March 18, 2019/InvestmentOne report
- Net interest income of N50.6billion, up 34.5% q/q; up 20.6% y/y
· Non-interest income of N37.8billion, up 10.4% q/q, up 187% y/y
· Profit before tax of N32.9billion, up 34.8% q/q; up 526.0% y/y
- Profit after tax of N32.1billion, up 37.7% q/q; up 768.7 y/y
Access Bank published its Q4 2018 financial scorecard last week Friday, with quite a remarkable performance q/q. The performance was largely driven by the 34.5% q/q jump in net interest income to N50.6billion and the 10.4% q/q increase in non-interest income to N37.8billion, which was more than enough to offset the 5x q/q surge in impairment charges to N6.3billion. Resultantly, PBT and PAT were up 34.8% and 37.7% to N32.9billion and N32.1billion respectively.
FY 2018 Performance
Net interest income was up 6.2% y/y to N173.6billion, largely attributable to the 25% and 12% y/y rise in income from investment securities and interests on loans. Unlike its peers, Access bank reported a 3% y/y increase in net loans to N2.1trillion and according to management, it took advantage of the rise in interest rates witnessed in Q4 2018. The outcome of the strategy was reflective in the 34.5% q/q rise in net interest income mentioned above. Net Interest Margin was down 50bps y/y to 5.3% as the bank’s Cost of Funds was up 40bps y/y to 5.5%.
Non-interest income also came in positive, inching up by 4.7% y/y albeit rising 10.4% q/q. This was driven largely by net gains on investment securities which came in at N96.2billion from a loss of N33.4billion in FY 2017.
Lower Impairments Boosts Bottom line
As seen across the board, most banks have seen support from improving macroeconomic conditions as impairment charges have generally declined. Access Bank’s Profit before provisioning inched up slightly by 5.5% y/y but the 57.5% y/y drop in impairment charges to N14.7billion was more than enough to offset the 6.1% y/y increase in total expenses to N193.6billion. As a result, PBT and PAT came in strong at 103.2billion and N94.9billion, up 32.0% and 58.1% respectively.
Furthermore, the bank’s NPL ratio declined 230bps y/y to 2.5% on the back of a de-recognition and repayment of its Etisalat loan even as absolute NPLs were down 45% y/y. Hence, Cost of risk was down 120bps y/y to 0.7%
Cost to Income ratio was up marginally by 30bps y/y but declined 89bps q/q to 62.2%, benefiting from the stronger revenue reported during the quarter. The y/y increase was on the back of the 20% increase in regulatory charges.
Overall, the bank’s FY 2018 performance was remarkable as the bank reported a 650bps increase in ROAE to 19.0% and Capital Adequacy ratio of 19.9%. Final dividend came in at N0.25k (down 37.5% y/y), with a dividend yield of 4.2% based on its closing price on Friday. Thus, total dividend for 2018 was N0.50k (down 23.1% y/y). The drop in the bank’s payout ratio from 30% in FY 2017 to 15% in FY 2018 was not surprising, given their recent merger with Diamond Bank Plc.
Going forward, management remains optimistic on its ability to deliver a smooth transition on its merger with Diamond Bank, given their past track record. Management also stated that the dividend policy adopted in 2018 should be retained in 2019 as it attempts to deliver on its 20.0% ROE target for 2019 and CAR north of 20%. Management also expects earnings to be driven by non-interest income, post-merger with a flat loan book growth as it attempts to limit credit risk.
ACCESS BANK PLC Q4 2018/FY 2018 (YE: DEC) (N millions) |
| ||||
| |||||
Q4 2018 | Q/Q
| Y/Y
| FY 2018 | Y/Y
| |
Interest Income | 106,418 | 21.2%
| 43.8%
| 380,915 | 19.1%
|
Interest Expense | -55,790 | 11.2%
| 74.3%
| -207,337 | 32.6%
|
Net Interest Income | 50,628 | 34.5%
| 20.6%
| 173,578 | 6.2%
|
Non-interest income | 37,834 | 10.4%
| 187.7%
| 138,229 | 4.7%
|
Profit before provisions | 88,463 | 23.0%
| 60.5%
| 311,807 | 5.5%
|
Loan Impairment charges | -6,303 | 522.2%
| -70.9%
| -14,657 | -57.5%
|
Operating Expenses | -49,240 | 5.9%
| 74.4%
| -193,962 | 6.1%
|
PBT | 32,919 | 34.8%
| 526.0%
| 103,188 | 32.0%
|
Tax | -849 | -25.5%
| -45.8%
| -8,207 | -54.6%
|
Tax rate
| 2.6% | -209bps
| -2722bps
| 8.0% | -1518bps
|
PAT | 32,070 | 37.7%
| 768.7%
| 94,981 | 58.1%
|
Source: Company financials, Investment One Financial Services Research
FY 2018 BANKS COMPARISON SHEET | ||||||
NGN billion (unless stated otherwise) |
| ZENITH | GTB | STANBIC | ACCESS | |
Key Income Statement Figures | Gross Earnings | 630.3 | 434.7 | 222.4 | 528.7 | |
Net Interest Income | 295.6 | 222.4 | 78.2 | 173.6 | ||
Non-interest Income | 180.0 | 125.8 | 102.6 | 138.2 | ||
Total Expenses | -225.5 | -127.8 | -95.601 | -194.0 | ||
Loan Impairment Charges | -18.4 | -4.9 | 2.9 | -14.7 | ||
Profit Before Tax | 231.7 | 215.6 | 88.2 | 103.2 | ||
Y/Y PBT Growth
|
| 16.2%
| 9.1%
| 44.1%
| 32.0%
| |
Dividend (Kobo per share) | 250 | 245 | 150 | 25 | ||
EPS (kobo per share) | 615 | 654 | 704 | 331 | ||
Key Balance Sheet Figures | Total Assets | 5,996 | 3,287 | 1,664 | 4,954 | |
Total Liabilities | 5,140 | 2,712 | 1,424 | 4,464 | ||
Total Equity | 856 | 576 | 240 | 491 | ||
Key Ratios | Net Interest Margin | 8.9% | 9.2% | 5.2% | 5.3% | |
Cost of Fund | 3.1% | 3.1% | 4.0% | 5.5% | ||
Cost to Income | 49.3% | 36.6% | 52.9% | 62.2% | ||
NPL ratio | 5.0% | 7.3% | 3.9% | 2.5% | ||
Liquidity (bank level) | 72.0% | n/a | n/a | 50.9% | ||
Cost of Risk | 0.9% | 0.3% | 0.7% | 0.7% | ||
Capital adequacy ratio (bank level) | 25.0% | 23.4% | 24.7% | 19.9% | ||
ROE | 23.8% | 30.9% | 34.5% | 19.0% | ||
ROA | 3.4% | 5.6% | 4.8% | 2.1% | ||
Source: Company financials, Investment One Financial Services Research
