EUR 18.54 For Business Accounts Only

ACCESS BANK PLC – FY’16 PAT constrained by higher tax provision, up a modest 8% y/y

​ ACCESS released its FY’16 result posting an impressive 13% y/y Gross Earnings growth. The top line came in at ₦381 billion (4% better than our estimate), buoyed by a modest 6% q/q rise in Q4’16. Whilst Non-Interest Income (₦133 billion) remained relatively flat y/y (against the general industry trend of strong growth), the income line was 9% better than our full year forecast – supported by a strong 30% q/q growth in Q4’16. In line with industry trend, ACCESS recorded a higher loan loss expense of ₦9.6 billion in the last quarter of the year (vs. Q3’16: ₦2.1 billion) – putting total provision for FY’16 at ₦22.0 billion (ahead of our ₦20 billion estimate). Despite the relatively higher provision, we note that ACCESS remains one of the banks with the best asset quality within our coverage – boasting of industry leading NPL ratio and Cost of Risk of 2.1% and 1.2% respectively. With this, PBT rose 20% y/y to ₦90.3 billion – 6% better than Vetiva’s estimate of ₦85.5 billion. However, with a significantly higher effective tax rate of 21% vs. prior year’s 12% and our 15% forecast, PAT (₦71.4 billion) was constrained to an 8% y/y growth – marginally missing our ₦72.7 billion estimate. Overall, the Board of Directors declared a Final dividend of ₦0.40 (interim: ₦0.25) – translating to a total dividend yield of 11% for 2016. Whilst we believe that the bank’s E-channel business will continue to support top line, we expect income from the off-balance-sheet currency SWAP transaction to continue to moderate as we approach the maturity date of 2018. With our modest 5% real credit growth expectation for FY’17 amidst a relatively contained interest rate environment, we forecast a modest 5% y/y rise in Gross Earnings for FY’17. We anticipate a mild deterioration in asset quality and forecast a loan loss provision of ₦24.2 billion – translating to a CoR of 1.3%. Thus, we revise our Target Price to ₦8.97 (Previous: ₦9.14).