Business
Access Bank performance sends positive market signal
JULIUS ALAGBE| As the investment environment gets more intense, especially in equity market, where investors have to tread with caution with several companies posting huge losses, some corporate giants are still giving shareholders sufficient confidence on good returns. For Access bank Plc, investors’ attitude has been influenced towards the bank stock in the couple of weeks on the back of significant improvement on its operating fundamentals in recent time.
The review of the sell side showed an improved sentiment on the stock as earnings and earnings outlook range above the red line.
Looking at the equity performance, the bank’s stock has become quite attractive to the market because of the changes in business drivers which seem to have started paying off.
The bank nine months result could be an investor’s tip-off to take position as analysts’ projection on full year end performance remains strong.
Analysts are of the view that the effect of the result could reverberate across the market, which sends a positive signal.
In the bank quest to increase shareholders wealth, profit increased on the back of an improved efficiency and customers’ service.
The performance splash came stronger, while projections for the year end rose.
Access Bank beat investment banking estimate in its third quarter result.
Profit after tax, efficient as well as loan growth moved up beyond Broad Street analysts expectations.
The leadership focus seems to be getting clearer than ever as the bank is moving towards taking it rightful place in the industry.
The review of the sell side showed an improved sentiment on the stock as earnings and earnings outlook range above the red line.
Looking at the equity performance, the bank’s stock has become quite attractive to the market because of the changes in business drivers which seem to have started paying off.
The bank nine months result could be an investor’s tip-off to take position as analysts’ projection on full year end performance remains strong.
Analysts are of the view that the effect of the result could reverberate across the market, which sends a positive signal.
In the bank quest to increase shareholders wealth, profit increased on the back of an improved efficiency and customers’ service.
The performance splash came stronger, while projections for the year end rose.
Access Bank beat investment banking estimate in its third quarter result.
Profit after tax, efficient as well as loan growth moved up beyond Broad Street analysts expectations.
The leadership focus seems to be getting clearer than ever as the bank is moving towards taking it rightful place in the industry.
The unaudited third quarter 2015 financial results released to the Nigerian Stock Exchange (NSE) showed gross earnings of N258 billion, which is an increase of 42% over the N182 billion recorded in the same period in 2014.
The breakdown of the headline performance on a line by line items showed that interest income contributed 60% while non-interest income came in at 40%.
While the financial year 2014 gross take was at N245.22 billion, Vetiva analysts have projected at total gross earnings of N331.05 billion for the year 2015. That will represent a whopping 35% upsurge for the year.
Meanwhile, the bank impressive performance at the top line breathe strong strength into the bottom line as the Group posted a profit before tax of N60 billion, which showed an increase of 43%, when compared to the third quarter of 2014 which came in at N42 billion.
Then, its profit after tax was up 34 per cent in 2015 to N48 billion, compared to N35 billion in nine months of 2014. In 2014, the bank profit before tax came in at N52.02 billion.
For the full year result, analysts have projected that the bank could rake in about N71.4 billion as pretax profit. This translated 37% addition to the base for the period.
The bank non-interest income rose by 106% to N102 billion in 2015, from N50 billion 2014 on the back of increase business activities around non-interest related transactions.
This includes commission and fees charge which often depend on volume of transactions that command such charges.
Access bank continues to invest in technology, which to a greater extent enhances its processes and improve service delivery whilst reducing cost.
In a statement on its website, the bank said that it has deployed simple and efficient digital solutions to meet the needs of its customers.
The recent upgrade of our core banking applications will act as catalyst for the sustainable growth of our retail base and deepen our share in key focus market segments.
Unfortunately, it looks like the bank continues to struggle with the cost of funding its operation as both interest income and operating expenses continue to rise.
In its 9 months result, interest expense remained under pressure; it went up by 42% to N79.5 billion as against Vetiva analysts estimate of N68.4 billion.
And, the bank record no improvement in its net interest income line as it remained flat year on year at N75.9 billion; but 17% behind Vetiva analysts N91.8 billion forecast.
Although loan loss provision was up 66% to N11.6 billion, quite in line with industry trend, it came in slightly better than analysts N12.3 billion forecast – putting cost of risk (CoR) at 0.97% but among all odds, operating Income moved up by 40% to N167 billion.
Its total deposit liabilities flared up by 7%, which could be an indication that customers patronage came in fairly better compare to the beginning of the year.
At the end of 9 months of the financial year 2015, ACCESS bank held N1.64 trillion in deposit from customers as against N1.45 trillion at the beginning of the year. A
lso, from the beginning of the year to the end of third quarter, the bank’s financial position expanded by 14% from N2.104 trillion to N2.4 trillion.
