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ACCESS BANK PLC 9M'19 Earnings - 9M profits strengthen amid cost consolidation

ACCESS BANK PLC - 9M profits strengthen despite cost pressures

Loan recoveries and investments support earnings growth
Access Bank recently reported its 9M’19 numbers, displaying double-digit growth across all line items following the business combination with the erstwhile Diamond Bank. The bank recorded 37% y/y growth in Gross Earnings to ₦513.7 billion (Vetiva Estimate: ₦521.1 billion), buoyed by significant loan recoveries and a 52% YTD rise in Investment securities postmerger. The bank has realized c.₦33.7 billion from merger synergies, with recoveries accounting for two-thirds of total realized revenue. Likewise, the bank realized a 44% y/y jump in 9M’19 PAT to ₦90.7 billion (Vetiva Estimate: ₦107.8 billion) to lift EPS by 28% to ₦2.79.

Q3’19 Interest Income declines 18% q/q
During the 3-month period, ACCESS realized ₦132.1 billion (Vetiva Estimate: ₦141.6 billion) in interest income, 18% less than it recorded in Q2’19; largely due to a 43% q/q decline in investment income, occasioned by a 9% reduction in the bank’s treasury bill position during the quarter. Net Interest income declined faster to ₦55.1 billion (-44% q/q) as interest expense spiked 21% q/q due to a 26% q/q rise in interest expense from customer deposits. Consequently, average Cost of Funds increased by 40bps q/q to 5.2%, on the back of a marginal q/q increase in customer deposits to ₦4.2 trillion. Over the next six months, we expect income from investments to improve, following the bank’s long position in fixed income securities, evidenced by the 64% q/q increment in their bond portfolio.