Category Archives: ACCESS BANK

Access Bank Q4 2017 results review: 2018 ROE guidance a stretch.

2018 ROE guidance a stretch

 

  • 10-12% cut to our 2017-18E EPS forecast and price target: Access Bank’s (Access) 2018 ROE guidance of 20% implies that the bank would have to deliver PAT growth of c.13% y/y to c.N110bn. On its conference call, management was confident that a reduction in funding cost via the re-pricing and gradual winding down of expensive structured funds would translate to a 70bp expansion in NIM, and that any ‘lost’ revenue on derivative income as its fx swaps mature could be replaced by funding income. We are more conservative than management; our 2018E NIM forecast is flattish y/y as we expect that a lower yield environment in general will limit the benefits accruing from the repricing of liabilities. Consequently, we have cut our 2018-19E EPS forecasts by around 10% on average and our price target by around 12% to N10.8. Our new forecast implies a 2018E ROAE of 12.4%, considerably lower than guidance. On asset quality, management sees the 38% provision taken on its 9mobile exposure as adequate, and as such guides to a cost of risk of 1.5% (vs 1.7% in 2017). It also expects the bank’s NPL ratio to improve slightly from the 4.8% reported as of end-2017. We find both guidance plausible. At current levels, Access Bank shares are trading on a 2018E P/B multiple of 0.59x for 12.7% ROAE in 2019E. These compare with the average multiple of 0.9x for 14.1% ROAE that our universe of banks is trading on. We retain our Neutral recommendation on the stock.

  • Q4 2017 PBT down 67% y/y: Access Bank’s Q4 2017 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 (fx swaps) and a 125% y/y spike in loan loss provisions stemming from a N19bn charge relating to its 9mobile exposure. These negatives completely offset funding income growth of 28% y/y and a 21% y/y decrease in opex (over-accrual as of 9M 2017 explains the softer opex in Q4). 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.

Access Bank (Access) published its Q4 2017 results which showed that PBT declined by 67% y/y to N7.2bn.

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.

MORE ABOUT ACCESS BANK MOBILE BANKING

The Access Mobile Classic service runs on Java-enabled phones and Smartphones (iPhone, Android, Blackberry).
What you can do on your Access Mobile Classic

  • Transfer funds between accounts (Access Banks Accounts & Other Bank)
  • View detailed balances and transaction history
  • Make payments
  • Add, edit or delete recipients
  • Buy prepaid airtime
  • Buy prepaid electricity
  • Cancel, order and activate cards
  • Locate ATMs and branches close to you
  • Get personalised offers for upgrades, limit increases and more

How you can download the App:
1. Download on all Java-enabled mobile phones via
Or
2. Send “D AM” to 20220 as an SMS
3. To download on smart phone, please visit your phone’s App store and search “Mobile Banking-Classic” to download.

The Access Mobile Premium service works on smart phones including iOs, Android, Blackberry devices.
What you can do on your Access Mobile Premium

  • Carry out transactions in higher volumes to the tune of N2million daily
  • Confirm Beneficiary name for Funds Transfers
  • Purchase your Airline ticket
  • Carry out your Cheque Management – Request, Confirmation and other cheque instructions
  • Locate branch and ATMs closest to you
  • Airtime top-up to any mobile network
  • Transfer funds within Access Bank and to other Banks
  • Pay bills – DSTV, PHCN, LCC. E.t.c

Get the App here

Blackberry App World

Apple App Store

Google Play