Access Bank: Impressive earnings growth continues in Q1’16

Nigeria’s tier-1 lender, Access Bank Plc has released its unaudited results for the first-quarter (Q1) period ended March 31, 2016.

The full service commercial bank –headquartered in Nigeria with operations across Sub-Saharan Africa, the UK, Asia and the Middle East – was able to beat most analysts’ expectations with its Q1’16 numbers.

The results released Monday to investors at the Nigerian Stock Exchange (NSE) show improved Q1 margins and strong profit growth despite prevailing macro headwinds and a slowed economy.

The bank’s Q1’16 results

Access Bank plc reported 5 percent growth in Q1’16 gross earnings to N80.3billion from Q1’15 level of N76.8 billion. Also in the review Q1’16 period, the bank’s Interest Income rose by 19.4 percent to N55.44billion from N46.42billion in Q1’15.

Net Interest Income stood 46.8 percent high at N34.6billion from N23.6billion in Q1’15. Profit Before Tax (PBT) rose by 36.7percent to N22.6billion from N16.52billion in Q1’16.

Profit After Tax in the Q1’16period rose by 42.1percent to N19.4billion from N13.7billion in Q1’15. Access Bank maintained its robust profitability, recording an annualised 20.7percent return on average equity (ROAE) from 19.2percent in the first quarter of 2015.

Loans and Advances in Q1’16 rose to N1.468trillion from N1.408trillion in Q1’15, up by 4.3percent. Deposits rose by 5.4 percent to N1.850trillion from N1.756trillion in the corresponding quarter of 2015. Cost to Income Ratio (CIR) stood low at 57.9percent from 62.2percent, down by 6.9percent.

Management comments

“I am pleased with the Group’s solid first quarter performance characterised by improved margins and strong profit growth despite prevalent macro headwinds and a slowed economy. Today, we are realising the benefits of initiatives that were deployed last year in the retail banking space, evidenced by the rapid adoption and utilisation of our enhanced digital platforms. This translated to growth in our retail-related fee and commission income”, said Herbert Wigwe, the GMD/CEO of Access Bank Plc, while commenting on the results.

Wigwe said: “As the bank cautiously grows its loan portfolio in light of macro realities, it will continue to uphold the highest standards of risk management in order to sustainably maintain asset quality.We are encouraged by these results, and in the coming quarters, we will intensify the implementation of our strategic cost reduction initiatives in order to improve our bottom-line”.

“We will also explore and activate other innovative avenues to expand our digital banking proposition so as to achieve improved revenues and deliver sustainable shareholder value in the long term,” Access Bank plc GMD/CEO stated.

Analysts reactions to Access Bank Q1 results 

In their reaction to Access Bank first-quarter (Q1) results, Olubunmi Asaolu-led team of research analysts at FBNQuest said: “Given the tough macro/operating environment, it is encouraging to see that Access turned in a healthy funding income result. We find the results encouraging and expect a slightly positive reaction from the market. Our estimates are under review. We rate Access shares outperform”.

The analysts added: “We continue to believe that the market’s bearish view on Access is unjustified, and reiterate out Outperform rating.”

According to FBNQuest research analysts, “Compared with our estimates, PBT beat by 27percent but the PAT was in line because we forecast zero on the other comprehensive income line. The better-than-expected PBT result was driven by provisions and opex surprising positively. The former was about half of what we had forecast while operating expense (opex) was 3.6percent below our forecast. The actual revenue performance (i.e. profit before provisions) was only slightly (1.7percent) ahead of our expectations. Again, funding income was the better performer of the two income lines, exceeding our forecast by 11percent”.

“Access Bank continued its impressive earnings growth, reporting strong performances across the key line items with top and bottom line. Gross earnings came in line with our estimate. The impressive top line growth was supported by the strong growth in Interest Income. We have updated our model and revised our forecast to reflect the positive surprise”, said Olalekan Olabode team of analysts at Vetiva Capital Management Limited.

“Whilst we note the moderation in the historically strong Non- Interest Income, we highlight that it was largely due to the loss recorded on trading securities. Amidst our flat growth forecast for gross earnings, we expect the improvement in funding cost to support efficiency. Whilst we note the significant moderation in Loan Loss provision, we remain wary of rising default risk across the industry. Overall, ACCESS trades at a discount to peers with 2016E P/E and P/B of 1.5x and 0.3x compared to Tier I averages of 2.7x and 0.5x respectively,” Vetiva analysts added.

The bank/equity price movement

Listed on the financial services sector (banking subsector) of the Nigerian Stock Exchange, the market capitalisation of Access Bank plc stood at N112.819billion as at Tuesday with shares outstanding of 28,927,971,631 units. The share price trend shows 52-week high of N6.39 and 52-week low of N3.48. The share price rose to N3.9 as at Tuesday this week.

Iheanyi Nwachukwu