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Access Bank Plc (Access) full-year 2018 earnings released this morning showed EPS expansion of 53.2% YoY to N3.28 following material decline in loan-loss provision (-57% YoY to N14.7 billion) and increase in net interest income (+6.2% YoY to N173.6 billion). On the latter, we reckon that despite 19.1% YoY growth in interest income (with assets yield expanding 4bps YoY to 12.5%), the single-digit growth in net interest income was due to a faster increase in interest expense by 32% YoY (with related cost of fund expanding 46bps YoY) which pressured moderation in Net Interest Margin (NIMs) to 5.7% (-47bps YoY).

On asset quality, Access recorded 230bps YoY contraction in Non-Performing Loans (NPL) ratio to 2.5% (compared to GTB and Zenith of 7.3% and 5% respectively). Accordingly, the impact reflected in the lower provisioning during the year, with cost of risk contracting 100bps YoY to 0.7%. Elsewhere, we reckon that the bank Non-Interest Revenue (NIR) remained resilient during the year declining by 0.7% YoY (relative to our estimate 15% YoY decline) to N138.2 billion due to strong performance in net trading income over Q4 18, which more than outweighed declines in fee income (-49% YoY) and foreign exchange loss of N39.5 billion on the Other Income line.

The bank declared a final dividend of N0.25 which in addition to interim of N0.25 brings total payout to N0.50. The final dividend translates to a dividend yield of 4.2% on current pricing.

Impressive performance across income lines in Q4 18. Access Q4 standalone numbers was impressive with sturdy performance across income lines resulting in 38% QoQ growth in EPS to N1.11. The strong performance stemmed from double-digit growth in net interest income by 34% and NIR growth of 10% QoQ, both of which more than outweighed the surprise additional N6.3 billion loan loss provision during the period and higher operating expense (+6% QoQ). On NIM, the gains stemmed largely from growth in interest income of 21% QoQ following recovery in interest on investment securities (+94% QoQ) and strong outing on interest on cash and interbank lending (+255% QoQ) both of which offset decline on interest on loans (-11.3% QoQ) to support 226bps QoQ expansion in assets yield. On the other hand, funding cost over the quarter expanded +18bps QoQ to 5.3% with interest expense rising 11.2% QoQ. Accordingly, the stronger expansion in assets yield necessitated expansion in NIM by 252bps QoQ to 6.9%. For Interest expense, the QoQ increase emanated from growth in interest on interbank placements (+76% QoQ to N16.5 billion) and customers deposit (+2% QoQ to N30.4 billion).

The stock currently trades at a current P/B of 0.34x which is at a discount to peers of 0.76x. Our last communicated FVE on ACCESS is N11.80, however, we have a HOLD rating on the stock. We will revisit our numbers after further analysis and discussion with management.

The bank will be holding a teleconference call on Today, March 15, 2019 at 2pm Lagos Time (1pm London/ 3pm Johannesburg/ 9am New York) with its senior management. Click here for the presentation and here for registration link.

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