November 1, 2024/InvestmentOne Report
High Yield Environment Drive Interest Income: As seen from the 9M:2024 result released by Access holdings; the financial institution recorded a stellar top line performance as income from core business remained strong. Interest income came in at NGN2.40trn, representing a 128.71% YoY increase amid the high yield environment as the central bank remains resolute in the fight against inflation. In detail, interest earned on cash (+247.29% YoY to NGN72.02bn), loans and advances (+150.71% YoY to NGN1.24trn) and investment securities (+91.90% YoY to NGN838.14bn) drove the higher interest income recorded by the bank. On the other hand, interest expense also witnessed a jump of 135.85% YoY to NGN1.55trn, bringing net interest income to NGN844.84bn (+116.65% YoY higher).
Commendable Improvement in Non-Interest Income: Moving down the line, non-interest income also contributed to earnings, with a rise of 88.88% YoY to NGN1.02trn, supported by higher fee and commission income (+92.87% YoY to NGN401.53bn). Additionally, fair value and foreign exchange gain stood at NGN548.38bn, 74.31% YoY higher, driven by the 177.52% YoY increase in fair value gains on equity investments to the tune of NGN307.15bn. Fair value gains on fixed income securities (+18.80% YoY to NGN151.32bn) and net foreign exchange gain (+66.43% YoY to NGN84.43bn) also contributed to the gains. Elsewhere, bad debt recovery and income from other investments propelled other operating income to a 202.14% YoY increase amounting to NGN66.80bn.
Resilient Profitability Despite Higher Cost: So far in the year, the bank has incurred a total of NGN1.09trn in OPEX, which represents a 109.98% YoY increase. This reflects the current inflationary economy, as personnel cost, AMCON levy and administrative expenses were the major drivers of the jump in operating expenses. However, the strong top line performance, which saw gross earnings rise by 114.31% YoY to NGN3.41trn, led to improved profitability. Specifically, PBT and PAT rose by 89.59% and 82.78% to NGN558.18bn and NGN457.45bn respectively. Consequently, EPS was at NGN12.40, higher than NGN6.92 recorded in 9M:2023. Following this performance, there was an improvement in profitability as ROE and ROA increased from 18.04% and 1.52% a year ago to 33.46% and 2.65% respectively.
Outlook: Our outlook for Access holdings is positive given the banks resilience with respect to
growing earnings despite the expansion in costs. We expect interest income to rise further considering elevated yields, which should positively impact asset yield through the growth in the loan book and higher investment securities. Furthermore, non-interest income is also expected to remain upbeat, with support from fair value gains on financial instruments. Consequently, we place a STRONG BUY recommendation on the ticker.
Click here to read full PDF copy of report
