Rating: BUY
Current Market Price: N9.00
Loan to Deposit Ratio: %51.61
Year High: N9.95
Year Low: N7.05
Fair Value: N13.23
Equity Analyst: Tunde Segun Jeariogbe

Introduction

• In this report, we observed the financials of Access Bank Plc for the six-month ended 30th June 2021, compared same to those representing the corresponding period of 2020 and thus established growth, projected expected earnings, and performed valuation analysis using full-year numbers accordingly.
• A close look at the numbers shows that the financial institution built its indices at an acceptable level above the comparable period.
• Although we maintained a highly conservative valuation approach, we expect that the bank will achieve high valuations in the years ahead.
• See the table below for other analyses:

Interim Dividend

• At the end of the half-year, the board of Access Bank announced an interim cash dividend of N0.30, up from the N0.25 paid in the corresponding period of 2020.
• The growth between the current interim dividend and the previous interim is 20.00%
• Confirming the improved performance between the previous half-year and the latest, the bank paid a higher dividend despite the reduction in pay-out ratio from 14.65% to 12.27%.
• Note that the 30 kobo is the same as 3.33% of its current share market price on the Nigerian Exchange, as of the time the result was released.
• The closure date for the said dividend is 17th September 2021, while the qualification date is 16th September and the payment date is 29th September 2021.

Company figures

• As at the end of the half-year, a total of N450.62 billion was reported as the Gross Earnings, a marginal 13.58% improvement over the previous N396.75 billion achieved through the first six months of the 2020 financial year.
• Interest Income is valued at N279.64 billion, same as 31.91% above N211.99 billion reported at the end of 2020 half-year.
• Interest Expense was estimated at N119.66 billion, slightly below the N120.51 billion stated in its corresponding period’s statement.
• Thus, Net Interest Income is estimated at N159.97 billion, which is 74.88% above the N91.47 billion achieved in the corresponding period.
• Operating Expenses is valued at N169.71 billion above the N156.92 billion in the comparable quarter.
• Thus, the amount stated as Profit before Tax is N97.49 billion, 31.21% above the N74.30 billion posted in its similar result of 2020.
• Having provided for the Tax Expenses for the period, a total of N86.93 billion was reported as the Profit for the period, which is 42.44% up from the N61.03 billion posted in its 2020 six months financial report.
• Hampered by Changes in fair value of FVOCI financial instruments, the Total Comprehensive Income for the period stood at N43.65 billion, the same as 44.63% from the N78.84 billion achieved at the end of the 2020 half-year business session

• Access Bank’s Total Assets Valuation improved by 29.46% to N10.05 trillion, up from N7.76 trillion stated in the 2020 six-month period.
• Total Liabilities equally grew by 30.77% from N7.09 trillion to N9.27 trillion
• Net Assets appreciated to N775.43 billion, compared to N670.36 billion in the comparable half-year.
• Retained Earnings improved in the same trend to N331.04 billion, up from N254.13 billion at the end of 2020 six-month.
• Total Deposits received through the six months is valued at N7.73 trillion, against the N5.98 trillion prior half-year.
• Thus, Total Loans and Advances through the first six months of 2021 stood at N3.99 trillion, higher than the N3.39 trillion granted through the 2020 period.

Financial Strength/Solvency Ratios

• Just like other financial institutions, Access Bank’s Debt Ratio remained high at 92.29%, mildly above the prior year’s estimate of 91.37%. In other words, more debt was used throughout the period. Note that Total Deposits was added to the Liabilities figure used in the estimate
• We also ascertained that the Total Debt for the period can replicate Equity 11.97 times, which is an improved position above the 10.59 times replicates estimated from in 2020 six months session. Understand that such a high ratio is typical of financial institutions.
• Total Equity was estimated as 7.71% of the Total Asset Value at the end of the period, below the 8.63% estimated at the end of the 2020 half-year.
• We have currently estimated a Beta value above that of the Exchange for Access Bank Plc shares. Note that at 1.15 beta value, it is now above the industry average of 1.11.

Profitability Ratios

• Pre-Tax Margin is estimated at 21.64%, up by 15.52% from the last estimate of 18.73% at the end of the six months of 2020.
• Interest Expense posted for the quarter is the same as 26.56% of the Estimated Gross Earnings figure; which is the same as a 12.57% reduction from the 2020 estimate of 38.56%.
• Returns Achieved on Average Equity used through the quarter was estimated at 11.21%, which is well above the 9.10% return achieved in 2020 six months numbers.
• See below table for detailed profitability ratios and comparison:

Efficiency Ratios

• Operating Expenses is estimated at 37.66% of the Gross Earnings Value estimate for the quarter, which is a 4.78% drop in efficiency when compared to the 39.55% estimated from 2020 six-month.
• Similarly, Gross Earnings was estimated at 4.48% of Total Assets, which is a 12.27% drop in efficiency when compared to estimate from the corresponding quarter.
• Total Loan to Deposit Ratio achieved at the end of the quarter stood at 51.61% down from the 56.64% achieved in the 2020 second-quarter business session.

Investment/Valuation Ratios

• At the end of the 2021 half-year, Access Bank earned N2.45 on each unit of its listed shares, the same as 42.44% growth from the N1.72 earned in a similar period of last year.
• On the other hand, Total Comprehensive Income per share dropped by 44.63% to N1.23, against N2.22 each last year.
• Our adjusted half-year P/E-Ratio dropped to 0.92x versus 0.93x in the corresponding period.
• The current Earnings per Share is the same as 27.18% of the share price of Access Bank on the Exchange as of the time the result was presented.
• The estimated value of each unit of Access Bank in its book is currently N21.82 this is an appreciable improvement over the corresponding quarter estimate.
• Confirming an under-priced status of Access Bank’s share price is the Price to Book Value estimate that stood below units
• See below for details 

Valuation

While valuing Access Bank’s shares, we chose a highly conservative method, seeking to present a very secure price to our users. Thus, we have valued each unit of Access Bank’s shares for N13.23, clearly below the Book Value but above the current market price of on the exchange. Hence, we Rated Access Bank a Buy. Please note that we see Access Bank achieving higher valuation in years to come, after settling down from all the acquisition changes it went through recently.