May 10, 2021/InvestmentOne Report
· Net interest income of N93.96billion, up 40.92%q/q , 30.12%y/y
· Non-interest income of N70.12billion, up 37.73%q/q, down 3.92%y/y.
· Profit before tax of N60.05billion, up 545.77%q/q, 29.72% y/y.
· Profit after tax of N52.55billion, up 1316.72%y/y, 28.39%y/y..
Strong Earnings Performance
Recently, Access Bank released its Q1 2021result which showed a jump in PBT to N60.05billion from N9.30billion in Q4 2020. This was driven by 40.92%q/q increase in Net Interest Income (NII), 37.73%q/q improvement in Non-interest income, 56.25%q/q decline in loan impairment charges which offset a 14.89%q/q increase in OPEX. We believe the increase in NII may not be unconnected to the improvement in the bank’s Net Interest Margin to 6.40% from 5.00% in FY 2020 on the back of lower cost of funds. Non-interest income was up due to 41.40% increase in net fees and commission income and gain of N5.33billion (compared to a loss of N795million in Q4 2020) on fair value hedge and FX revaluation gain of N1.08bllion (compared to FX loss of N20.21billion in Q4 2020) which offset a 29.69% decline in Gains on investment securities.
Higher NII drags y/y growth in PBT
On a y/y basis, while Net Interest Income (NII) increased by 30.12%, Non-interest declined by 3.92%. Loan Impairment rose by 46.06% as the bank accounted for the impact of the current pandemic on assets value (Loan asset). We highlight that the fall in Non-interest Income was driven by lower gains on investment securities due to selloff in fixed income market and loss on derivative instruments. OPEX was somewhat flat, only rose by 1.30%, on the back of the impact of the bank’s cost reduction strategy. As a result of the improvement in NII, the bank’s PBT rose by 29.72% y/y to N60.05billion in Q1 2021.
As a result of the improvement in earnings in relation to a flattish OPEX, cost to income ratio fell to 55.76% from 63.40% and 62.20% in FY 2020 and Q1 2020. This is well in line with the bank’s cost to income ratio guidance of less than 60% set by the bank for 2021. Elsewhere, the bank’s NPL ratio fell to 4.00% from 4.30% in FY 2021 on the back of the bank’s intensified recovery drive.
Outlook
Given that most banks already applied for loan restructuring with the CBN, we expect the impact of the current pandemic to be limited on asset quality. With that being said, we believe a diversified loan portfolio of Access bank puts its risk lower than others. Elsewhere, we believe recent increase in rates in the fixed income market should support its asset yield and improve its Net Interest Margin further.
We expect the current expansion strategy to other African countries and non-bank financial services to have a positive impact on the bank’s earnings diversification and sustainability in the long run. We highlight that the bank expanded its business to Kenya and Mozambique, further increasing its footprints across the African Continent. Access Bank Zambia also concluded the acquisition of Cavmont Bank Limited in January 2021 and the Group recently announced the approval by relevant regulatory authorities for the acquisition of Grobank Limited in South African market. To complement its strategic expansion, the bank recently announced its definitive and binding agreement with ABC Holdings Limited to acquire a 78.15% shareholding in African Banking Corporation of Botswana. In terms of Holdco structure, the Bank has received the Approval-In-Principle from the Central Bank of Nigeria for the restructuring and the HoldCo will consist of 4 subsidiaries in order to tap into the market opportunities that are available in the consumer lending market, electronic payments industry and retail insurance market.
Overall, we expect the bank’s strong capital base (CAR of 22.20%), which is well above the regulatory requirement of 15% should support its ability to survive in the current challenging macroeconomic environment.
ACCESS BANK PLC Q1 2021 (YE: DEC) (N millions)
| |||
Q1 2021
| Q/Q
| Y/Y
| |
Interest Income
| 143,798
| 26.21%
| 9.05%
|
Interest Expense
| -49,839
| 5.46%
| -16.46%
|
Net Interest Income
| 93,959
| 40.92%
| 30.12%
|
Non-interest income
| 70,122
| 37.73%
| -3.92%
|
Profit before provisions
| 164,082
| 39.54%
| 13.01%
|
Loan Impairment charges
| -12,535
| -56.25%
| 46.06%
|
Total Opex
| -91,496
| 14.89%
| 1.30%
|
PBT
| 60,050
| 545.77%
| 29.72%
|
Tax
| -7,503
| 34.22%
| 39.88%
|
Tax rate
| 12.5%
| -4762bps
| 91bps
|
PAT
| 52,547
| 1316.72%
| 28.39%
|
Source: Company financials, Investment One Financial Services Research
Q1 2021 BANKS COMPARISON SHEET
| |||||||
NGN billion (unless stated otherwise)
|
| UBA
| GTB
| Zenith
| Access
| FBNH
| |
Key Income Statement Figures
| Gross Earnings
| 155.40
| 106.17
| 157.31
| 222.14
| 136.60
| |
Net Interest Income
| 74.38
| 54.43
| 83.17
| 93.96
| 52.80
| ||
Non-interest Income
| 32.27
| 45.86
| 51.20
| 78.34
| 52.60
| ||
Total Expenses
| 64.45
| 39.78
| 69.49
| 91.50
| 73.30
| ||
Loan Impairment Charges
| 2.03
| 1.86
| 3.86
| 12.54
| 13.20
| ||
Profit Before Tax
| 40.58
| 45.55
| 61.02
| 60.05
| 18.90
| ||
Y/Y PBT Growth
|
| 24.00%
| -9.03%
| 3.80%
| 29.72%
| -34.10%
| |
Dividend (Kobo per share)
| Nil
| nil
| nil
| nil
| nil
| ||
EPS (kobo per share)
| 1.04
| 1.60
| 1.69
| 1.49
| 0.43
| ||
Key Balance Sheet Figures
| Total Assets
| 7,892
| 4,993
| 8,683
| 9,054
| 7,836
| |
Total Liabilities
| 7,130
| 4,155
| 7,591
| 8,261
| 7,071
| ||
Total Equity
| 762
| 838
| 1,092
| 793
| 765
| ||
Key Ratios
| Net Interest Margin
| 4.87%
| 7.20%
| 6.00%
| 6.40%
| 4.60%
| |
Cost of Fund
| 2.01%
| 0.83%
| 1.10%
| NA
| 1.60%
| ||
Cost to Income
| 60.44%
| 42.56%
| 53.20%
| 55.76%
| 69.60%
| ||
NPL ratio
| NA
| NA
| 4.20%
| 4.00%
| 7.90%
| ||
Liquidity (bank level)
| NA
| NA
| 45.00%
| 48.30%
| NA
| ||
Cost of Risk
| 0.29%
| 0.45%
| 0.50%
| 1.33%
| 2.30%
| ||
Capital adequacy ratio (bank level)
| NA
| NA
| 21.10%
| 22.18%
| 16.60%
| ||
ROAE
| 20.53%
| 22.06%
| 19.20%
| 27.22%
| 8.20%
| ||
ROA
| 1.96%
| 3.67%
| 2.50%
| 2.35%
| 0.80%
| ||
Source: Company financials, Investment One Financial Services Research
