March 21, 2022/Cordros Report
ACCESS released 2021FY results last week Thursday (March 17th), which showed that the bank recorded substantial growth in Gross Earnings (+27.1% y/y to NGN971.89 billion). This was driven by growth in both the funded and non-funded income segments as the bank was more aggressive in creating risk assets, especially through its digital and retail-based products, which bolstered fees and commission income. On the EPS of NGN4.58 (+52.2% y/y), the board proposed a final dividend of NGN0.70/s (2020FY: NGN0.55/s), which equates to a dividend yield of 7.1% based on the last closing price of NGN9.80/s (March 18th).
The bank recorded an interest income growth of 23.0% y/y to NGN601.70 billion in 2021FY, buoyed by the uptick in income from investment securities (+31.7% y/y to NGN203.68 billion). Similarly, income from loans and advances to customers (+16.4% y/y to NGN360.19 billion) and banks (+116.8% y/y to NGN28.38 billion) increased following the double-digit loan growth (+29.3% y/y to NGN4.16 trillion), the highest seen so far among Tier-1 peers. The growth across these income lines offset the sole decline in cash and balances with banks (-20.9% y/y to NGN9.46 billion).
Interest expense also increased by 32.8% y/y to NGN300.24 billion, with a significant spike in the cost of deposit from customers (+41.1% y/y) as the bank took on more expensive term deposits to meet its obligations. Consequently, the bank’s Current Account Savings Account (CASA) mix deteriorated to 58.4% in 2021FY from 64.6% in 2020FY. Likewise, expenses on interest-bearing liabilities (+77.1% y/y) and debt securities (+12.6% y/y) increased during the period.
Similar to Tier-1 peers, non-interest income grew significantly by 30.6% y/y to NGN329.60 billion, supported by the solid income growth from foreign exchange trading (+126.3% y/y to NGN101.10 billion), net fees and commission income (+26.7% y/y to NGN118.60 billion), and bad debt recoveries. This growth in non-funded income further supported the funded income growth, leading to a 21.1% y/y expansion in operating income.
Operating expenses increased by 13.7% y/y to NGN371.14 billion in 2021FY, as all major contributory lines recorded spikes – personnel expenses (+32.2% y/y to NGN96.71 billion), deposit insurance premium (+32.0% y/y to NGN20.44 billion), AMCON levy (+17.1% y/y to NGN41.51 billion) and non-cash depreciation and amortization charges (+12.3% y/y to NGN42.15 billion). Given the more significant year-on-year expansion in operating income than expenses, the bank’s cost-to-income ratio (after accounting for LLEs) improved to 67.7% from 72.2% in 2020FY.
Tying it all together, the bank recorded a profit before tax growth of 40.3% y/y to NGN176.70 billion. However, PAT notched up higher (+51.1% y/y to NGN160.22 billion), given the lower income tax expense (-17.2% y/y).
Comment: ACCESS’s increasingly strong financial performance and the corresponding increase in payout to shareholders lend credence to our positive outlook on the bank. We envisage positive price reactions in the short to medium term. The bank is also one of the fastest-growing banks nationwide, with an increasing footprint across Africa. This, coupled with the strong execution of its digitization and retail-led strategy in the Nigerian market informs our view of a positive growth trajectory. Our estimates are under review.
