September 25, 2023/Cordros Report
Access Holdings Plc (ACCESSCORP) released its audited H1-23 financials yesterday, reporting an EPS growth of 48.4% y/y to NGN3.74/s (H1-22: NGN2.52/s), supported by growth across its core (+63.4% y/y) and non-core (+53.0% y/y) income lines. Peculiarly, ACCESSCORP recorded the slowest earnings expansion rate among its tier 1 peers – UBA (+453.0% y/y), GTCO (+268.2% y/y), FBNH (+224.8% y/y), and ZENITH (+161.7% y/y). The board has proposed an interim dividend of NGN0.30/s (H1-22: NGN0.20/s), which equates to a dividend yield of 1.9% based on the last closing price of NGN15.55/s (25 September).
The holdco recorded a 63.0% y/y increase in its interest income to NGN606.84 billion, driven majorly by the combined impact of (1) elevated yields in the fixed-income market and (2) the growth in the group’s earnings assets (+38.5% YTD to NGN14.24 trillion) in the period. In nominal terms, the holdco recorded increased income from loans & advances to customers (+33.8% y/y to NGN318.53 billion), investment securities (+113.8% y/y to NGN259.33 billion), loans & advances to banks (+178.2% y/y to NGN22.51 billion) and cash and balances with banks (+33.9% y/y to NGN6.47 billion).
Interest expenses grew faster by 118.9% y/y to NGN382.60 billion, triggered by the higher cost of deposits from customers (+91.1% y/y to NGN207.57 billion) and financial institutions (+245.3% y/y to NGN115.55 billion), following the elevated interest rate in the environment amid the deteriorating CASA mix (H1-23: 60.7% | 2022FY: 62.6%). Likewise, the group recorded higher costs on debt securities (+77.4% y/y to NGN20.06 billion) and interest-bearing borrowings (+67.5% y/y to NGN38.64 billion). After accounting for credit impairment charges (+0.8% y/y to NGN37.18 billion), net interest income (ex-LLE) settled higher by 16.4% y/y to NGN187.06 billion.
Furthermore, non-interest income (NII) expanded by 53.0% y/y to NGN296.48 billion, spurred by gains in fees and commission (+58.8% y/y to NGN88.03 billion) and FX revaluation (+362.4% y/y to NGN244.34 billion). The preceding was sufficient to offset the losses incurred on its trading books – investment securities (NGN37.06 billion) and FX (NGN15.22 billion).
Elsewhere, operating expenses increased by 23.1% y/y to NGN315.94 billion, reflecting the heightened inflationary pressures and rise in regulatory costs. In terms of contributory items, the group recorded an increment in NDIC premium (+45.5% y/y to NGN16.16 billion), AMCON levy (+30.5% y/y to NGN68.81 billion), depreciation & amortization (+20.7% y/y to NGN26.18 billion) and personnel expenses (+11.8% y/y to NGN65.13 billion). Following the faster operating income growth (+36.4% y/y) relative to OPEX, the cost-to-income ratio (ex-LLE) improved at 65.3% in H1-23 (vs 72.4% in H1-22).
To sum up, profit before tax grew by 71.4% y/y to NGN167.60 billion. Meanwhile, following a surge in income tax expense (+255.3% y/y), profit after tax settled 52.6% y/y higher at NGN135.44 billion.
Comment: ACCESSCORP performance in the review period was impressive unsurprisingly, highlighting the impact of the elevated interest rates and FX devaluation on its core and non-core income lines, amid the improvement in its operational efficiency. Over the rest of the year, we believe the group will maintain this positive momentum, particularly as the elevated interest rates remain a catalyst for earnings growth. Our estimates are under review.
