September 16, 2022/CSL Research

Access Holding’s H1 2022 audited numbers showed a 16.5% y/y growth in Interest Income driven by growth in Interest Income on Net Loans to Customers which was up 37.0% y/y. The increase in interest income on Net Loans was driven by an increase in the quantum of loans and advances to customers. Net Loans to customers were up 28.9% y/y and up 11.0% in June compared with December 2021. Average asset yield was down to 8.6% in H1 2022 compared with 10.3% in H1 2021. Interest Expense also grew strongly, up 46.1% y/y, bringing Net Interest Income down by 1.3% y/y. Net Interest Income however grew 26.1% q/q (Q2 2022 compared with Q1 2022). While Customer Deposits were up 31.2% y/y, Interest Expense on such deposits were up 91.3%. Customer Deposits grew 12.7% in June compared with December 2021. Average funding cost increased to 3.2% in June 2022 compared with 2.9% in June 2021 due to the rising interest rate environment. Overall, Net Interest Margin was down to 4.5% in June 2022 compared with 6.4% in June 2021.

Net Fee and Commission declined significantly in Q2 compared with Q1, down 70.8% q/q, leading to a y/y decline of 5.2%. Some fee lines strongly grew y/y, such as Commission on other financial services (up 83.6% y/y), Channels and other E-business income (up 29.9% y/y) and Account maintenance charge and handling commission (up 10.9% y/y). 

H1 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 141.9% y/y to N138.3bn from N57.2bn in H1 2021. The group reported Net gains on disposal of fixed Income securities held as fair value through other comprehensive income of N106.2bn in H1 2022 compared with a loss of N15.3bn in H1 2021. This offsets the impact of the Net loss on financial instruments at fair value through profit or loss of N42.1bn in H1 2022 compared with a smaller loss of N7.9bn in H1 2021. The group also reported Net gain on fair value hedge (Hedging ineffectiveness) of N11.3bn in H1 2022 compared with a loss of N4.2bn in H1 2021.

Impairment charge of N36.9bn was up 28.6% y/y bringing H1 2022 annualised Cost of Risk (COR) to 1.6% compared with 1.4% in H1 2021.

The bank’s Opex grew significantly, up 35.4% y/y. The slower y/y growth in Total Operating Income (up 23.9% y/y) compared with the growth in Opex led to a deterioration in the H1 2022 Cost to Income Ratio (CIR ex provisions) to 65.6% compared with 60.1% in H1 2021. The growth in Opex were driven by a 33.9% y/y growth in personnel expenses and a 40.2% y/y growth in Other Operating Expenses. Major drivers of the strong growth in Other Operating Expenses were growth from premises and equipment costs, administrative expenses, (AMCON) surcharge, and IT and e-business expenses.

Overall, PBT was up 0.4% y/y but declined 50.8% q/q while Net Profits grew 2.2% y/y bringing H1 2022 annualised RoAE to 16.7%. compared with 22.8% in H1 2021.

The Group reports Capital Adequacy Ratio under Basel II guidelines of 22.4%.

An interim dividend of N0.20/s was proposed.

We have a Buy rating on Access Bank with a target price of N19.14/s. Current price of N8.75/s. Our estimates and target price are under review.