October 30, 2019/InvestmentOne Report
· Net interest income of N55.1billion, down 44.0% q/q; up 71.0% y/y
· Non-interest income of N50.6billion (against N0.4billion in Q2 19), down 2.6% y/y
· Profit before tax of N29.0billion, down 0.1% q/q; up 46.7% y/y
· Profit after tax of N27.7billion, up 26.7% q/q; up 44.2 y/y
Access Bank published their Q3/9M 2019 financial scorecard last Friday, recording a 46.7% y/y and 44.2% y/y rise in PBT and PAT respectively. On a sequential basis, PBT came in flat, while PAT rose 26.7%, on the back of an effective tax rate of 4.4% (24.6% in Q2 2019).
It appears non-interest income was the sole driver of the bottom-line performance, as it was up to N50.6billion in Q3 2019 versus N0.4billion in Q2 2019. This was driven by the reversal of FX related loss reported in Q2 2019, to a profit of N24.1billion, which was enough to cushion the effect of the 24.4% q/q decline in net fee and commission income.
Contrarily, net interest income was down 44.0% q/q, as interest income was down 18.5% q/q and interest expense rose 20.8% q/q, reflecting a declining yield on asset environment, triggered by the apex bank’s LDR mandate. As such, net interest margin dipped to 5.0% from 8.0% in Q2 2019, while cost of funds gained 100bps q/q to 6.0%.
However, net loans were up 38.9% YtD (up 4.0% q/q), on the back of a consolidated balance sheet, following the Diamond merger. As of the deadline of the first LDR policy, Access’ LDR stood at 60.7%. Nonetheless, the bank recorded NPL ratio of 6.3% in 9M 2019, 50bps down q/q. However, impairment charges were up 2.8x q/q to N5.7billion. Consequently, cost of risk stood at 0.6%.
That said, total expenses were up 4.1% q/q (34.2% y/y) and cost-to-income ratio came in at 63.1% versus 61.0% in H1 2019, showcasing the cost effect of the joint business.
Elsewhere, the bank announced its plans to acquire 93.6% stake in a Kenyan Bank, Transnational Bank, following its merger with Diamond Bank in Nigeria, barely 7 months ago. As at FY 2018, Transnational Bank had total assets of c.N35.7billion (c.1.8% of Access’ assets) and it made a net loss of KES2.0billion. We opine that the acquisition would not have a significant impact on Access’ position, but we would be looking to management for further clarity on the underlying motive behind the deal.
Finally, going forward, we believe Q4 2019 would continue to reflect management’s efforts to completely integrate with Diamond Bank. The bank announced yesterday (28th October) that it had successfully completed the second phase of its integration with Diamond bank and has brought together all its core banking platforms, which we opine should be positive for the bank’s operations.
| ACCESS BANK PLC Q3/9M 2019 (YE: DEC) (N millions) | ||||
| Q3 2019 | Q/Q | 9M 2019 | Y/Y | |
| Interest Income | 132,129 | -18.5% | 405,025 | 47.6% |
| Interest Expense | -77,057 | 20.8% | -194,807 | 28.5% |
| Net Interest Income | 55,072 | -44.0% | 210,218 | 71.0% |
| Non-interest income | 50,594 | 13795.6% | 97,745 | -2.6% |
| Profit before provisions | 105,666 | 7.1% | 307,963 | 37.9% |
| Loan Impairment charges | -5,731 | 280.9% | -10,611 | 27.0% |
| Total Opex | -70,947 | 4.1% | -194,248 | 34.2% |
| PBT | 28,988 | -0.1% | 103,104 | 46.7% |
| Tax | -1,273 | -82.2% | -12,364 | 68.1% |
| Tax rate | 4.4% | -2021bps | 12.0% | 152bps |
| PAT | 27,715 | 26.7% | 90,740 | 44.2% |
Source: Company financials, Investment One Financial Services Research
| 9M 2019 BANKS COMPARISON SHEET | ||||
| NGN billion (unless stated otherwise) | FBNH | GTB | ACCESS | |
| Key Income Statement Figures | Gross Earnings | 439.85 | 316.39 | 513.66 |
| Net Interest Income | 211.44 | 172.94 | 210.22 | |
| Non-interest Income | 92.20 | 99.96 | 97.75 | |
| Total Expenses | -176.94 | -99.60 | -194.25 | |
| Loan Impairment Charges | -22.11 | -2.65 | -10.61 | |
| Profit Before Tax | 60.01 | 170.65 | 103.10 | |
| Y/Y PBT Growth | 16.90% | 3.90% | 46.70% | |
| Dividend (Kobo per share) | nil | nil | nil | |
| EPS (kobo per share) | 138 | 519 | 279 | |
| Key Balance Sheet Figures | Total Assets | 5,734 | 3,519 | 6,606 |
| Total Liabilities | 5,130 | 2,883 | 5,991 | |
| Total Equity | 605 | 637 | 615 | |
| Key Ratios | Net Interest Margin | 7.3% | 9.0% | 6.3% |
| Cost of Fund | 3.3% | 2.6% | 4.8% | |
| Cost to Income | 71.5% | 36.5% | 63.1% | |
| NPL ratio | 12.6% | 5.6% | 6.3% | |
| Liquidity (bank level) | 36.8% | n/a | n/a | |
| Cost of Risk | 1.9% | 0.3% | 0.6% | |
| Capital adequacy ratio (bank level) | 15.1% | n/a | 17.4% | |
| ROE | 12.2% | 33.0% | 22.0% | |
| ROA | 1.2% | 5.7% | 2.1% |
Source: Company financials, Investment One Financial Services Research
