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ACCESS BANK PLC 9M'17 - Earnings in line with estimates, HOLD rating maintained

Earnings in line with estimates, HOLD rating maintained                                                                            

ACCESS released its 9M’17 result maintaining the modest earnings run rate from prior quarters. Whilst top line came in mildly ahead of our estimate at ₦365 billion (Vetiva estimate: ₦361 billion), PAT (₦56.4 billion) marginally missed our ₦58.6 billion estimate – largely due to higher than expected Interest Expense. In line with prior trends, top line was driven by strong growth in Interest and Non-Interest Income, up 36% and 28% y/y respectively. Furthermore, following a 20bps rise in Cost of Funds to 5.8% within the quarter, Interest Expense rose 8% q/q to bring 9M’17 Interest Expense to ₦124 billion – a notable 9% deviation from our ₦114 billion estimate. With NPL ratio contained at 2.5%, Loan Loss Provision came in at ₦12.8 billion – a mild 4% rise y/y and 15% better than our ₦15.7 billion estimate. However, despite a lower than expected Operating Expense of ₦155 billion (Vetiva: ₦157 billion), PBT (₦72.9 billion) lagged our ₦74.7 billion estimate. Overall, PAT rose 4% y/y to ₦56.4 billion – 4% lower than our ₦58.6 billion estimate.                                                                      

We highlight that most of the line items came much in line with our estimate with major deviations around Interest Expense and Loan loss provision expectation. Consequently, whilst we raise our Interest Expense estimate higher to ₦162 billion (Previous: ₦152 billion) to reflect the higher CoF, we revise our loan loss provision estimate lower to ₦17.5 billion (Previous: ₦20.8 billion) in line with current run rate. Although we maintain our flat loan growth forecast for FY’17, we cut our customer deposit growth forecast to -8% (Previous: -3%; Ytd: -8%). Overall, our Target Price is little changed at ₦9.59 (Previous: ₦9.66). ACCESS trades at FY’17 P/E and P/B ratios of 3.5x and 0.6x respectively.                                                                       

ACCESS BANK PLC (ACCESS) is the fifth largest bank in Nigeria. The bank offers its 7 million clients a wide range of corporate, investment, business and personal banking products and solutions across over 300 branches, predominantly in Nigeria, with subsidiaries in Sub-Saharan Africa and UK. ACCESS has its primary listing on the Nigerian Stock Exchange.