Access Holdings H1 24 Results reveals benefits of diversification
Access Holdings (ACCESSCORP) released its H1 2024 results after close of business on Friday 20th September, reporting
Net profit growth of 103.5% y/y, buoyed primarily by a 128.9% y/y increase in Net Interest Income and a 111.9% y/y
increase in Trading Revenues. On the H1 2024 EPS of N7.61, the board has proposed an interim dividend of N0.45 per
share (+50.0%y/y), which implies an interim dividend yield of 1.2%on today’s closing price.
The overall performance is primarily attributable to the impact of the high yield environment and improved loan growth.
Although Q2 2024 earnings assessed on a standalone basis declined quarter on quarter, the overall growth was positive
and underscores the firm’s focus on delivering performance and value to its shareholders.
The stock traded on a bearish note last week, losing 1.3%. The stock is up 12.4% over 1-year, 18.8% above its low point this
year(25thApril) and we expect it to out perform the NGX Banking Index going forward.
We believe that the market is beginning – just beginning – to understand the earnings potential of a highly diversified and
non-correlating portfolio of assets, with some 25% of Group equity in the UK and some 20% of Group equity spread across
13 African subsidiaries outside of Nigeria. A price to book valuation of 0.24x represents an attractive entry point, in our
view. We recommend the stock a BUY with 45.9%upside potential.
Financial Performance
Interest income rose by 142.6% y/y in H1 2024 as interest on loans and advances to customers surged 117.2% y/y. In
our view, the bank was able to reprice its loans to reflect favourable rates given the hike in the MPR rate during the
period. Loans and advances to customers have increased by 34.8% y-t-d, driven by both organic expansion and foreign
currency revaluation. Elsewhere, interest on Investment securities (+89.3% y/y) and interbank lending (+285.1% y/y)
contributed positively to the growth In Interest Income, driven primarily by improved market yields.
On the other hand, interest expense (+150.6% y/y) outpaced interest income following a 262.8% y/y increase in
expenses on deposits from banks. We highlight that the bank’s Current Account Savings Account (CASA) mix improved
to 66.4% in H1 2024 (FY 2023: 62.8%). However, its Cost of Funds (CoF) rose to 7.2% (H1 2023: 5.0%). Consequently,
Net Interest Income rose by 128.9% y/y with the Net Interest Margin (NIM) increasing by 101bps to 4.6%, according to
our estimates.
Non-interest income grew by 128.5% y/y as trading revenues (+111.9% y/y) expanded. The increase is attributable to
the N253.9bn rise in Net realised and Unrealised Foreign exchange gains on items not hedged and the N132.8bn in
Fixed income securities trading recorded by the Group. These were sufficient to make up for N334.7bn fair value loss
on non-hedged derivatives.
Fees and Commission income also grew at an impressive rate, of 132.6% y/y, supported Credit-related fees and
commissions and Channels and other E-business income. Operating expenses felt the impact of inflation, growing by
127.6% y/y. However, the Group’s Cost-to-Income ratio fell to 60.4% (H1 2023: 60.7%) as the growth in income
outpaced expenses. Pre-provision operating profit rose by 130.5% y/y. Further down the income statement, loan loss
provisions rose by 230.2% y/y reflecting macroeconomic challenges. Overall, the Group’s Pre-Tax profits rose by
108.2% y/y in H1 2024.
Asset Quality
Asset quality remained impressive during the period, with the non-performing loan (NPL) ratio decreasing to 3.1%,
down from 3.2% H1 2023, and on the same level of 3.1% reported at FY 2023, and well below regulatory limits.
However, the Group’s cost of risk jumped to 2.5% up from 1.2% in H1 2023 due to heightened expectations of credit
losses. Additionally, the Group’s total capital adequacy ratio (CAR) declined to 19.7% from 23.3% in FY 2023 due to
additions of risk-weighted assets. The Group’s total capital adequacy stands well above the regulatory minimum of
16.0%.
Conclusion
Overall, the results showcased rapidly growing earnings from a highly diversified portfolio of earning assets over the
period, particularly from core operations, and efficient deployment of its online channels. As market rates moderate in
Nigeria in Q3, we expect a degree of moderation in funded income. On recapitalisation, the Group has concluded its
N351.01bn capital raising program through a 1:2 rights issue in August, and is going through the capital verification
phase now before announcing the outcome. SOURCE: Coronation Asset Management
