April 28, 2022/CSL Research

Access Holding’s Q1 2022 unaudited numbers showed a 20.8% y/y growth in Interest Income driven by growth in both Interest Income on Net Loans to Customers and yields on investment securities. The increase in interest income on investment securities was driven by increased volume and improved yield on securities during the period while the increase in interest income on loans was driven by an increase in the quantum of loans and advances to customers. Net Loans were up 31.6% y/y % but up only 3% in March compared with December 2021. Interest Expense on the other hand grew strongly, up 73.2% y/y, bringing Net Interest down by 7.0% y/y. While Customer Deposits were up 31.8% y/y, Interest Expense on such deposits were up 156% y/y suggesting significant increase in funding costs.

Net Fee and Commission grew strongly, up 39.6% y/y. All the Fee and Commission Income lines showed y/y growth with the major drivers being Credit related fees and commissions (up 91.8% y/y), Commission on other financial services (up 104.5% y/y) and channels and e-business income (up 12.3% y/y).

Q1 2022 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), and Other Operating Income) was up 66.9% y/y to N65.7bn from N39.4bn in Q1 2021. The group reported Net Foreign Exchange gain of N85.8bn in Q1 2022 compared with N1.1bn in Q1 2021. Though the impact of this on the bottom line was partly offset by a Net loss on financial instruments at fair value of N44.6bn reported in Q1 2022 compared with a gain of N27.1bn reported in Q1 2021. The group also reported Net gain on fair value hedge (Hedging ineffectiveness) of N17.5bn in Q1 2022 compared with only N5.3bn in Q1 2021.

Impairment charge of N13.7bn was up 9.2% y/y bringing Q1 2022 annualised Cost of Risk (COR) to 1.3%.

The bank’s Opex grew significantly, up 28.1% y/y. The slower y/y growth in Total Operating Income (up 19.5%y/y) compared with the growth in Opex led to a marginal deterioration in the Q1 2022 Cost to Income Ratio (CIR ex provisions) to 59.8% compared with 55.8% in Q1 2021. Major drivers of the strong opex growth were Amcon Charge, up 26.8% y/y and personnel expenses, up 45.8% y/y.

Overall, PBT was up 8.5% y/y while Net Profits also grew 9.2% y/y bringing Q1 2022 annualised RoAE to 21.4%.

The Group reports Capital Adequacy Ratio under Basel II guidelines of 23.5%.

We have a Buy rating on Access Bank with a target price of N19.14/s. Current price of N9.90/s. Our estimates and target price are under review.