March 27, 2024/CSL Research

Access Holding’s FY 2023 audited numbers showed a 99.9% y/y growth in Interest Income (18.5% higher than our forecast) driven by growth in both Interest Income on Net Loans and yields on investment securities due to a higher yield environment and growth in earnings assets. Yield on earning assets increased to 12.8% in 2023 from 9.2% in 2022. Net Loans grew 57.6% in December 2023 compared with December 2022 inclusive of the impact of devaluation on foreign currency loans.

Interest Expense also grew strongly reflecting the increasing interest rate environment, up 105.0% y/y driven mainly by strong growth in Interest Expense on deposits from financial institutions (up 170.6% y/y) and deposits from customers (up 85.2% y/y). We believe the impact of devaluation on the FX portion of interest expense must have also contributed to the growth. Cost of funds closed 2023 at 5.4% compared with 4.1% in 2022. Overall, Net Interest Income grew strongly, up 93.4% y/y bringing Net Interest Margin to 5.4% from 4.0% in 2022. Customer Deposits were up 65.2% for FY 2023 compared with the December 2022 position also inclusive of the impact of devaluation on foreign currency deposits.

Net Fee and Commission grew strongly, up 42.6% y/y and 19.0% higher than our forecast. The strong growth in Fee and Commission Income was driven mainly by a significant jump in channels and other e-business income (up 70.3%y/y) and commission on other financial services (up 157.8% y/y). Credit-related fees and commissions also grew moderately (up 10.9% y/y).

FY 2O23

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Source: Company’s Financials, 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 82.9% y/y to N662.0bn in FY 2023 from N361.9bn in 2022.The significant growth was mainly driven by growth in Net gains on financial instruments held at fair value to N512.4bn and growth in net gains on fair value hedge (Hedging ineffectiveness) to N99.3bn from N19.7bn in 2022. The group also reported unrealised foreign currency translation difference under Other Comprehensive Income (OCI) of N481.1bn.

Impairment charge of N139.5bn was down 29.5% y/ bringing FY 2023 Cost of Risk (COR) to 2.1%, higher than our 1.4% estimate. Nonperforming loan ratio (NPL) improved to 2.8% from 3.2% in 2022.

The bank’s operating expenses (Opex) surged by 38.9% y/y to reach N697.5billion. This significant uptick in Opex was overshadowed by an even greater increase in Total Operating Income, which rose by 80.5% y/y. Consequently, there was a marked improvement in the Cost to Income Ratio (CIR ex provisions) for the full year 2023, dropping to 44.6% from 57.9% in FY 2022.The primary contributors to the notable Opex growth included a substantial rise in personnel expenses, up by 44.0% year-on-year, driven by adjustments for the cost of living. Additionally, expenses related to Amcon charges increased by 30.5% year-on-year. IT and e-business-related expenditures surged by 74.9% year-on-year, likely due to foreign exchange (FX) fluctuations, while administrative expenses rose sharply by 85.4% year-on-year, reflecting the impact of a high inflationary environment.

Overall, PBT was up 334.8% y/y to N729.0bn. The company reported significant growth in Tax Expense to N109.7bn from only N14.8bn for FY 2022. This, according to the management, was due to some changes to the Company Income tax brought about by the New Finance Act. Effective tax rate was up to 15.0% from 8.8% in 2022. Net Profit also grew 306.9% y/y to N619.3bn bringing FY 2023 RoAE to 36.2%.

Capital Adequacy Ratios of 19.0% and 21.09% were reported for Access Holdings and Access Bank respectively.

The Board of Directors proposed a final dividend of N1.80 (Dec 2022: N1.30) per share. This in addition to the interim dividend of N0.30/s brings total FY 2023 dividend to N2.10/s, implying total dividend yield of 8.8% based on current price of N24.00/s.

We have a Buy rating on Access Bank with a target price of N36.97/s. Current price of N24.00/s

Kindly click on the below link to download the full report.

​Access Holdings FY 2023 quick take .pdf​​​