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ACCESS BANK PLC H1'21 Earnings Release - FY'21 earnings expected to grow 15% y/y

In Access Bank’s recently released H1’21 results, Gross earnings were reported to have grown by 13% y/y. This impressive growth was the result of a 30% y/y expansion in Interest Income to ₦320 billion, with Q2 Interest Income coming in 22% higher than Q1 at ₦176 billion, as the bank reported a yield on assets of 10.3% for the period (H1’20:9.4%). Along with this impressive growth which bucked industry trend, the bank also reported a 1% y/y decline in Interest expense to ₦120 billion, as cost of funds printed at 2.9% for the period (H1’20: 1.8%). However, Q2 Interest Expense was 40% higher at ₦70 billion. This meant that Net Interest Income came in at ₦200 billion, with a Net interest Margin (NIM) of 6.4% representing a 395bps y/y improvement in NIMs for the bank. However, the bank also reported a 17% y/y decline in Non-Interest Revenue (NIR) to ₦116 billion, after Q2 NIR came in 35% lower q/q, dragged by a ₦50 billion loss on financial instruments at fair value.

For FY’21, we expect ACCESS to maintain some of its impressive performance from H1, most especially with regards to Net Interest Income. However, as the CBN maintains its aggressive stance with regard to local borrowing, we expect income from investment securities to be pressured in H2 and anticipate a drop in yield to ~10%; thus, we forecast a FY Interest Income of ₦630 billion (FY’20: ₦489 billion). Furthermore, we expect cost of funds in H2 to remain at current levels (2.9%), pushing Interest Expense to ₦241 billion (FY’20: ₦226 billion) which gives a Net Interest Income figure of ₦389 billion (FY’20: ₦263 billion) and NIM of 6%. Also, due to the losses reported in H1 and the possibility of further moderations in trading gains for the rest of the year, we adjust our FY NIR estimate to ₦223 billion (FY’20:₦252 billion). This gives us a Gross Earnings expectation of ₦852 billion, a 17% y/y growth. Finally, we anticipate a FY cost-to-Income ratio of 58% for the bank, with Opex of ₦357 billion (FY’20:₦327 billion). Overall, we revise our PBT projection to ₦203 billion (Previous: ₦226 billion) and PAT of ₦174 billion (Previous: ₦189 billion), giving us an ROAE of 21.8%.