October 31, 2022/CSL Research

Access Holding’s 9M 2022 unaudited numbers showed a 21.5% y/y growth in Interest Income driven by growth in Interest Income on Net Loans to Customers which was up 11.1% in 9M 2023 compared to the December position. Interest Expense also grew strongly, up 43.4% y/y and 31.8% q/q resulting in a marginal 4.8% y/y growth in Net Interest Income. Q/q, (Q3 2022 compared with Q2 2022), Net Interest Income was down 24.6%. Customer Deposits grew 17.7% in September compared with December 2021. Overall, Net Interest Margin was down to 4.6% in September 2022 compared with 5.6% in September 2021.

Net Fee and Commission grew 7.3% y/y but was up significantly in Q3 compared with Q1, up 216.9% q/q, due to a low base in Q2. Net Fee & Commission Income in Q2 was the lowest of the three quarters. Some fee lines strongly grew y/y, such as credit related fees and commission (up 21.4%y/y), Commission on other financial services (up 42.4% y/y), and Account maintenance charge and handling commission (up 15.3% y/y).

9M 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 85.8% y/y to N201.3bn from N108.4bn in 9M 2021. The bank reported Net gains on financial instruments at fair value of N78.4bn in 9M 2022 compared with a loss of N1.8bn in 9M 2021. Net foreign exchange gain also grew moderately, (up 11.6% y/y). The group also reported Net gain on fair value hedge (Hedging ineffectiveness) of N8.8bn in 9M 2022 compared with a loss of N1.1bn in 9M 2021.

Impairment charge of N52.95bn was up 37.0% y/y bringing 9M 2022 annualised Cost of Risk (COR) to 1.6%.

The bank’s Opex grew significantly, up 29.6% y/y. The slower y/y growth in Total Operating Income (up 24.2%y/y) compared with the growth in Opex led to a deterioration in the 9M 2022 Cost to Income Ratio (CIR ex provisions) to 65.3% compared with 62.6% in 9M 2021. The growth in Opex was driven by a 25.2% y/y growth in personnel expenses and a 34.7% y/y growth in Other Operating Expenses. Major drivers of the strong growth in Other Operating Expenses were premises and equipment costs, administrative expenses, (AMCON) surcharge, and IT and e-business expenses

Overall, PBT was up 8.9% y/y but grew significantly in Q3 compared to Q2 (up 53.5% q/q) while Net Profits grew 12.3% y/y bringing 9M 2022 annualised RoAE to 17.5%. compared with 21.0% in 9M 2022.

We have a Buy rating on Access Bank with a target price of N19.14/s. Current price of N7.70/s. Our estimates and target price are under review.

Kind regards,

Gloria Fadipe

Important Risk Warnings and Disclaimers

CSL STOCKBROKERS LIMITED (“CSLS”) is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange. CSL Capital (UK) Ltd (Firm Reference Number: 913994, Registered Number: 11818051), trading in the name of ‘CSL Stockbrokers’ for its activities, is authorised by the Financial Conduct Authority (FCA).

Both CSLS and CSL Capital (UK) Ltd are members of the FCMB Group (“the Group”) of Nigeria, a group of companies which also includes First City Monument Bank Ltd.

RELIANCE ON THIS PUBLICATION FOR THE PURPOSE OF ENGAGING IN ANY INVESTMENT ACTIVITY MAY EXPOSE YOUTO A SIGNIFICANT RISK OF LOSS. By receiving this document, you will not be deemed a client or provided with the protections afforded to clients of CSLS and CSL Capital (UK) Ltd. When distributing this document, CSLS, or any member of the Group is not acting for any recipient of this document and will not be responsible for providing advice to any recipient in relation to this document. Accordingly, CSLS or any member of the Group will not be responsible to any recipient for providing the protections afforded to its clients.

If you are in the UK, you are a person to whom either Articles 19 or 49 of the Financial Services and Markets 2000 (Financial Promotion) Order 2005 apply or a person to whom this communication may otherwise be lawfully made.

In the United Kingdom, this document is available only to such persons described above and persons of any other description should not rely on this document. Transmission of this document to any other person in the United Kingdom is unauthorized and may contravene the Financial Services and Markets Act 2000 (FSMA). If you are not such a person or if the distribution of this document is otherwise unlawful where you are, you are required to return the document immediately to CSLS. This document is not intended for Retail Clients in the UK.

This document is not an offer to buy or sell or to solicit an offer to buy or sell any securities. This document does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The appropriateness of a particular investment will depend on an investor’s individual circumstances and objectives. The investments and shares referred to in this document may not be suitable for all investors.

CSLS or any other member of the Group may effect transactions in shares mentioned herein and may take proprietary trading positions in those shares, and may receive remuneration for the publication of its research and for other services. Accordingly, this document may not be considered as objective or impartial. Additionally, information may be available to CSLS, or the Group, which is not reflected in this material. Further information on CSLS’ policy regarding potential conflicts of interest in the context of investment research and CSLS’ policy on disclosure and conflicts in general are available on request.

This document is based on publicly available information obtained from sources which CSLS believes are reliable, but which it has not independently verified. Neither CSLS, or their advisors, directors or employees make any guarantee, representation or warranty as to the accuracy, reasonableness or completeness of this information and neither CSLS or their advisors, directors or employees accepts any responsibility or liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. The opinions contained in this document are subject to change without notice and are not to be relied upon and should not be used in substitution for the exercise of independent judgment.

Past performance is not a guarantee of future performance. Investments may go down in value as well as up and you may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the exchange rates may have an adverse effect on the value, price or income of that investment. In case of an investment for which there is no recognised market it may be difficult for investors to sell their investment or to obtain reliable information about their value or the extent of the risk to which they are exposed.

The information contained in this document is confidential and is solely for use of those persons to whom it is addressed and may not be reproduced, further distributed to any other person or published, in whole or in part, for any purpose.