | 35,427 | 20.6% |
| Other income | 36,481 | 47.5% | -10.1% | 27,626 | 32.1% |
| Profit before provisions | 79,218 | 33.5% | 8.0% | 63,052 | 25.6% |
| Provisions | -3,197 | 33.3% | -66.8% | -3,521 | -9.2% |
| Operating expenses | -44,813 | 30.4% | -1.3% | -42,022 | 6.6% |
| PBT | 31,208 | 38.2% | 70.2% | 17,509 | 78.2% |
| Tax | -5,189 | 64.0% | 30.0% | -2,802 | 85.2% |
| -Tax rate | 16.6% | 16.0% | |||
| Discontd. Ops. | 0 | n/a | n/a | 0 | n/a |
| Profit before comp. income | 26,019 | 34.0% | 81.4% | 14,708 | 76.9% |
| Other comprehensive income | -1,726 | -65.1% | -32.7% | 0 | n/a |
| PAT before min. int. | 24,293 | 67.8% | 106.2% | 14,708 | 65.2% |
| Minority interest | 211 | -29.1% | n/a | -465 | n/a |
| PAT after min. int. | 24,504 | 65.8% | 107.6% | 14,243 | 72.0% |
Source: NSE; FBNQuest Estimates
