Rating: BUY
Current Market Price: N9.35
Loan to Debt Ratio: 53.32%
Year High: N9.95
Year Low: N7.05
Fair Value: N13.05
Equity Analyst:  Tunde Segun Jeariogbe

Introduction

• In this report we observe the nine months financial numbers of Access Bank Plc for the year ended 30^th September, 2021. The result was compared to numbers representing the corresponding quarter (2020) and thus, we 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 financial indices at a rate above comparable numbers, despite the tough business environment suffered by most businesses during the year.
• Although we were highly conservative in our approach, we are of the opinion that the bank will achieve high valuations in years to come.
• See below for other analyses:

Company figures

• As of the end of the nine-month period, a total of N606.56 billion was reported as Gross Earnings income, 22.30% above the N495.95 billion achieved through the first nine months of 2020.
• Interest Income is valued at N470.91 billion, the same as 25.48% above the N375.24 billion reported in the corresponding period of 2020.
• Interest Expense was estimated at N203.18 billion, above the N179.01 billion stated in the prior nine months.
• Thus, Net Interest Income is estimated at N267.72 billion, or 36.41% above the N196.27 billion in the same period of 2020.
• Operating Expenses is valued at N260.71 billion, above the N220.93 billion in the comparable period.
• Thus, the amount stated as Profit before Tax was N135.07 billion, 15.82% above the N116.62 billion posted in its similar result of 2020.
• After providing for the Tax Expenses in the period, a total of N121.89 billion was reported as Profit, translating to 19.15% growth from the N102.30 billion posted in 2020 nine-month.
• Impaired by the negative Non-Controlling interest, Total Comprehensive Income for the period stood at N77.72 billion, lower than the N96.58 billion achieved at the end of the 2020 third quarter.

• Total Assets improved by 30.81% to N10.36 trillion, compared to N7.92 trillion in 2020 nine-month.
• Total Liabilities grew by 32.05% from N7.24 trillion to N9.56 trillion.
• Net Assets, appreciated to N799.35 billion, compared to N679.46 billion in the comparable quarter.
• Retained Earnings improved to N352.67 billion, as against N282.64 billion posted at the end of 2020 nine months.
• Total Deposits received from customers through the first nine months of the year amounted to N7.57 trillion, as against the N5.99 trillion posted in the comparable period of 2020.
• Thus, Total Loans and Advances through the first nine months of 2021 stood at N4.04 trillion, higher than the previous N3.50 trillion.

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 91.43%, meaning that more debt was used through 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, an improved position, when compared to the 10.66 times replicate estimated in the 2020 nine months. Note also that such a high ratio is typical of financial institutions
• Total Equity was estimated at 7.71% of the Total Asset Value at the end of the quarter, below the 8.57% estimated at the end of the 2020 nine-month session.
• We have estimated a Beta value above the market Beta for Access Bank Plc shares. It is noteworthy that at 1.01 beta value, Access Bank is slightly below the 1.11 industry average.

Profitability Ratios

• Pre-Tax Margin is estimated at 22.27%, down by 5.30% from the last estimate of 23.51% at the end of the 2020 nine months.
• Interest Expense for the quarter is the same as 33.50% of the Estimated Gross Earnings figure; and same as a 7.19% reduction from the 2020 estimate of 36.09%.
• Returns achieved on Average Equity used through the quarter was estimated at 15.25%, fairly above the 15.06% achieved in the 2020 nine months.
• See the below table for detailed profitability ratios and comparison.

Efficiency Ratios

• Operating Expenses is estimated at 42.98% of the Gross Earnings estimate for the period, a 3.51% drop in efficiency when compared to the 36.09% estimated in the 2020 nine months.
• Similarly, Gross Earnings was estimated at 5.85% of Total Assets, which is a marginal 6.51% drop in efficiency compared to estimate from the corresponding quarter.
• Total Loan to Deposit Ratio achieved at the end of the quarter stood at 53.32%, down from the 58.43% achieved in 2020.

Investment/Valuation Ratios

• At the end of the 2021 third quarter, Access Bank earned N3.43 on each unit of its listed shares, the same as 19.15% growth from the N2.88 earned in the similar quarter.
• On the other hand, Total Comprehensive Income per share dropped by 19.52% to N2.19 from N2.72 each.
• Our estimated third-quarter P/E-Ratio adjusted up to 0.92x, versus 1.01x in the corresponding quarter.
• The current Earnings per Share is same as 36.29% of the share price of Access Bank on the exchange as of the time the result was made available to the investing public.
• The estimated value of each unit of Access Bank’s shares in its book is currently N22.49, an appreciable improvement over the corresponding quarter’s estimate.
• Confirming an under-priced status of Access Bank’s share price is the Price to Book Value estimate at below unity.
• See below for details:

Valuation

While valuing Access Bank’s shares, we choose a highly conservative method to present a very secure price to our users. Thus, we have valued each unit of Access Bank’s shares for N13.05, this is clearly below the Book Value but above the current market price of Access Bank on the floor of the exchange. Hence, we Rated Access Bank a Buy. Please understand that we see Access Bank achieving higher valuation in years to come, after settling down from all the changes it went through from various acquisitions.