Published On: Mon, Apr 2nd, 2018

Access, Ecobank reward shareholders with mouth watering returns

As the economy continues to show signs of better days, results of listed companies on the Nigerian Stock Exchange (NSE) are also painting a fair picture of improvement. Access bank Plc and Ecobank Transnational Incorporated (ETI) have both joined the league of G T Bank and Zenith Banks whose results have kept investors smiles warm and inviting. Against the backdrop of major macro -economic difficulties in 2017 Access Bank will still pay a dividend of 65kobo bringing dividend yield on recent market price of N11.15 to 7.08 per cent.

Access strategic plan gathers momentum

Access Bank’s gross earnings grew by N77.76 billion or 16.94 per cent compared to the N381. 32 billion posted in the corresponding period of 2016. Its audited results show that profit before tax declined to N80.07 billion from N90.34 billion in 2016. Profit before tax dropped by N10.27 billion or 11.36 per cent compared to the N90.34 billion achieved in the previous year.

Analysts believe the slip was as a result of higher impairment charges and FX revaluation losses.

The accounts show that profit for the year stood at N61.99 billion from N71.44 billion posted in 2016. Further analysis of the bank result showed that total impaired loans and advances stood at N 101.36 billion from N36.61 billion recorded in 2016.

Whereas Interest income rose to N319.85 billion from N247.29 billion in the comparative period of 2016, Net interest income also grew to N163.45 billion from N139.15 billion. At the close of business last year, Access bank’s fees and commission income rose to N56.67 billion from N55.44 billion recorded in 2016.

The bank’s Total assets equally surged to N4.10 trillion from N3.48 trillion in 2016. The bank’s board of directors has proposed a final dividend of 40k per ordinary share held by investors. Access bank had earlier paid an interim dividend of 25k, the same amount paid in the previous year.

‘’9-mobile exposure drives asset quality deterioration. In line with peers that have released thus far, higher provisioning in Q4 has been a key theme. In our view, a sizable chunk of this stemmed from exposure to 9mobile which banks have had to take a hair-cut based on the disparity between the carrying value and market value. Consequently, Access booked N27.3 billion in impairment over Q4 (9mobile exposure: N40 billion) with cost of risk expanding to 4.2% in the period (Q3 17: 0.5%)’’ ARM Research said.

The bank which just rolled out a five year strategic plan to pursue a more robust banking model through enhanced technology, perceives an impressive and rewarding future for shareholders.

In what appears an attempt at fine-tuning its earlier mid-term plan that ran from 2013 to 2017, Access Bank in December last year released its new five year strategic template that, on the face of it, appears tall on revenue growth assumptions but short on loan provisions despite a bigger appetite for continental loans and advances. The fresh corporate framework looks like a mixture of smart guesstimates, cautious assumptions and bold aspirations. Not unexpectedly the playbook has come under some amount of scrutiny with some analysts complaining of a lack of bare-knuckle details.

The best guide to understanding Access banks gambit going forward would be to examine its overall results in the last five years and review newly published assumptions for the next half decade between 2018 and 2022. The easiest place to start would perhaps be the banks revenue and profit history and its assumptions for growth of the profit and loss account in months ahead.

Analysts note that between 2012 and 2016 the bank’s net revenues rose from N134 billion to N273 billion a forward leap of 19.5 per cent on a compound annual basis (CAGR). The bank itself prefers to compare its recent results over a ten year horizon between 2005 and 2016 but this tends to bias its performance upwards as it suffers from the statistician’s curse of a low base effect.   For example comparing the banks net income in 2005 to its income in 2016 shows a compound annual growth of 42 per cent as against the five year calculation of slightly below 20 per cent.

ETI: No dividend for shareholders

ETI, a pan African bank with presence in over 30 countries recorded a 4% decline in Gross Earnings to $2.5billion (up 15% to N763.6billion) in 2017.

Its operating profit before impairment also took a 5% knock slumping to $699million in 2017 from $735.052 billion in 2016 (up 14% to N214.3billion.

Profit Before Tax also elbowed up rising to $288.3billion (up to N88.3billion) while total assets rose 9% to N22.4billion (up 10% to N6.864.1billion.

At the end of the 2017 business year, the bank’s loans and advances inched forward marginally by 1% to $9.4billion (up 13% to N2.863.5billion).

The bank’s deposit from customer experienced a growth of 13% to $15.2billion (up 13% to N4.652.2 billion); according to the bank, its total equity snapped up 23% to $2.2billion (up 24billion N664.7bilion.

Ecobank’s management believes that the 2017 financial performance was encouraging and an improvement on the 2016 result.

‘’ We delivered a profit before tax of $288 million compared to a loss of $131 million in the previous year. $1.8 billion of revenue remained largely unchanged from 2016 due to our decision to keep a tight lid on loan growth. Our customers showed their confidence in the firm’s value proposition by giving us more of their deposits, which grew by 13%.’’ ETI’s management said.

ETI also said its actions to improve the firm’s efficiency were productive; adding that it had reduced its cost to income ratio to 61.8% which was evidence of the effectiveness of policy actions in the course of the year to drive down the ratio.

As more results continue to emerge from the floor of the Nigerian Stock Exchange (NSE) investors are counting their gains and losses. So far, the banks which results have been made public have all performed fairly well and paid dividends to their shareholders except Ecobank Transnational incorporation that did not recommend any dividend in 2017.

Analysts predict a mixed fortune for the financial industry. As the economy continues to struggle, the indices are latching on to the rising price of crude oil at about $70pbd to grow. The economy which emerged from a deep recession in 2016 to grow by 1.4 per cent in the third quarter 2017 also grew 1.9 in fourth quarter has elicited a sustainability question from economic experts and analysts. Given that the health of any economy reflects the health condition of other sectors, the financial sector is seemingly showing signs of relative good health. In fact, the Central Bank of Nigeria has consistently confirmed the soundness and good health of the Nigerian banks, even in 2017.

But the new International financial reporting standard which requires that financial institutions commit more to provisions for deteriorating assets may pose some difficulty going forward.

 

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