Snapshot

• PAT flat y/y – marginally ahead of analyst's estimate 

• Loan loss provision moderates further, down 52% q/q 

• Loan book dips, down 5% in Q2 

• Board of Directors proposed interim dividend of N0.25/share 

PAT flat y/y – marginally ahead of analyst's estimate 

31 August 2018 : After a long wait, ACCESS released its H1’18 audited result, posting a flat y/y performance with a PAT of N39.6 billion. Although Gross Earnings (N253 billion) came in 6% behind analyst's estimate, bottom line performance was 3% better than analyst's N38.7 billion estimate following contained OPEX coupled with better than expected loan loss provisioning. The bank proposed an interim dividend per share of N0.25 – just in line with analyst's 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 N91.1 billion – constraining H1’18 performance to a 15% y/y rise and in line with analyst's N186 billion estimate. Non-Interest Income performance was even much weaker within the quarter with the income line down 42% q/q to N24.3 billion – taking H1’18 number to N66.1 billion vs. analyst's N83.5 billion estimate and H1’17: N84.4 billion. Furthermore, despite a 4% q/q moderation in customer deposits, Interest Expense stayed flat in Q2’18 – putting the expense line at N101 billion for H1’18– higher than analyst's N98 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. With an additional provision of N2.4 billion in Q2 standalone, the expense line came in at N7.3 billion for the half year period, 32% and 29% better than analyst's estimate and prior year’s performance respectively. Impressively, amid a N17.5 billion AMCON levy due in Q2’18, Operating Expense still came in lower q/q – resulting in an 11% outperformance for the H1’18 period and 6% lower than prior year. Despite this, PBT (N45.8 billion) came in 12% lower y/y and 8% weaker than analyst's N49.6 billion estimate. Overall, amidst a more conservative effective tax rate of 14% vs. their estimate of 22% and prior year’s 24%, PAT came in flat y/y and marginally ahead of their estimate. 

Estimates revised, TP raised to N13.32 (Previous: N12.80) 

Although PAT came in much in line with their estimate, analysts have updated their model to reflect the misses across a few line items. Whilst analysts cut their loan growth expectation to flat for 2018 (Previous: 10%), analysts raise their yield on asset estimate to reflect the expected higher interest rate environment in H2’18. Hence, their Interest Income estimate is left relatively unchanged. Analysts cut their 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, analysts revise their loan loss expectation lower to N14.5 billion (Previous: N20.0 billion) – translating to a cost of risk of 0.7%. Analyst's Operating Expense estimate is also revised lower to N203 billion (Previous: N212 billion) – albeit still ahead of H1’18 run rate. With this, analysts estimate a mildly improved efficiency for FY’18 and forecast a 50bps improvement in cost to income ratio to 62.1% for the year. 

Overall, analyst's PAT for FY’18 is estimated at N87.4 billion – translating to an RoE of 17.5% vs. management’s guidance of 20%. Overall, analysts raise their Target Price to N13.32 (Previous: N12.80). ACCESS trades at FY’18 P/E and P/B ratios of 3.1x and 0.6x vs. tier 1 averages of 4.2x and 0.9x respectively. 

Reporting for EasyKobo on Friday ,31 August 2018 in Lagos, Nigeria

Source: Olalekan Olabode from Vetiva Capital Management Limited