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Earnings Release ACCESS BANK PLC H1'18 - Earnings Track Estimates Despite Slower Q2

Earnings track estimates despite slower Q2                                                                       

After a long wait, ACCESS released its H1’18 audited result, posting a flat y/y performance with a PAT of ₦39.6 billion. Although Gross Earnings (₦253 billion) came in 6% behind our estimate, bottom line performance was 3% better than our ₦38.7 billion estimate following contained OPEX coupled with better than expected loan loss provisioning. The bank proposed an interim dividend per share of ₦0.25 – just in line with our estimate and translating to an interim dividend yield of 2.6%. Notably, amidst a 5% q/q moderation in loan portfolio, Interest Income was down 5% in Q2’18 to ₦91.1 billion – constraining H1’18 performance to a 15% y/y rise and in line with our ₦186 billion estimate. Non-Interest Income performance was even much weaker within the quarter with the income line down 42% q/q to ₦24.3 billion – taking H1’18 number to ₦66.1 billion vs. our ₦83.5 billion estimate and H1’17: ₦84.4 billion. Furthermore, despite a 4% q/q moderation in customer deposits, Interest Expense stayed flat in Q2’18 – putting the expense line at ₦101 billion for H1’18– higher than our ₦98 billion forecast. Consistent with the trend observed across other banking names so far in Q2’18, Loan loss provision came in more modest than expected.                                                                              

Although PAT came in much in line with our estimate, we have updated our model to reflect the misses across a few line items. Whilst we cut our loan growth expectation to flat for 2018 (Previous: 10%), we raise our yield on asset estimate to reflect the expected higher interest rate environment in H2’18. Hence, our Interest Income estimate is left relatively unchanged. We cut our Non-Interest Income forecast following the marked miss in Q2’18. Furthermore, amidst improving asset quality and in line with the run rate so far this year, we revise our loan loss expectation lower to ₦14.5 billion (Previous: ₦20.0 billion) – translating to a cost of risk of 0.7%. Our Operating Expense estimate is also revised lower to ₦203 billion (Previous: ₦212 billion) – albeit still ahead of H1’18 run rate.                                                            

ACCESS BANK PLC (ACCESS) is the fourth largest bank in Nigeria. The bank offers its 7 million clients a wide range of corporate, investment, business and personal banking products and solutions across over 300 branches, predominantly in Nigeria, with subsidiaries in Sub-Saharan Africa and UK. ACCESS has its primary listing on the Nigerian Stock Exchange.