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H1-19: How Access Bank jumped in gross earnings, profitability

...Holds teleconference call today Sept 9 on critical issues

The audited H1-19 results of Access Bank recently released at the Nigerian Stock Exchange (NSE) has shown impressive half year outing as the bank recorded strong growth in both gross earnings and profitability.

The strong performance was underpinned by funded income growth, with non-funded income underperforming the prior year. Consequently, the bank recorded a strong PBT growth of 61.7% y/y.

Already, Access Bank has proposed an interim dividend of NGN0.25/share, which translates to a yield of 3.9% based on the closing price on the 5th of September 2019 (NGN6.45).

The bank recorded interest income growth of 46.4% y/y to NGN226.1 billion in the period, which was underpinned by the strong growth recorded in gross loans and advances of 30.6% y/y to NGN2.72 trillion.

On the other hand, non-interest income declined by 28.7% y/y to NGN47.15 billion, as trading income on investment securities declined by 93.0% y/y to NGN4.15 billion.

Additional facts show that interest expense increased by 16.1% y/y to NGN117.75 billion, significantly below the growth rate in income, resulting in a significant growth in net interest income of 81.9% y/y.

Consequently, the bank’s net interest margin expanded by 2.0ppts to 7.6% from the prior year, reflecting the benefits of the bank’s increased pool of low-cost liabilities.

Also, the bank’s operating expenses increased substantially during the period by 28.9% y/y to NGN123.30 billion. This was driven by a combination of increases in (1) AMCON levy (+29.4% y/y) given the expansion in the bank’s assets base (+31.0% y/y to NGN6.49 trillion), (2) Professional fees (+325.1% y/y to NGN4.84 billion) related to the business consolidation with Diamond, (3) Personnel expenses (+19.8% y/y to NGN31.5 billion) also related to the larger entity, as well as other ancillary costs.

However, despite the expansion in operating expenses, the bank’s cost-to-income ratio (after accounting for LLEs) moderated to 62.5% from 68.2% in the corresponding period of the prior year.

Business Hilights found out that consequent on the growth in income relative to expenses, the bank recorded a profit before tax growth of 61.7% to NGN74.12 billion, while PAT settled 59.1% higher y/y at NGN63.02 billion.

At the current run-rate the bank’s PAT for FY-19 will settle 56.1% higher, while annualized RoAE would settle at 23.5% relative to 19.0% in the prior year.

Already, industry pundits who have weighed the released results agreed that the macro-prudential ratios remained strong, save for the bank’s NPL of 6.4% which remains above the statutory level but has trended downward from the 10.0% recorded in Q1-19.

The bank’s capital adequacy ratio of 20.8% remains well above the statutory limit for D-SIBs (16.0%), while the bank’s liquidity level of 49.7% also remains well above the limit. While the bank has significant headroom to drive growth given the macro-prudential ratios, we expect more focus on the remediation to bring NPLs downwards.

Reviewing the result, leading corporate performance assessment group, Codros Capital said “So far so good, it seems for the bank, as the numbers seem to show no signs, as of yet, of synergistic issues. The performance is strong, and the improvement in non-performing loans is positive. However, we seek clarity as to the driver of the moderation to gauge the sustainability. Nonetheless, at the current run-rate, the bank is on course to record a strong FY-19 performance.”

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