April 20, 2023/Cordros Report
Access Holdings Plc (ACCESSCORP) released its 2022FY results this morning, showing a 3.1% y/y decline in EPS to NGN4.44 (2021FY: NGN4.58), despite its top-line crossing the NGN1.00 trillion mark. The decline in the group’s earnings can be attributed to the higher impairment charges (+137.7% y/y) in the period, primarily driven by its exposure to the Government of Ghana’s (GoG) debt. Notwithstanding, the board proposed a final dividend of NGN1.30/s (2021FY: NGN0.70/s), which equates to a dividend yield of 14.4% based on the last closing price of NGN9.00/s (19 April).
Interest income advanced by 37.5% y/y to NGN827.47 billion in 2022FY, buoyed by the expansion in the Holdco’s earning assets (+25.4% y/y) and elevated yields in the environment. Specifically, higher income was generated from investment securities (+64.0% y/y to NGN333.99 billion), loans and advances to customers (+28.0% y/y to NGN461.19 billion), and cash and balances with banks (+29.6% y/y to NGN12.26 billion) in the review period.
The Holdco recorded a 55.8% y/y increase in interest expense to NGN467.84 billion, triggered by higher costs incurred on deposit from banks (+83.6% y/y to NGN118.53 billion), deposits from customers (+63.4% y/y to NGN273.06 billion), interest-bearing liabilities (+14.0% y/y to NGN52.01 billion) and debt securities (+5.0% y/y to NGN22.82 billion).
In 2022FY, the group recorded a higher impairment charge (+137.7% y/y) owing to its exposure to the GoG debt. While the GoG is yet to present restructuring terms for its Eurobonds, the group took an impairment of NGN103.10 billion on its GoG debt holdings (Domestic debt and Eurobonds holdings). On that note, the fair value for Ghana’s sovereign debts in the group’s books amounts to NGN348.15 billion.
Similarly, non-interest income grew by 54.2% y/y to NGN508.20 billion, as the solid gains from investment securities trading (+528.2% y/y to NGN281.30 billion), and net fees and commission income (+22.9% y/y to NGN145.74 billion) neutered the loss in FX trading (-65.9% y/y to NGN34.50 billion) during the period.
Operating expenses increased by 35.4% y/y to NGN502.36 billion in 2022FY, due to higher regulatory charges and inflationary pressures. For clarity, the group incurred higher expenses on AMCON levy (+27.0% y/y to NGN52.73 billion), personnel expenses (+20.6% y/y to NGN116.76 billion), deposit insurance premium (+10.2% y/y to NGN22.53 billion), and depreciation and amortization charges (+5.4% y/y to NGN44.42 billion). Given the faster expansion in operating expenses than income (+22.3% y/y), the bank’s cost-to-income ratio (after accounting for LLEs) deteriorated to 75.0% (2021FY: 67.7%).
All in, profitability was pressured as the group’s profit before tax declined by 5.1% y/y to NGN167.68 billion. Likewise, PAT settled 4.6% y/y lower to NGN152.90 billion, despite the lower income tax expense (-10.4% y/y) in the period.
Comment: While the revenue expansion in the period was impressive, ACCESSCORP’s exposure to the GoG’s debt pressured its profitability growth in 2022FY. Going into 2023E, we believe the group will deliver a positive financial performance, given the strong execution of its digitization and retail-led strategy in the Nigerian market, coupled with the leverage of its Holdco status to boosts earnings growth. Our estimates are under review.
