Strong growth across funded, non-funded income lines raised AccessCorp’s EPS
Access Holdings Plc (ACCESSCORP) released its Q1-23 unaudited financials after trading hours on last Thursday, April 20, 2023, revealing a double-digit EPS growth (+26.4% y/y to NGN2.06 I Q1-22: NGN1.63). The rise in the Holdco’s earnings was supported by the strong growth across its funded (+46.4% y/y) and non-funded (+42.5% y/y) income lines.
The group’s interest income grew by 46.4% y/y to NGN254.22 billion in Q1-23, as all major contributory lines, save for income from cash and balances with banks (-6.4% y/y to NGN2.56 billion) recorded increases. In nominal terms, higher income was generated from loans and advances to customers (+62.6% y/y to NGN149.10 billion), investment securities (+18.0% y/y to NGN90.47 billion) and loans and advances to banks (+360.6% y/y to NGN12.10 billion). We attribute the higher income generated from investment securities to the volume growth (+27.3% YTD to NGN3.51 trillion) and improved yield on securities during the period.
Interest expense advanced by 84.1% y/y to NGN158.94 billion, as the group incurred higher costs on deposits from financial institutions (+152.2% y/y to NGN39.12 billion), deposits from customers (+82.2% y/y to NGN98.09 billion), and other borrowings – interest-bearing borrowings (+27.1% y/y to NGN14.31 billion) and debt securities issued (+11.4% y/y to NGN6.00 billion) – in the period under review.
Similarly, the group’s non-interest income advanced by 42.5% y/y to NGN154.82 billion, primarily driven by the gains in FX trading (+30.9% y/y to NGN112.39 billion) and net fees & commission (+5.8% y/y to NGN45.38 billion). Likewise, the lower losses on investment securities amounting to NGN6.71 billion (vs a loss of NGN44.63 billion in Q1-22) further aided the growth in non-interest income. Consequently, the group’s net interest income settled 9.1% y/y higher to NGN95.28 billion.
Further in, operating expenses surged by 27.8% y/y to NGN149.79 billion, triggered by the combined impact of higher regulatory costs and inflationary pressures in the review period. For clarity, the group incurred higher costs on business travel expenses (+676.6% y/y to NGN7.58 billion), administrative expenses (+105.2% y/y to NGN15.92 billion), AMCON levy (+24.8% y/y to NGN33.32 billion), NDIC premium (+22.0% y/y to NGN7.65 billion), and personnel expenses (+14.8% y/y to NGN33.57 billion). Consequent to the higher rate of increase in expenses than income, the Holdco’s cost-to-income ratio (after accounting for LLEs) inched slightly higher to 64.7% (from 64.3% in Q1-22).
Cordros averred that “On a balancing note, the Holdco recorded a profit before tax growth of 25.3% y/y to NGN81.60 billion. Eventually, the group delivered a 24.8% y/y growth in profit-after-tax to NGN71.66 billion, amid the higher income tax expense (+28.5% y/y to NGN9.94 billion) in the period.
According to Cordros Capital analysts, “The group’s Q1-23 financial performance was remarkable, despite the challenging and dynamic macro-economic environment. Specifically, we like the stellar growth across the group’s core and non-core income lines. For 2023E, we believe the rising interest rates in the fixed-income market and the continuous leverage of its Holdco status will boost the group’s earnings growth.
