Event: Access Bank reports Q4 2017 results
Implications: Likely downward revisions to consensus PBT forecasts and negative reaction from the market
Positives: Funding income grew 28% y/y: opex declined by 21% y/y
Negatives: PBT fell by 67% y/y due to a reduction in non-interest income and a spike in provisions
This afternoon, Access Bank (Access) published its Q4 2017 results which showed that PBT declined by 67% y/y to N7.2bn. The key drivers behind the marked drop in profitability were a -50% y/y reduction in non-interest income and a 125% y/y spike in loan loss provisions. These negatives completely offset funding income growth of 28% y/y and a 21% y/y decrease in opex. Further down the P&L, the y/y contraction in PAT narrowed to -9%, thanks to a positive result of N8.2bn in other comprehensive income (OCI). Sequentially, PBT and PAT fell by -66% q/q and -57% q/q respectively. Again the spike in provisions and a subdued non-interest income line were primarily responsible.
Compared with our estimates, PBT missed by 57% because of negative surprises in non-interest income and provisions. However, thanks to the OCI gain, PAT was in line with our N13.3bn forecast. The bank’s PBT also trailed consensus’ 2017 PBT forecast of N91.4bn.
On a fully year basis, PBT and PAT both fell by around 11% y/y. Management has proposed a final dividend of N0.40 per share, which is in line with our N0.42 DPS forecast. The dividend implies a yield of 3.4%. Having paid an interim dividend of N0.25, the final dividend brings the total dividend for 2017 to N0.65 per share, flat y/y. The total dividend implies a payout ratio of 20.9%.
The y/y spike in provisions was due to due to impairments taken on the bank’s 9mobile exposure while the positive surprise in opex was largely due to over-accrued expenses as at 9M 2017. We appreciate the view that fx swaps are a nice-to-have as far as the CBN’s gross reserves are concerned, and therefore the product is probably here to stay. In addition, given the painful lessons some corporates have learned as a result of the devaluation of the last few years, the demand for hedges is not going to zero. However, because fx swap income is more difficult to model or predict, the market is likely to continue to ask for reassurance on the sustainability of this income line within non-interest income after the scale of the negative surprise in these Q4 results. We expect to see a negative reaction from the market and a downward revision to consensus 2018E earnings forecasts.
We rate Access shares Neutral. Our estimates are under review.
Access Bank Q4 2017 results: actual vs. FBNQuest Capital Research estimates (N millions)