Access Bank Plc (ACCESS) yesterday released its Q3-17 results, wherein gross earnings (9.31% q/q and 18.26% y/y, in line with our estimate) came in lower relative to Q2-17. This follows lackluster performance across income lines - interest income grew lower than expected (1.69% q/q and 21.84% y/y, 4.32% below our estimate) and non-interest income declined 28.25% q/q (+10.35% y/y), 11.37% above our estimate. However, following significant declines in loan loss provision and opex, PBT (+0.12% q/q and -5.08 y/y - 7.63% below our estimate) grew marginally, while PAT (26.04% q/q and -3.81% y/y - 9.28% below our estimate) grew double-digit, supported by a lower effective tax rate during the quarter.
The steep contraction in NIR stemmed from significant declines in fixed income securities and derivative instruments trading, the cumulative impact of which masked the 36.85% q/q growth in foreign exchange trading income and marginal growth in fee income.
Given the impressive PAT over Q3, we believe management is still on course to deliver its 2017F ROE guidance of 20.0% (vs. 17.4% in FY-16). While acknowledging the slow growth in interest income in Q3, we believe ACCESS is poised to outperform in 2017F, driven by (1) the significant growth reported in interest income and (2) foreign exchange trading gain booked in 9M-17. Based on our last TP of N12.06, we have a BUY recommendation on the stock.