ACCESS BANK: DESPITE ECONOMIC HICCUP, INNOVATION, EXCELLENT LEADERSHIP DRIVE EARNINGS

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 2015financial year, earnings rose 13.02%, beating analysts’ 9% Year-on-Year growth estimate to N381.32bnfrom N337.4bn in 2015, while bottom line rose marginally by 8.44% from N65.87bnin 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 losson 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 jumpedto 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, therebyincreasinginvestors’ 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 top previous year’s is evidence of higher provisions for bad loans and other costs.

ACCESS BANK PLC
FULL YEAR AUDITED REPORT 2016
COY	2015	2016
	(N)	(N)	% Chg
Date Released	March 17, 2016	March 6, 2017
Price as at Released Date	4.35	6.82	56.78
Gross Earnings	337,404,230,000	381,320,780,000	13.02
Profit After Tax	65,868,773,000	71,439,347,000	8.44
Shareholders' Fund	367,801,467,000	454,494,580,000	23.57
Dividend	0.55k	0.65k	18.18
ESTIMATED RATIOS
Earnings Per Share	2.28	2.47	8.33
PE Ratio	1.91	2.76	44.50
Earnings Yield	52.34	36.21	-30.82
Book Value	12.71	15.71	23.60
Price To  Book (P/B)	0.34	0.43	26.47
ROE (%)	17.91	15.72	-12.23
Profit Margin (%)	19.52	18.73	-4.05
Year End	Dec	Dec

The continued growth strategy of the bank that  led it to invest in the infrastructure needed to strengthen itproducts 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

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 toN7.02 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 0.43xand 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
Share Holding Structure
Stanbic Nominees Nigeria Limited	18.92%
Access Bank Staff Investment Trust Scheme	5.76%
Other Nigerian Citizens & Association.	75.32%
Other Statistics
Shares Outstanding	28,927,971,631
Opening Price (2016)	4.85
Closing Price (2016)	5.87
Closing Price as at March 16, 2017	6.51
Date Listed	18/11/1998
Year End	31st December

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.

ACCESS BANK FOUR YEARS FINANCIAL PERFORMANCE
	2013	2014	2015	2016
Date Released	April 07, 2014	March 13, 2015	March 17, 2016	March 6, 2017
Price @ Released Date	7.33	6.10	4.35	6.82
Gross Earnings	206,786,000,000	245,383,536,000	337,404,230,000	381,320,780,000
Profit After Tax	36,298,000,000	42,976,212,000	65,868,773,000	71,439,347,000
Shareholders' Fund	244,482,000,000	277.411000,000	367,801,467,000	454,494,580,000
Dividend	0.60	0.60	0.55	0.65

Four-Year Financial Performance Analysis

The bank’s performance in the past four years shows gross income on year-on-year basis increased from N206.79bnin 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 upon 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.

ACCESS BANK- ESTIMATED RATIOS
	2013	2014	2015	2016
Earnings Per Share	1.59	1.88	2.28	2.47
PE Ratio	4.62	3.25	1.91	2.76
Earnings Yield (%)	21.64	30.79	52.34	36.21
Book Value	10.68	12.12	12.71	15.71
Price To Book	0.81	0.57	0.34	0.43
ROE (%)	15.00	15.49	17.91	15.72
Profit Margin (%)	17.55	17.53	19.52	18.73
Year End	Dec	Dec	Dec	Dec

Estimated Performance Ratios

The bank’s earnings per share for the four-year period increased, reflecting its earnings power, despite the additional shares at post-acquisition which did not dilute the EPS for the period under review. The amount earned per share increased from 159 kobo in 2013 to 247 kobo in 2016. The improved earnings within the period has reduced  investors waiting period due to changes in share price as recoupment period has declined from 4.62x in 2013 to 1.91x in 2015 before adjusting up in the recent report as a result of market value of 6.82  as released date. 

Price to Book Value for the period has slide to 0.34x in 2015 from 0.81x in 2013 before moving up again in 2016 to 0.43x to revealed inherit value in Access Bank.  Also there is a high margin of safety for investors looking the way of the stock at the market price.  Earnings Yield, Return on Equity and Profit Margin were up from 2013 but down from previous year’s figures. On the strength of the figures posted and consistent dividend payout for the past four years, the stock is fairly priced at N14.