September 2, 2021/CSL Research

Access Bank’s H1 2021 AUDITED numbers showed a 29.6% y/y growth in Interest Income. Average yield on the bank’s assets ticked up to 10.3% in H1 2021, from 9.5% in H1 2020. Net Loans were up 11.3% in H1 2021 compared with December 2020 (including the impact of devaluation on FX loans) with 10.0% of that growth in Q2 alone. This may have supported the strong q/q growth in Interest Income (up 22.3% q/q). Interest Expense on the other hand declined 0.7% y/y but grew significantly within the quarter (up 40.1% in Q2 compared with Q1 2021). Customer Deposits were up 6.9% in H1 2021 compared with December 2020, with 5.1% of that growth in Q2. Cost of funds of 2.9% was reported for June 2021 compared with 3.7% for June 2020. Overall, Net Interest Margins (NIM) increased to 6.4% in H1 2021 from 4.9% in H1 2020.

Net Fee and Commission was up 44.7% y/y but declined 8.9% q/q. The y/y growth was on the back of significant growth in the following line items; Credit related fees and commissions (up 20.1% y/y), Account maintenance charge and handling commission (up 52.1% y/y), Commission on bills and letters of credit (up 130.3% y/y), Commission on other financial services (up 159.1% y/y) and channels and e-business income (up 36.9% y/y)

H1 2021 Nm

Source: Company, CSL Research.

Other Income (Net (loss)/gains on financial instruments at fair value, Net foreign exchange gain/(loss), Net loss on fair value hedge (Hedging ineffectiveness), Bargain purchase from Acquisition and Other Operating Income) was down 41.8% y/y to N57.2bn from N98.3bn in H1 2020, mainly due to Net loss on financial instruments at fair value of N23.3bn in H1 2021 compared with a gain of N134.8bn in H1 2020. The loss was however partly offset by total Net Foreign Exchange Gain of N68.2bn in H1 2021 compared with a loss of N66.2bn in the prior period. The bank also reported Net gain on fair value hedge (Hedging ineffectiveness) of N4.2bn in H1 2021.

Impairment charge of N28.7bn was up 74.1% y/y bringing H1 2021 annualised Cost of Risk (COR) to 1.6% compared with 1.1% for H1 2020. The bank reports Non-Performing Loans (NPL) ratio of 4.3% for H1 2021 same as was reported in December 2020. This, according to the bank’s management was due to intensified recovery drive within the period.

The bank’s Opex grew moderately, up 8.9% y/y and 7.4% Q/q. The stronger y/y growth in Total Operating Income (up 19.2%y/y) compared with the growth in Opex led to an improvement in the H1 2021 Cost to Income Ratio (CIR ex provisions) to 60.1% compared with 65.8% in H1 2020.

Overall, PBT was up 31.2% y/y but declined 37.7% in Q2 2021 compared with Q1 2021 while Net Profits also grew 42.4% (due to a lower tax rate) bringing annualised RoAE to 22.8%.

The Nigerian Bank reports Capital Adequacy Ratio of 16.3% compared with a regulatory minimum of 15%.

The bank reported changes in fair value of FVOCI financial instruments loss of N59.1bn under Other Comprehensive Items that may be subsequently reclassified to the income statement. The nature/treatment of that line item will be clarified at the conference call.

The bank’s management proposed an interim dividend of N0.30/s compared with N0.25/s paid in June 2020.

We have a Buy rating on Access Bank with a target price of N16.45/s. Current price of N9.00/s. Our estimates and target price are under review.