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ACCESS BANK PLC FY'20 Earnings Release - FY'21 profits expected to surge amid tame Opex growth

ACCESS recently posted its Audited FY’20 results, reporting 15% y/y growth in Gross Earnings to ₦765 billion (Vetiva: ₦776 billion). This came despite a 9% y/y slump in Interest Income to ₦489 billion (Vetiva: ₦490 billion). Thus, the growth was driven by a 112% y/y increase in Non-Interest Income to ₦276 billion (Vetiva: ₦286 billion). This impressive Non-Interest Income growth came as the result of a 27% y/y improvement in fees and commissions, an 86% y/y jump in gains on investment securities and a 90% drop in FX revaluation losses - the bank reported a loss of ₦8 billion on that line item, down from ₦80 billion in 2019. Meanwhile, loan loss provisions surged 212% y/y to c.₦63 billion (Vetiva: ₦41 billion), while Opex also increased 27% y/y to ₦350 billion (Vetiva: ₦322 billion) due to a 56% y/y increase in AMCON charges to ₦35 billion - this can be attributed to the 36% y/y increase in total assets to ₦8.7 trillion. Overall, the bank recorded a FY’20 PBT of ₦126 billion and a 13% y/y increase in PAT to ₦106 billion (Vetiva: ₦135 billion), giving an EPS of ₦2.98 (FY’19: ₦2.74). Management also declared a final dividend of ₦0.55/share (FY’19: ₦0.40) resulting in a total dividend payout of ₦0.80/share for 2020 (FY’19: ₦0.65). ACCESS recently posted its Audited FY’20 results, reporting 15% y/y growth in Gross Earnings to ₦765 billion (Vetiva: ₦776 billion). This came despite a 9% y/y slump in Interest Income to ₦489 billion (Vetiva: ₦490 billion). Thus, the growth was driven by a 112% y/y increase in Non-Interest Income to ₦276 billion (Vetiva: ₦286 billion). This impressive Non-Interest Income growth came as the result of a 27% y/y improvement in fees and commissions, an 86% y/y jump in gains on investment securities and a 90% drop in FX revaluation losses - the bank reported a loss of ₦8 billion on that line item, down from ₦80 billion in 2019. Meanwhile, loan loss provisions surged 212% y/y to c.₦63 billion (Vetiva: ₦41 billion), while Opex also increased 27% y/y to ₦350 billion (Vetiva: ₦322 billion) due to a 56% y/y increase in AMCON charges to ₦35 billion - this can be attributed to the 36% y/y increase in total assets to ₦8.7 trillion. Overall, the bank recorded a FY’20 PBT of ₦126 billion and a 13% y/y increase in PAT to ₦106 billion (Vetiva: ₦135 billion), giving an EPS of ₦2.98 (FY’19: ₦2.74). Management also declared a final dividend of ₦0.55/share (FY’19: ₦0.40) resulting in a total dividend payout of ₦0.80/share for 2020 (FY’19: ₦0.65).
Soft Q4 performance drags FY profitsThe bank’s Q4’20 performance once again dragged FY profits, realizing ₦172 billion (Vetiva Estimate: ₦194 billion) in Gross Earnings which is a 12% q/q drop. Interest Income was down 11% q/q to ₦114 billion, and although Interest Expense moderated 19% q/q to ₦47 billion, the company’s Net Interest Income figure declined 5% q/q to ₦67 billion. Furthermore, Non-Interest Income also declined as a result of a 20% q/q drop in fees and commissions and a ₦21 billion FX loss. Added to this, provisions worsened by 61% q/q to c.₦29 billion, while Opex grew 12% to ₦87 billion. Overall, this dragged PAT by 91% q/q to ₦4 billion (Q4’19: ₦9 billion). Whilst we expect loan loss provisions to remain elevated in 2021, we do not envision them reaching the heights of FY’20, as the Nigerian economy continues to improve, thus we forecast loan loss provisions of ₦52 billion in FY’21 (Previous: ₦32 billion). Also, we note that our expectation of tame Opex costs were unrealized, however, we expect Opex growth to be tamer this year due to further cost synergies and weaker AMCON fee growth, with a ₦358 billion forecast (Previous: ₦331 billion) on the back of milder (8%) Asset growth expectation (FY’20: 21%).