FSDH Initial Reaction: Access Holdings 3Q22 results 
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November 6, 2022/FSDH Report

Key Performance Highlights:

• Access Holdings recorded a 29.9% YoY growth in gross earnings to N315.1 billion in 3Q22, principally driven by a 34.1% YoY rise in interest income calculated using the effective interest rate, a significant net foreign exchange gain of N44.1 billion, and higher fee & commission income, partially offset by lower gain on financial instrument held at fair value and loss on fair value hedges. Interest income on investment securities jumped 32.1% YoY to N199.7 billion in 3Q22 compared to N151.2 billion in 3Q21 due to increased volume and improved securities yield during the period. The Group’s Interest expense soared 39.7% YoY to N116.6 billion in 3Q22 due to an increase in customer deposits during the period. Consequently, the company’s net interest income climbed 22.7% YoY to N83.0 billion in 3Q22.
   
• Although net impairment charges jumped 61.0% YoY to N16.1 billion in 3Q22, the net Interest Income after loan impairment charges grew 16.1% YoY to N66.9 billion in 3Q22. The fee & commission income increased 30.6% YoY to N52.4 billion, primarily due to higher credit-related fees and financial services commissions (+126.5% YoY) to N31.2 million in 3Q22. Fee & commission expenses grew by 28.3% YoY to N12.6 billion, driven by an increase in E-banking expenses (+23.5% YoY).
   
• The group’s net foreign exchange gains vaulted 136.7% YoY to N44.1 billion in 3Q22 against a net gain of N18.6 billion in 3Q21. Net gains on financial instruments held at fair value declined 33.4% YoY to N14.3 billion in 3Q22, compared to N21.5 billion in 3Q21, primarily due to significant trading losses on fixed-income securities. The group’s personnel expenses rose 11.8% YoY to N31.6 billion, and other operating expenses spurted 23.7% YoY to N77.6 billion in 3Q22 on the back of rising inflationary pressure. In 3Q22, the company paid an effective tax at the rate of 2.5% in 3Q22 compared to 6.9% in the prior period, further magnifying the group’s profit after tax by 37.1% YoY to N48.3 billion in 3Q22 against N35.2 billion in 3Q21. The basic earnings per share came in at N1.36/share in 3Q22 versus N0.98/share in 3Q21.
   
• Looking at the segmental loan book, Business Banking grew the most (+155.7% YoY) to N404.1 billion, followed by a 24.2% YoY jump in Commercial Banking to N2,306.0 billion in 2Q22. Corporate & Investment banking vaulted 20.5% YoY to N2,182.7 billion, while Retail Banking fell 72.9% YoY to N58.3 billion.
   
• On a sequential basis, groups’ gross earnings grew 6.5% QoQ to N315.1 billion in 3Q22. However, net interest income decreased 24.6% QoQ, as a 172.7% QoQ jump in interest income on financial assets at FVTPL was more than offset by a 31.8% QoQ rise in interest expenses and a 15.0% QoQ decline in income calculated using the effective interest rate to N154.9 billion in 3Q22. The fee & commission income vaulted 111.3% QoQ, while the fee & commission expense merely increased by 3.2% to N12.6 billion in 3Q22. The company’s net loss on the fair value hedge came in at N2.5 billion (versus a net gain of N6.2 billion in 2Q22), while the net foreign exchange gain stood at N44.1 billion (2Q22: N33.0 billion loss), resulting in a 53.2% QoQ increase in after-tax profit to N48.3 billion in 3Q22 against N31.5 billion in 2Q22.
   
• On October 25, 2022, Access Holdings Plc obtained approvals from the National Pension Commission (PenCom) and the Federal Competition and Consumer Protection Commission (FCCPC) for the proposed acquisition by First Guarantee Pension Limited (FGPL) and First Ally Asset Management Limited (First Ally) of the entire issued shares of Actis Golf Nigeria Ltd (AGNL) and by extension Sigma Pensions Ltd (Sigma). AGNL is the sole shareholder of Sigma. Access had recently announced its acquisition of a majority equity stake in FGPL. Moreover, it is intended that, subject to the receipt of relevant regulatory approvals, the operations of FGPL and Sigma will be merged to create Nigeria’s fourth-largest Pension Fund Administrator (PFA) by Assets Under Management.
   
• On October 5, 2022, Access Holdings Plc entered into a binding agreement with Montepio Holding SGPS S.A (‘Montepio’) to acquire a 51% majority shareholding in Finibanco Angola S.A. The transaction, subject to regulatory approvals in Nigeria and Angola, is expected to close in the 1H23 following fulfillment of customary conditions precedents. It will be consummated at 1.0x tangible book value less pre-agreed adjustments to be determined by a customary completion audit. Upon completion of the transaction, the company is expected to increase its shareholding in Finibanco S.A and has reached certain conditional agreements in this regard.
   
• On September 21, 2022, Access Holdings Plc received final approval from the Central Bank of Nigeria for its wholly owned payment subsidiary, Hydrogen Payment Services Company limited (‘Hydrogen’).

Market Reaction: The investor reaction to the solid 3Q22 results was positive as the stock closed 1.30% higher at N7.80 versus a 0.17% decline for the All-Share Index (31/10). Furthermore, the stock rose 1.28% at N7.90 compared to a 0.21% decline for the All-Share Index on 1/11.

Access Holdings Earning Highlights 3Q22

Source: Company Financials, FSDH