March 21, 2018/Cordros Report

• Access Bank Nigeria Plc (ACCESS) released its FY-2017 results at close of trade today, showing growth in Gross earnings in the year by 20.39% to NGN459.08 billion – short of our estimates by 5.71%. PBT (-11.36%) and PAT (-13.23%) declined to NGN80.07 billion and NGN61.99 billion – missing our estimates by 17.16% and 19.28% respectively, and were below Bloomberg’s polled estimates by 12.41% and 16.26%.

• Interest income (+29.35% to NGN319.85 billion) increased at a slower pace than Interest expense (+44.63% to NGN156.40 billion), resulting in a 17.47% increase in net interest income, lower than the 32.04% rise recorded in the previous year.

• As a result, net interest margin dipped 40 bps to 5.80%, from 6.20% in the previous year. Asset yield was 11.30% from 11.10% in 2016, while cost of fund increased to 5.10% from 4.30% in the previous year. 

• NIR inched higher by 4.26% to NGN139.14 billion, supported by the surge in forex income to NGN107.93 billion, from NGN3.60 billion in the previous year, as well as marginal improvement in net fee and commission income (+3.16%). Both muted the significant declines in net trading  (-160.68%) and other incomes (-59.80%).

• The decline in net trading income follows a 178.38% downturn in return on derivative instruments, which dropped to a loss of NGN39.27 billion, from a gain of NGN50.11 billion in the previous year.  

• Provision for credit losses was higher by 57.0% at NGN34.47 billion – 63.29% higher than we expected. Accordingly, cost of risk increased to 1.70%, from 1.30% in the previous year. CAR dropped 140 bps to 21.10%, but remained well above the regulatory requirement.

• The increased loan loss provision matched the 270 bps increase in the NPL ratio to 4.80%, against 2.1% recorded in the previous year.

• Opex growth increased to 17.31%, from a 10.13% increase in the previous year, driven by a 23.02% and 20.82% increases in other operating expenses and depreciation and amortization respectively.

• Although tax expense was 4.33% lower in absolute terms, the effective tax rate increased by 271 bps to 29.17%.

• Over Q4-17, the top and bottom line performances were poor, with Gross Earnings (-20.25% q/q, -11.49% y/y), PBT (-65.67% q/q, -60.94% y/y), and PAT (-66.97% q/q, -60.99% y/y) posting declines. All three line items came short of our estimates by 22.75%, 69.84%, and 72.57% respectively.

• Net Interest income (+9.23% q/q, +28.08% y/y) increased to NGN41.98 billion, despite decline in interest income (-11.89% q/q, +11.96% y/y), as interest expense (-29.72% q/q, -3.90% y/y) dipped at a faster pace.

• NIR declined by 40.89% q/q and 49.89% y/y, owing to decrease in forex income to a loss position of NGN8.52 billion in the quarter, from positive positions of NGN57.43 billion and NGN57.29 billion in the previous quarter and same period in the previous year. Net trading income also plunged 120.81% q/q,a and  118.97% y/y during the quarter.

• Loan impairment provision surged by 779.43% against the previous quarter to NGN21.64 billion, and was 125.05% higher than the same period in the previous year.

• A dividend of NGN0.65 was declared, unchanged from the previous year, and yielding 5.53% on today’s closing price of NGN11.75.

• ACCESS’ unimpressive performance is likely to trigger selloffs in tomorrow’s trading session, similar to investors’ reaction to its peers (despite broadly impressive releases) last week.