24/10/2018/InvestmentOne Report
- Net interest income of N37.6billion, down 7.4% q/q; down 2.0% y/y
- Non-interest income of N34.3billion, up 40.9% q/q, down 0.4% y/y
- Profit before tax of N24.4billion, up 32.7% q/q; up 17.1% y/y
- Profit after tax of N23.3billion, up 33.0% q/q; up 37.5% y/y
Late Monday, Access Bank released its Q3 2018 financial results which revealed the combined impact of the q/q loss reversal in net foreign exchange income, from a loss of N26.9billion in Q2 2018 to a gain of N4.2billion in Q3 2018 and the 15.4% q/q decline in impairment charges in lifting PBT and PAT up, 32.7% and 33.0% q/q respectively.
Net-Interest Income Follows Industry Trend
We highlight that Access Bank is the only bank thus far to record strong credit growth Year to Date (YtD) with 11%. However, despite the 4% q/q increase in net loans, net interest income came in 7.4% q/q lower to N37.6billion, as interest income came in at N87.8billion, 3.6% lower q/q. This followed the recent trend as seen thus far in recent earnings release; a reflection of the lower interest rate environment. However, the bank’s Net Interest Margin came in flat q/q at 5.3%, while Cost of Funds dropped 20bps q/q to 5.6% in Q3 2018.
However, net interest income came in 1.2% higher y/y on the back of the 11.6% y/y increase in interest income, attributable to the marginal increase in loans to N2.1trillion and the 20bps y/y decline in CoF to 5.6%.
Foreign Exchange Gains Provide Non-Interest Income Necessary Boost
On the back of relative stability in exchange rate space, Access Bank witnessed moderation in foreign exchange losses. As a result, non-interest income rose 40.9% q/q to N34.3billion, despite declines along other major contributors such as the 51.3% q/q decline in gains from investment securities and the 8.6% q/q decline in net fee and commission income.
However, on a y/y basis, non-interest income came in 15.5% lower at N100.4billion as the N29.6billion loss recorded in 9M 2018 from a profit of N116.5billion in 9M 2017 nullified the impact of the N75.1billion profit from gains on investment securities in 9M 2018 versus the N41.2billion loss recorded in 9M 2017 and the 12.4% y/y increase in net fees and commission.
Lower Impairment Charges Also Plays a Role
In what we could assume to be the current trend among banking names, Access Bank’s impairment charges came in 57.4% q/q lower to N1.0billion on the back of improving economic realities. Hence, the bank’s Cost of Risk(CoR) came in 10bps lower in 9M 2018 at 0.5%. While the bank’s Non-Performing Loans (NPL) ratio came in unchanged at 4.7%, as gross loans came in flat at N2.1trillion.
Furthermore, operating expenses increased 5.2% q/q to N46.5billion, which is very much unlike its peers with an average decline of 16.63% so far, largely due to the absence of the NDIC and AMCON charges not recorded in the period. We opine that the bank spread out its NDIC charges into Q3 2018.
However, this was not enough to offset lower impairment charges and the rise in net interest income as PBT and PAT came in strong, up 32.7% q/q and 33.0% q/q respectively. With ROE and ROA coming in at 17.0% and 1.9%.
Going forward, we expect to see an improvement in the bank’s non-interest income on the back of moderation in the losses derived from its net short foreign currency balance sheet position due to a convergence of translation rates as we continue to experience stability in foreign exchange rates. However, due to the hiatus status on the sale of 9Mobile to Telelogy, the bank’s N58billion exposure to the telecommunication operator could put a major constraint on asset quality.
ACCESS BANK PLC Q3 2018/9M 2018 (YE: DEC) (N millions) |
| ||||
| |||||
Q3 2018 | Q/Q
| Y/Y
| 9M 2018 | Y/Y
| |
Interest Income | 87,811 | -3.6%
| 4.6%
| 274,497 | 11.6%
|
Interest Expense | -50,157 | -0.6%
| 10.1%
| -151,547 | 21.8%
|
Net Interest Income | 37,653 | -7.4%
| -2.0%
| 122,950 | 1.2%
|
Non-interest income | 34,275 | 40.9%
| -0.4%
| 100,394 | -15.5%
|
Profit before provisions | 71,928 | 10.7%
| -1.2%
| 223,344 | -7.1%
|
Loan Impairment charges | -1,013 | -57.4%
| -58.8%
| -8,353 | -34.9%
|
Operating Expenses | -46,489 | 5.2%
| -6.1%
| -144,723 | -6.4%
|
PBT | 24,426 | 32.7%
| 17.1%
| 70,268 | -3.6%
|
Tax | -1,140 | 27.4%
| -71.0%
| -7,357 | -55.4%
|
Tax rate
| 4.7% | -20bps
| -1415bps
| 10.5% | -1218bps
|
PAT | 23,286 | 33.0%
| 37.5%
| 62,911 | 11.6%
|
Source: Company financials, Investment One Financial Services Research
9M 2018 BANKS COMPARISON SHEET | ||||||
NGN billion (unless stated otherwise) |
| ACCESS | ZENITH | GTB | UBA | |
Key Income Statement Figures | Gross Earnings | 375.2 | 474.6 | 337.3 | 374.8 | |
Net Interest Income | 122.9 | 228.5 | 170.6 | 150.7 | ||
Non-interest Income | 100.4 | 135.5 | 97.2 | 87.7 | ||
Total Expenses | -144.7 | -182.4 | -101.8 | -149.1 | ||
Loan Impairment Charges | -8.3 | -14.3 | -1.8 | -10.7 | ||
Profit Before Tax | 70.3 | 167.3 | 164.2 | 79.1 | ||
Y/Y PBT Growth
|
| -3.60%
| 9.70%
| 9.50%
| 1.30%
| |
Dividend (Kobo per share) | nil | nil | nil | nil | ||
EPS (kobo per share) | 69 | 458 | 503 | 172 | ||
Key Balance Sheet Figures | Total Assets | 4,555 | 5,618 | 3,213 | 4,507 | |
Total Liabilities | 4,082 | 4,840 | 2,631 | 3,998 | ||
Total Equity | 473 | 778 | 582 | 509 | ||
Key Ratios | Net Interest Margin | 5.30% | 9.65% | 8.60% | 5.90% | |
Cost of Fund | 5.60% | 3.30% | n/a | n/a | ||
Cost to Income | 64.80% | 50.10% | 38.00% | 62.50% | ||
NPL ratio | 4.70% | n/a | 5.60% | 7.00% | ||
Liquidity (bank level) | 44.20% | n/a | n/a | 43.90% | ||
Cost of Risk | 0.50% | 0.90% | 0.20% | 0.80% | ||
Capital adequacy ratio (bank level) | 20.30% | n/a | n/a | n/a | ||
ROE | 17.00% | 23.00% | 33.20% | 15.70% | ||
ROA | 1.90% | 3.40% | 5.60% | 1.80% | ||
Source: Company financials, Investment One Financial Services Research
