ACCESSCORP published its 9M-22 unaudited financials over the weekend, reporting a double-digit earnings growth (EPS: +12.1% y/y to NGN3.88 vs 9M-21: NGN3.46), supported by an expansion in core (+21.5% y/y) and non-core (+50.3% y/y) income.
Interest income rose by 21.5% y/y to NGN571.98 billion, aided by higher gains from loans and advances to customers (+34.3% y/y to NGN350.71 billion), cash and balances with banks (+25.5% y/y to NGN8.27 billion), loans and advances to banks (+8.0% y/y to NGN12.38 billion), and investment securities (+4.6% y/y to NGN200.62 billion). Like other tier 1 names, drivers for the expansion in ACCESSCORP’s interest income are attributed to (1) risk assets creation as the loan and advances to customers grew by 11.1% YTD to NGN4.62 trillion and (2) an expansion in yields across the FI market.
Sustaining the momentum from the previous quarter of the year, the HoldCo recorded interest expenses growth of 43.4% y/y to NGN291.45 billion due to the cost incurred on funding, given that total liabilities increased (+16.2% YTD to NGN12.42 trillion) during the period. Sieving the numbers, expenses on deposits from customers (+66.3% y/y to NGN175.83 billion), deposits from financial institutions (+31.3% y/y to NGN63.50 billion), and interest-bearing borrowings (+6.0% y/y to NGN34.33 billion) drove the higher liabilities outturn.
Accordingly, net interest income grew by 4.8% y/y to NGN280.53 billion. However, given the higher credit impairment charges (+36.0% y/y to NGN52.95 billion), the net interest income ex-LLE settled 0.5% y/y lower at NGN227.58 billion.
Impressively, the HoldCo recorded higher gains from non-interest income (+50.3% y/y to NGN296.65 billion), driven by gains on FX (+11.6% y/y to NGN96.90 billion), fees & commission (+7.0% y/y to NGN95.18 billion), and investment securities (+4506ppts to NGN78.44 billion). Consequently, operating income grew by 23.0% y/y to NGN524.22 billion.
The HoldCo’s operating expenses advanced by 29.5%y/y to NGN376.92 billion, as all the contributory lines – AMCON levy (+27.0% y/y to NGN52.73 billion), personnel expenses (+25.1% y/y to NGN89.84 billion), depreciation & amortization (+7.8% y/y to NGN32.74 billion), and deposit insurance premium (+5.0% y/y to NGN15.91 billion) – increased during the period. Owing to the faster increase in OPEX relative to operating income, the HoldCo’s cost-to-income ratio declined by 360bps to 71.9% (9M-21: 68.3%).
Overall, profit before tax advanced by 9.1% y/y to NGN147.30 billion. Following a tax expense of NGN10.29 billion, profit after tax print came in +12.4% y/y higher at NGN137.01 billion.
Comment: ACCESSCORP’s performance remains strong in our view, particularly given the expansion in its non-core income. Notwithstanding, we remain concerned about the effect of the persistent interest expense surge on the HoldCo’s core income. For 2022FY results, the elevated interest rates are likely to increase gains generated from funded income. Likewise, for the non-funded income, we expect the growth trajectory to be sustained following the commencement of operations of the HoldCo’s payments businesses (Hydrogen Card, Hydrogen Pay & Hydrogen Switch).
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