Access Bank: Drive Earnings With Innovation, Excellent Leadership, Despite Economic Hiccup

(By Chief Research Officer, AMBROSE OMORDION) Access Bank management recently released it full year earnings report for the period ended December 31, 2016 to the investing community to remain consistent and keeping to its post-listing requirement earlier than the 2015 filing date.
The bank tripartite agenda of delivering satisfactory services, with speed and security have boosted its activities as reflected in all the numbers presented, as the board and management continue the task of building a world class financial institution with strong asset base and positive performance ratios at all times and in the process create value for all stakeholders.
Despite the harsh operating environment during the period under review, made worse by the economic recession in Nigeria, its home and source of the lion’s share of earnings and profit, the bank’s Statistics showed impressive performance in top and bottom lines which closed green. Compared with figures for the 2015 financial year, earnings rose 13.02%, beating analysts’ 9% Year-on-Year growth estimate to N381.32bn from N337.4bn in 2015, while bottom line rose marginally by 8.44% from N65.87bn in 2015 to N71.44bn. This translated to Earnings Per Share for the period improved from 228 kobo in 2015 to 247 kobo, out of which the directors are offering 40 kobo dividend per share.
Other operating income from securities trading and sale of investment in Stanbic IBTC Pension Managers and others incomes for the period supported profit, while provision for foreign exchange revaluation loss on non-performing loans and operating expenses hampered bottom line by 86.41%, 54.36% and 10.13% respectively to N3.60 billion, N21.95 billion and N160.30 billion. Shareholders funds jumped to N454.49 billion from N367.80 billion in the 2015 financial year.
Its full year earnings power per share of 247 kobo is a replica of the price in 2.76x, which is higher than the 1.91x recorded in the previous year, thereby increasing investors’ waiting period as share price for the period grew by 56.78%. Book Value for the period stood at N15.71 from N12.71 in 2015. The marginal drop in profit margin compared to previous year’s is evidence of higher provisions for bad loans and other costs.
Access BankQ4
The continued growth strategy of the bank that led it to invest in the infrastructure needed to strengthen it products offering and at the same time focus on mainstream support for women in business, SME and others to deliver sustainable economic growth that is profitable, environmentally responsible and socially relevant.
Technical View
Access BankQ4-2
Technically, Access Bank has pulled back as market reacted negatively to its 2016 financial to form a falling channel and symmetrical triangle, while at the same time signaling reversal to support the chart pattern and ‘BUY’ opportunity. Investors should position right away as the stock is now trading at a discount. Traders should position for the very short term because any breakout of the channel and triangle will retrace to N7.02 again as liquidity in the sector will further boost performance in the near future.
Valuation
The bank’s continued securities trading and taking advantage of high yielding fixed income securities has resulted in returns on equity and assets at 15.72% and 2.05% respectively.
Access Bank looks very attractive at the current market value, as it currently trades with Price to Book (P/B) ratio of 0.43x and profit margin of 18.72%, while the Book Value of N15.71 reveals an underpriced stock.
Consequently, each unit of Access Bank is fairly priced at N10.00, following which we retain our BUY position for traders and investors.
Analysts Opinion/Recommendations
The bank’s performance and profitability ratios for 2016 were mixed as some fell, compared to the previews year, with Loan to Deposit ratio rising to 82.19% from 80.21% in 2015, an indication that it grew credit despite the highly volatile macroeconomic environment. The stock looks good for traders, especially from the current price of N6.50.
On the other hand, the management has strengthened its presence in other Africa countries, a good move that would diversify its operational bases, besides the recent injection of funds into it operations to boost bottom line.
This is in addition to an expected increase in commission income from the Central Bank of Nigeria (CBN) forex intervention and on the strength of all these, the bank’s first quarter EPS is projected to be in the region of 0.70 kobo.
Access Bank Q4-3
The bank’s performance and excellent leadership style has influenced all aspect of its operations as reflected in the numbers posted in recent years. This outstanding performances hitting the market from the bank as it took strategic positions, which saw the price in an oscillating mood, creating wealth for traders that buy low and high on the trendy movement before the current retracement that had been sustained in this season.
Similarly, the bank’s shareholders fund has grown in the same direction from N244.48bn in 2013 to N454.49 billion. Investor confidence and strong numbers from the bank supported its price as valuation tools placed the bank’s stock at N14, representing a 115% upside potential to current market value of N6.51.
AccessBank Q4-4
Four-Year Financial Performance Analysis
The bank’s performance in the past four years shows gross income on year-on-year basis increased from N206.79bn in 2012 to N381.32bn in 2016, representing 84.4% for the period. The post-acquisition impact and aggressive leadership style of the result, which follows the strategic plans and implementation that has supported this up trending in earnings so far in the last four years. Despite this improvement in the bank’s gross earnings, it is obvious that profit margin for the period under consideration has been fluctuating, reflecting the high operating cost and provisions for bad loans.
The bank’s innovation and change in management style had improved service product capable. Regardless of the over-regulation in the banking sector and headwinds that comes with an economy in recession which has recently put pressure on the sector’s earnings capacity.
The Dividend Yield of 6.82% is a laudable achievement, considering how many times the sector has been downgraded by international rating agencies, following the downgrade of the sovereign where these banks operate. The earnings accounts for 32% of the market price as at the released date. Thus the period for return on investment has been up and down as shown in the table above.
The key profitability and value indicators like Net Assets has continued to point up on a Year-on-Year basis, which corresponded to the estimated Book Value that grew to N15.71 from N10.68 in 2013, which is above the market value of N6.51.

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