ACCESS BANK: ANOTHER IMPRESSIVE BEGINNING

Access Bank recently presented its scorecard for the period ended March 31, 2017 to the investing community, in compliance with its post-listing requirement, slightly later when compared to the 2016 released date.

Its consistency in releasing its numbers has helped investors and traders in forecasting and planning their investment, just as the focus on delivering satisfactory services, with speed and security continues to boost performance and activities in the bank’s transformation process which has passed through various stages over the past 28 years.

Access Bank now ranks among the top five financial institutions in Nigeria, engaging in investment, corporate, commercial, retail and business banking.

The bank’s Q1 scorecard revealed an impressive performance as against the comparable period, with profitability and investment ratios looking up to indicate a better future for the bank, all things being equal. This is especially as the economy is recovery and the business environment expected to become better,thereby enhancing productivity and living standard of people, which would also translate to improve savings. 

Access Bank’s earnings came in stronger, largely due to better asset quality, following the latest foreign exchange market policy of the Central Bank of Nigeria (CBN); besides the revenue from treasury investment, margin in FX forward transactions and revaluation foreign currency from operations outside, in addition to recent recovery in crude oil prices and a now more upbeat outlook on the macro-economic indices.

The table below highlights the released figures in comparison to similar quarter in 2016 and as can be seen, Gross Earnings for the period grew by 38.77% while profit after tax was up by 33.99% from N19.42bn in 2016 to N26.02bn.

Meanwhile, despite the 34.59% drop in fees and commission income to N11.8bn from N18.04bnin 2016; while loan loss provision for the period went up by 33.33% from N2.4bn in 2016 to N3.2bn, meaning that with the likely drop in inflation, going forward, and the positive outlook of the economy, there is the possibility of lower provisions in subsequent quarters is high which will further boost bottom-line. The bank’s securities trading loss from N3.28bn in the corresponding period of 2016 to N5.54bn profit in 2017, just as forex Income for the period was above the comparable period by 177.69%. This resulted from the FX transaction differences and value change of AFS financial instrument according to the numbers posted. In all, the result turned out a good performance, considering the several tight economic regime within which the financial institutions operated through the reported quarter.

ACCESS BANK PLC
3 MONTHS UNAUDITED REPORT 2017
COY	2016	2017
	(N)	(N)	% Chg
Date Released	April 25, 2016	April 27, 2017
Price as at Released Date	3.87	6.48	67.44
Gross Earnings	83,547,467,000	115,941,055,000	38.77
Profit After Tax	19,418,837,000	26,019,083,000	33.99
Shareholders' Fund	382,480,635,000	467,311,089,000	22.18
ESTIMATED RATIOS
Earnings Per Share	0.67	0.90	34.33
PE Ratio	1.44	1.80	25.00
Earnings Yield (%)	17.35	13.88	-20.00
Book Value	13.22	16.15	22.16
Price To  Book (P/B)	0.29	0.40	37.93
ROE (%)	5.08	5.57	9.65
Profit Margin (%)	23.24	22.44	-3.44
Year End	Dec	Dec

The bank kicked off the 2017 financial year with strong numbers like this as it plans to roll out another strategic five-year rolling plans to further expand operations within and outside the shores of Nigeria to boost performance that will create more value for shareholders and the banking public. It must be noted also that the bank’s investment in infrastructure to strengthen operation and product offerings has started yielding desired results.

Technical View

Access Bank’s price action for more than a year has formed a rising channel with positive sentiments supporting the uptrend, despite various pullbacks as a result of profit taking by traders at different intervals. The bank’s impressive numbers and low valuation has continued to attract investors, but the recent double top chart pattern formation signals reversal for traders to take profit. Investors with long term goals should position in stages as the stock is now trading at a discount, considering the Book Value of N16.15. 

Valuation

Access Bank looks very attractive at the current market value, as it currently trades with trailing  Price to Book (P/B) ratio of 0.40x and profit margin of 22.44%, while the  return on equity for the period stood at 5.57%, with full year projection of 20% ROE as the economy improves.

Consequently, we forecast an EPS of ₦3.55 for FY’17 and raise our Target Price (TP) to ₦14.12 per share.

 Access Bank trades at FY’17 P/B: 1.2x and P/E: 3.12x, even as we equally retain our BUY position for traders and investors.

Analysts Opinion/Recommendations

The bank’s performance and profitability ratios for Q1 is good and strong to drive price as improvements in subsequent numbers would help to sustain uptrend, after the expected pull back. The stock looks good for traders due to it trendy moves.

On the other hand, with the management’s plan to further strengthen its presence in other Africa countries isa good move that would help to 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 CBN forex intervention, and on the strength of all these, the bank’s second quarter Earnings Per Share (EPS) is projected to be in the region of N1.85 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 (2017)	5.87
Closing Price (2017) as at May, 10, 2017	7.21
Date Listed	18/11/1998
Year End	31st December

The bank’s performance and leadership style has influenced all aspects of its operations as reflected in the numbers posted in recent years. This outstanding performance from the bank after it took strategic positions that saw its price in an oscillating mood, thereby creating wealth for traders that buy low and high on the trendy movement before the current retracement 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 Access 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 N206.79bn in 2012 to N381.32bn in 2016, representing 84.4% rise for the period. The post-acquisition impact and aggressive leadership style, which follows the strategic plans and implementation has supported this up trending earnings so far in the last four years.  Despite this improvement in 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 has improved service delivery, regardless of the over-regulation in the banking sector and headwinds that come with an economy in recession which has put pressure on the sector’s earnings capacity in recent times.

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 (Nigeria) where these banks operate.  The earnings account 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 Asset has continued to rise on a yearly basis corresponding to the estimated Book Value that grew to N15.71 from N10.68 in 2013, which is significantly above the N6.51 per share market value.

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 the N6.82 market value as at released date. 

Price to Book Value for the period dropped to 0.34x in 2015 from 0.81x in 2013, before moving up again in 2016 to 0.43x to reveal the inherent value in Access Bank. Also, there is a high margin of safety for investors looking the way of this stock at current 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.

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