ACCESS BANK PLC Q1'18 - Earnings beat driven by strong top line growth
Earnings beat driven by strong top line growth
ACCESS released its Q1’18 results, posting better than expected performances across major line items – supported by impressive top line growth. Gross Earnings rose 19% y/y to ₦137 billion, beating our ₦122 billion estimate and up a significant 46% q/q. The strong top line growth was spurred by double digit growth in Interest and Non-Interest Income – up 20% and 15% y/y, 13% and 10% ahead of our estimates respectively. We highlight the huge y/y rise in Interest Income on loans and advances (₦74 billion vs. ₦58 billion in Q1’17) despite a relatively flat loan book and weaker interest rate environment. Furthermore, ACCESS reported a loan loss provision of ₦5.0 billion – up 55% y/y. Although the expense line came in much lower than our ₦7.9 billion expectation, we note that the provisioning appears much higher than the trend we have seen from other banks in Q1’17 following the implementation of IFRS 9. With this, Operating Income rose 7% y/y to ₦81.5 billion – 9% better than our ₦74.6 billion estimate. However, with Operating Expense up 21% y/y to ₦54.1 billion vs. Vetiva estimate of ₦52.9 billion, PAT was down 15% y/y to ₦22.1 billion – albeit beating our ₦17.0 billion estimate for the period.
We revise our estimates based on the better than expected Q1’18 performance. Particularly, we maintain our 10% loan growth forecast for FY’18. Also, given the stronger than expected yield on assets in Q1’18, we raise our estimate marginally by 40bps and revise our Interest Income estimate to ₦371 billion (Previous: ₦337 billion). Similarly, we raise our Non-Interest Income estimate higher to ₦167 billion as we expect improving macro environment and transactions to drive the income line. Overall, our Gross Earnings forecast is raised to ₦538 billion (Previous: ₦489 billion) – tracking Q1’18 run rate. Overall, our PAT estimate comes in at ₦83.9 billion – translating to an RoE of 17% vs. management’s guidance of 20%.
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