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ACCESS BANK PLC 9M'20 Earnings Review - Strong 9M results, thanks to Non-Interest Income lines

Profits surge 16% y/y on back of strong Non-Interest Income
ACCESS recently released 9M’20 results, reporting 15% y/y growth in Gross Earnings to ₦592.8 billion (Vetiva estimate: ₦568.8 billion). Once again, this came despite a 7% y/y decline in Interest Income and was mainly the result of a 100% y/y surge in Non-Interest Income, which was driven by net gains on financial instruments, and foreign exchange gains totaling ₦96.8 billion. On the other hand, provisions jumped 223% y/y to ₦34.2 billion (Vetiva estimate: ₦24.7 billion) while Opex grew 27% y/y to ₦262.9 billion, in line with our estimate. As expected, the bank’s operating costs softened in Q3, falling 2% y/y to ₦77.4 billion after the one-off charges recognized in Q2 which caused the initial surge. Overall, this led to a 16% y/y growth in PBT to ₦116.6 billion and PAT of ₦102.3 billion, already surpassing FY’19 PAT of ₦98 billion.

Stronger cost synergies drive strong Q3 outperformance
Access Bank’s Q3 performance was mixed, with Gross Earnings climbing 5% q/q to ₦196.0 billion. Interest Income rose 12% q/q to ₦128.6 billion while Interest expense declined 4% q/q to ₦58.5 billion, resulting in a 30% q/q rise in Net Interest Income to ₦70.1 billion. Meanwhile, Non-Interest Income was 6% lower q/q, dragged by a ₦50.6 billion net loss on financial instruments. Amid these, Opex fell 14% q/q as one-off charges and expenses present in Q2 were not repeated. Furthermore, provisions grew 124% q/q to ₦17.8 billion. This led to a 51% q/q rise in PBT to ₦42.3 billion, while PAT came in 106% higher q/q at ₦41.3 billion. Looking forward, the expected improvements in quarterly performance have begun to materialize and we foresee further improvements in both Interest and Non-Interest Income in the final quarter due to further improvements in economic activity, whilst we forecast lower provisions to be recognized in Q4. Therefore, we raise our FY’20 Non-Interest Income estimate to ₦285.8 billion (Previous: ₦227.4 billion). Conversely, we revise our provision expectation to ₦40.7 billion (Previous: ₦32.9 billion), while raising our Opex forecast to ₦321.9 billion (Previous: ₦306.2 billion).