Culled—Proshare
August 23, 2017/FBNQuest Research
Event: Access Bank reports Q2 2017 results
Implications: Consensus earnings estimates likely to move up; Neutral reaction expected from the market
Positives: Strongly double-digit revenue growth
Negatives: Opex increased by 45% y/y; provisions by 124% q/q
This afternoon Access Bank (Access) published its Q2 2017 results which showed that PBT declined marginally by -3% y/y to N20.8bn. Although pre-provision profits increased by 25% y/y driven by growth from both revenue lines, the non-interest income line which grew by 30% y/y was the stronger of the two lines. However, funding income also grew healthily by 19% y/y.
Despite the double-digit growth in pre-provision profits and an 8% y/y decline in loan loss provisions, a 45% y/y spike in opex proved significant and completely offset the positives from the these lines. Further down the P&L, PAT fell by a much wider margin of-57% y/y, largely because of negative base effects in other comprehensive income (OCI) which came in at N7.7bn compared with around N30.7bn in Q2 2016.
Sequentially, PBT was down by -33% q/q, mainly driven by spikes in opex and provision which were up by 34% q/q and 124% q/q respectively. Funding income was also around 6% lower q/q. Compared with our forecasts, PBT missed by around 12%, mainly because of the negative surprise in opex. However, PAT beat by 4% because the bank had a positive result of N7.7bn on the OCI line (we had forecast zero OCI).
In terms of the H1 trends, PBT expanded by 18% y/y to N52.0bn. However, PAT declined by 28% y/y due to negative base effects in OCI. The bank has declared an interim dividend of N0.25 which compares with our N0.20 forecast and implies a yield and payout ratio of 2% and 16% respectively.
The strong y/y results on the non-interest income line was driven by N59.8bn income from fx trading in H1 2017, related to mark-to-market gains on the bank’s derivative positions. We expect the spike in opex and the bank’s asset quality position (following the steep rise in loan impairments charges q/q) to be a central theme with investors and analysts on the bank’s conference call which is billed to hold on Wednesday, 30 August 2017.
Access Bank’s H1 2017 PBT tracks ahead of consensus PBT forecast of N98.4bn. As such we expect to see slight upward revisions to consensus earnings estimates. However, given the dark spots in the results, particularly opex and impairments, we expect to see a subdued / neutral reaction from the market over the next few days.
The shares are up 74.4% ytd, vs. the 37.9% return on the ASI. Our estimates are under review. We rate Access shares Outperform.
Access Bank Q2 2017 results: actual vs. FBNQuest Research estimates (N millions)
| Q2 2017 | H1 2017 | ||||||||
| Actual | Y/y | Q/q | FBNQuest est. | Actual vs FBN Quest est. (%) | Actual | Y/y | FBNQuest est. | Actual vs FBN Quest est. (%) | |
| Interest income | 82,572 | 45.2% | 4.1% | 78,560 | 5.1% | 161,905 | 44.2% | 157,893 | 2.5% |
| Interest expense | -42,267 | 83.6% | 15.5% | -36,358 | 16.3% | -78,864 | 79.9% | -72,955 | 8.1% |
| Net interest income | 40,305 | 19.1% | -5.7% | 42,201 | -4.5% | 83,042 | 21.3% | 84,938 | -2.2% |
| Other income | 47,938 | 29.6% | 31.4% | 32,363 | 48.1% | 84,420 | 36.8% | 68,845 | 22.6% |
| Profit before provisions | 88,243 | 24.6% | 11.4% | 74,565 | 18.3% | 167,461 | 28.6% | 153,783 | 8.9% |
| Provisions | -7,166 | -8.3% | 124.1% | -7,043 | 1.7% | -10,363 | n/a | -10,240 | 1.2% |
| Operating expenses | -60,237 | 44.8% | 34.4% | -43,980 | 37.0% | -105,050 | 38.3% | -88,793 | 18.3% |
| PBT | 20,841 | -2.7% | -33.2% | 23,542 | -11.5% | 52,049 | 18.3% | 54,750 | -4.9% |
| Tax | -7,400 | 2.9% | 42.6% | -3,767 | n/a | -12,589 | 21.6% | -8,956 | 40.6% |
| -Tax rate | 35.5% | 16.0% | 24.2% | 16.4% | |||||
| Discontd. Ops. | 0 | n/a | n/a | 0 | n/a | 0 | n/a | 0 | n/a |
| Profit before comp. income | 13,441 | -5.5% | -48.3% | 19,775 | -32.0% | 39,460 | 17.3% | 45,794 | -13.8% |
| Other comprehensive income | 7,744 | -78.3% | n/a | 0 | n/a | 6,018 | -80.4% | -1,726 | n/a |
| PAT before min. int. | 21,185 | -57.5% | -12.8% | 19,775 | 7.1% | 45,478 | -29.3% | 44,068 | 3.2% |
| Minority interest | -432 | n/a | n/a | 160 | n/a | -221 | -87.7% | 371 | n/a |
| PAT after min. int. | 20,753 | -56.5% | -15.3% | 19,935 | 4.1% | 45,256 | -27.6% | 44,439 | 1.8% |
