November 1, 2021/CSL Research

NIR growth support Q3 numbers

Access Bank’s 9M 2021 numbers showed a 25.5% y/y growth in Interest Income. Average yield on the bank’s assets ticked up to 9.9% in 9M 2021, from 9.7% in 9M 2020. Net Loans were up 16.4% in 9M 2021 compared with December 2020. Net Loans were up 4.6% in Q3 compared with the 10.0% growth seen in Q2.This may have accounted for the q/q decline in Interest Income (down 14.1% q/q). Interest Expense on the other hand  was up 13.5% y/y and 19.6% in Q3 compared with Q2 2021. Customer Deposits were up 11.4% in 9M 2021 compared with December 2020. Overall, Net Interest Margins (NIM) increased to 5.6% in 9M 2021 from 5.1% in 9M 2020.

Net Fee and Commission was up 23.9% y/y and 8.1% q/q. All the Fee and Commission Income lines showed y/y growth. Credit related fees and commissions (up 21.2% y/y), Account maintenance charge and handling commission (up 50.9% y/y), Commission on bills and letters of credit (up 111.0% y/y), Commission on other financial services (up 72.2% y/y) and channels and e-business income (up 19.2% y/y), commission on channels (up 67.9% y/y) and retail account services (up 31.2%y/y).

9M 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 16.4% y/y to N108.4bn from N129.6bn in 9M 2020 but grew significantly in Q3 compared to Q2 mainly due to Net gains on financial instruments at fair value of N21.5bn in Q3 compared with a Net Loss of N50.3bn in Q2.

Impairment charge of N38.9bn was up 13.7% y/y bringing 9M 2021 annualised Cost of Risk (COR) to 1.3% compared with 1.4% for 9M 2020. The bank reports non-Performing loans (NPL) ratio of 4.4% for 9M 2021 compared with 4.3% for 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 17.9% y/y and 3.0% q/q. The slower y/y growth in Total Operating Income (up 16.9%y/y) compared with the growth in Opex led to a marginal deterioration in the 9M 2021 Cost to Income Ratio (CIR ex provisions) to 62.6% compared with 62.1% in 9M 2020.

Overall, PBT was up 15.8% y/y but grew only marginally in Q3 2021 compared with Q1 2021, up 0.4% q/q while Net Profit also grew 19.1% y/y bringing annualised RoAE to 21.0%.

The Nigerian Bank reports Capital Adequacy Ratio of 17.64% compared with a regulatory minimum of 15% for 9M 2021. In September, the bank successfully issued a  US$500 million Senior Unsecured Eurobond. Also, subsequently, the bank issued the first Additional Tier 1 (AT1) Eurobond out of Nigeria. The AT1 instrument is aimed at strengthening the bank’s capital ratios, ahead the adoption of the new Basel III framework.

We have a Buy rating on Access Bank with a target price of N16.45/s. Current price of N9.50/s. Our estimates and target price are under review.