March 22, 2022/CSL Research

Access Bank’s FY 2021 AUDITED numbers showed a 23.0% y/y growth in Interest Income. Q/q, Interest Income declined 13.5%. The Q/q decline was due to a significant decline in Interest Income on investment securities. Average yield on the bank’s assets moderated to 8.6% in FY 2021, from 9.7% in FY 2020. Net Loans were up 29.3% y/y. Interest Expense, on the other hand, was up 32.7% y/y and 16.2% q/q as cost of funds increased gradually through the year. Overall, Net Interest Income was up 14.6% y/y but declined 50.1% in Q4 compared with Q3. Customer Deposits were up 24.5% in December 2021 compared with December 2020. Overall, Net Interest Margins (NIM) declined to 4.3% in FY 2021 from 4.9% in FY 2020.

Net Fee and Commission was up 26.7% y/y but declined marginally q/q. All the Fee and Commission Income lines showed y/y growth with the major drivers being Credit related fees and commissions (up 33.1% y/y), E-business Income (up 18.2% y/y), Commission on other financial services (up 102.9% y/y) and channels and e-business income (up 19.2% y/y), commission on collections (up 511.8%).

FY 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 up 32.8% y/y to N210.9bn from N158.8bn in FY 2020 and grew significantly in Q4 compared to Q3 (up 100.2%). The y/y growth was mainly due to significant growth in Net FX gains compared to a loss in FY 2020. The growth was, however, tampered with by a significant decline in Net gains on financial instruments at fair value. 

Impairment charge of N83.2bn was up 32.3% y/y bringing FY 2021 Cost of Risk (COR) to 2.2% compared with 1.9% for FY 2020. The bank reports a Non-Performing Loan (NPL) ratio of 4.0% as of December 2021 compared with 4.3% 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 13.7% y/y but declined 21% in Q4 compared with Q3. The higher y/y growth in Total Operating Income (up 22.4%y/y) compared with the growth in Opex led to a moderate improvement in cost to income ratio (CIR ex-provisions) to 58.8% in FY 2021 compared with 63.4% in FY 2020.  

Overall, PBT was up 40.3% y/y and 10.8% q/q while Net Profits grew 51.1% y/y and 9.6% q/q bringing FY 2021 RoAE to 17.8% from 15.6% in FY 2020. 

The Nigerian Bank reports a Capital Adequacy Ratio of 20.93% compared with 16.25% 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 has strengthened the bank’s capital ratios, ahead of the adoption of the new Basel III framework, which requires systemically important banks to have an additional Tier 1 capital over the current 16.0% minimum for such banks. 

The Management of the bank proposed a final dividend of N0.70/s. This brings the final dividend to N1/s, implying a dividend yield of  10.2% based on the current price of N9.80/s. 

We have a Buy rating on Access Bank with a target price of N19.14/s. Current price of N9.80/s.  

The bank will host an audio conference call for analysts and investors on 23 March 2022 at 2 pm WAT.