Access Bank’s 15% non-interest income growth key driver of revenue in Q1, 2018

A 15 percent growth in non-interest income was the main revenue driver in the first quarter for Access Bank, a Nigeria tier-1 lender, which has just released its unaudited account for the first three months of 2018.

A flattish year-on-year N27.4 billion was recorded as profit before tax for the quarter, but this flattish year-on-year earnings were largely driven by a 55 percent year-on-year spike in loan impairment charges, according to a further analysis of the result.

Pre-provisioning, the bank saw a profit growth of nine percent (9%) year-on-year. Non-interest income, the main driver at 15 percent growth, had been boosted, during the quarter, by an impressive growth of 407 percent year-on-year growth to N27.7 billion in income earned from forex swaps that helped to wipe out a net foreign exchange loss of N6.8 billion, say analysts commenting on the results.

A further examination of the incomes lines in the result released on Wednesday 25 April, 2018, showed that the bank grew funding income by five percent (5%) year-on-year.

Profit before tax on a quarter-on-quarter basis grew by as much as 283 percent. The high growth recorded was also principally driven by the 106 percent quarter-on-quarter growth recorded in non-interest income.
On a quarter-on-quarter basis Access Bank saw a reduction of 77 percent in its loan loss provisioning, which resulted in sequential growth in earnings; and despite the negative result on the other comprehensive income (OCI) line, the bank was able to grow profit after tax (PAT) quarter-on-quarter by19 percent.

Analysts at FBNQuest Research, comparing the actual result turned out by the bank for Q1, admitted that the bank beat their forecasts with PBT coming in at 11 higher than they had estimated. They said this was “mainly because of the positive surprise in non-interest income.” But a negative surprise in OCI result saw the bank miss analysts’ PAT estimate by as much as 22 percent.

Other items in the Q1 results showed that funding income grew by around five percent year-on-year; PAT declined by 24 percent year-on-year, the outcome of a negative result of –N5.3 billion in other comprehensive income.

Making a call on the results, FBNQuest Research analysts said the bank’s loan book had been flattish year-on-year, “in contrast to the q/q decline in loan growth showed by other banks that have reported Q1 2018 results.”

They noted that the bank’s management had provided a 10 percent year-on-year loan growth guide in their 2018 estimate, “in order to compensate for declining yields on T-bills and supported by improving macro-fundamentals.”
They added that on an annualised basis, Access Bank’s PAT implies a ROAE of around 13 percent, short of a management’s guidance of 20 percent. It is now not clear if this estimate will be reviewed, or if the management will continue to be bullish about turning in this guidance figure at the end of the year.