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Company News and Results

Access Bank plc: Impressive H1:12 performance

Event: Access Bank plc released its unaudited H1:12 results on Tuesday 11 September 2012, showing 156% y/y growth in EPS. 

What do we think?

  • Access Bank’s H1:12 results were encouraging and are currently ahead of our FY12e expectations on some key metrics. Annualised ROE of 23.5% showed progress vs. its Q1:12’s performance of 21.6%, driven by improved efficiency. Cost to income ratio showed a notable improvement declining to 60% in H1:12 from 67% in Q1:12. In Q2:12, cost to income reduced significantly to 50%. This is lower than the tier I peer average of 63.1% in the same period. The cost of funds has been on an improving trend indicating its ability to attract low cost deposits by leveraging on its enlarged branch network. Based on our estimates, cost of funds declined to 3.3% in Q2:12 from 3.4% in Q1:12. The positive trend is notable but slightly behind the tier I average of 3.2%. Cost of risk increased to 0.6% from 0.1%, which is still materially lower than our FY12e estimate of 2.3% but supportive of our view of rising loan loss provisions as we approach year-end, as Q2:12 cost of risk increased to 1%. The cost of risk for our tier I banks stood at 0.5% in H1:12. Access Bank’s upgrade to tier I status is also reflecting in its valuations as it is now trading at 1.0x FY12e P/B a premium to our coverage average of 0.66x and tier II average of 0.46x.


Key positives:

  • Gross earnings were up 103% y/y but down 26% q/q vs. our FY12e growth estimate of 61%, driven by strong interest income growth. Interest income was up 106% y/y but also down 38% q/q.
  • Net interest income was up 93% y/y but down 38% q/q, in our view the poor q/q performance was driven partly by an 8% decline in net loans in Q1:12. We expect the 12% q/q growth in net loans to support interest income in H2:12. Net loans were up 3% in H1:12 but behind our FY12e forecast of 15%. However, the current high interest rate environment could limit loan growth in H1:12.
  • Non-interest revenue was up 91% y/y and 33% q/q, driven by a 226% increase in other income and a 47% increase in net fee income.
  • NPL ratio improved to 5.51% in H1:12 from 8.4% from Q1:12.

Key negatives:

Loan loss expense increased by 258% q/q to N1.45bn in Q2:12 from N0.405bn in Q1:12 but declined 77%y/y to N8.13bn. Consequently, cost of risk was up to 0.6% from 0.1%, which is still materially lower than our FY12e estimate of 2.3% but supportive of our view of rising loan loss provisions as we approach year end. Annualised cost of risk increased to 1% in Q2:12, the cost of risk for our coverage names as at H1:12 was 0.9%.


Valuation and recommendation (Buy; N10.10 TP)
  • Based on our numbers, Access Bank is currently trading at a FY12e PE of 5.4x notwithstanding the impressive YTD price performance, a discount to our banking coverage average and a GEM peer average based on Bloomberg consensus estimate  of 6.6x and 11x respectively. The bank is trading on a 2012E PB of 1.0x, a premium to our coverage average of 0.8x but a discount to our GEM peer average of 1.67x. Based on the current share price, we expect a DY of 8% for FY12e, vs. our coverage average of 11%.