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ACCESS BANK PLC Q1'17 - Earnings beat, supported by strong top line growth

ACCESS released its Q1’17 result posting an impressive 44% y/y growth in Gross Earnings (₦116 billion) – 16% ahead of our ₦100 billion estimate. The strong top line performance was spurred by notable growth in both Interest and Non-Interest Income lines, up 43% and 47% respectively. However, with Interest Expense up a significant 76% y/y and 26% ahead of our estimate, the y/y rise in Net Interest Income growth was constrained to a 23% y/y increase – 5% ahead of our forecast. We highlight that the 47% growth in Non-Interest Income was supported by a huge jump in FX Income to ₦17.1 billion (Q1’16: ₦6.1 billion) despite a notable moderation in Fees & Commission Income (down to ₦11.8 billion from the ₦18.0 billion reported in Q1’16). However, retracing from a quarterly high of ₦9.6 billion in Q4’16, ACCESS reported a loan loss provision of ₦3.2 billion for Q1’17 – better than our ₦4.8 billion estimate. Consequently, Operating income rose 33% y/y to ₦76 billion, beating our ₦66 billion estimate. However, despite the unabated Operating Expense pressure (up 30% y/y and 6% worse than our estimate), PAT came in strong – up 34% y/y at ₦26 billion, ahead of our ₦20 billion estimate.

We have updated our model to reflect the better than expected performance across most income lines. Notably, we raise our Interest and Non-Interest Income estimates to ₦301 billion and ₦138 billion respectively (Previous: ₦280 billion and ₦120 billion). Similarly, we revise our Interest and Operating Expenses higher to ₦130 billion and ₦182 billion respectively (Previous: ₦117 billion and ₦169 billion) – to reflect higher cost pressure. Despite the flat loan portfolio in Q1’17, we maintain our 5% credit growth for FY’17. Also, we cut our loan loss provision estimate to ₦22 billion (Previous: ₦24 billion) – albeit still higher than the Q1’17 run rate. Overall, we raise our FY’17 PAT forecast to ₦86 billion (Previous: ₦74 billion) – translating to an EPS of ₦2.97 (Q1’17 run rate: ₦3.60) Thus, we revise our Target Price to ₦9.60 (Previous: ₦8.97). ACCESS trades at FY’17 P/E and P/B ratios of 2.2x and 0.4x respectively.