The growth in size could as well be attributed to aggressive lending that permeate the period when loan portfolio rose by 15% to N1.28 trillion from N1.11 trillion at the beginning of the year.
Investment decision: Why and/or why not
Access Bank is strong at the retail segment, quite accessible. Inside its banking hall, you will observe that someone is thinking.
Talking about the structure, the approach and the customers care.
It has widespread business scope and its infrastructure base boosted.
The management continues to adopt tools and strategies to improve customers’ services experience; and that is the future!
Access Bank Plc has ample opportunity to grow its business. While the loan to deposit ratio for the industry is at 80%, the bank is currently doing far less than that. Loan to deposit ratio is forecasted to drop to 69.8% for financial year 2015, from 76.4% last year.
It means when the economy opens up, Access bank will be quite liquid to support businesses to achieve pre-stated goals and increase its shareholders wealth by expanding interest earnings assets. That will probably translate to improve future earnings per share.
According to Vetiva analysts, the bank’s cost to income ratio is expected to drop to 61.9% at the end of financial year 2015 from N62.2% in 2014.
Though, the market is expecting a lower cost as portion of income but the recent high interest rate environment stands as an impediment. The good news is that it cut across the industry.
Its return on average equity is expected to increase to 19.5% in 2015 from 16.7% it previously recorded in 2014 and then significant change is envisage from the use of its resources. Return on average assets is estimated to move up to 2.5% in the year from 2.2%, widen the gap between its performance two years ago when return on average assets of the bank berthed at 2%.
So, the improvement in loans and advances as well as increased deposit collections is expected to provide a pivotal platform for earnings growth in the fourth quarter of financial year 2015.
The cumulative effects of these, is expected to translate into improve earnings which would be used to price the bank stock going forward.
The breakdown of the headline performance on a line by line items showed that interest income contributed 60% while non-interest income came in at 40%.
While the financial year 2014 gross take was at N245.22 billion, Vetiva analysts have projected at total gross earnings of N331.05 billion for the year 2015. That will represent a whopping 35% upsurge for the year.
Meanwhile, the bank impressive performance at the top line breathe strong strength into the bottom line as the Group posted a profit before tax of N60 billion, which showed an increase of 43%, when compared to the third quarter of 2014 which came in at N42 billion.
Then, its profit after tax was up 34 per cent in 2015 to N48 billion, compared to N35 billion in nine months of 2014. In 2014, the bank profit before tax came in at N52.02 billion.
For the full year result, analysts have projected that the bank could rake in about N71.4 billion as pretax profit. This translated 37% addition to the base for the period.
The bank non-interest income rose by 106% to N102 billion in 2015, from N50 billion 2014 on the back of increase business activities around non-interest related transactions.
This includes commission and fees charge which often depend on volume of transactions that command such charges.
Access bank continues to invest in technology, which to a greater extent enhances its processes and improve service delivery whilst reducing cost.
In a statement on its website, the bank said that it has deployed simple and efficient digital solutions to meet the needs of its customers.
The recent upgrade of our core banking applications will act as catalyst for the sustainable growth of our retail base and deepen our share in key focus market segments.
Unfortunately, it looks like the bank continues to struggle with the cost of funding its operation as both interest income and operating expenses continue to rise.
In its 9 months result, interest expense remained under pressure; it went up by 42% to N79.5 billion as against Vetiva analysts estimate of N68.4 billion.
And, the bank record no improvement in its net interest income line as it remained flat year on year at N75.9 billion; but 17% behind Vetiva analysts N91.8 billion forecast.
Although loan loss provision was up 66% to N11.6 billion, quite in line with industry trend, it came in slightly better than analysts N12.3 billion forecast – putting cost of risk (CoR) at 0.97% but among all odds, operating Income moved up by 40% to N167 billion.
Its total deposit liabilities flared up by 7%, which could be an indication that customers patronage came in fairly better compare to the beginning of the year.
At the end of 9 months of the financial year 2015, ACCESS bank held N1.64 trillion in deposit from customers as against N1.45 trillion at the beginning of the year. A
lso, from the beginning of the year to the end of third quarter, the bank’s financial position expanded by 14% from N2.104 trillion to N2.4 trillion.
The growth in size could as well be attributed to aggressive lending that permeate the period when loan portfolio rose by 15% to N1.28 trillion from N1.11 trillion at the beginning of the year.
Investment decision: Why and/or why not
Access Bank is strong at the retail segment, quite accessible. Inside its banking hall, you will observe that someone is thinking.
Talking about the structure, the approach and the customers care.
It has widespread business scope and its infrastructure base boosted.
The management continues to adopt tools and strategies to improve customers’ services experience; and that is the future!
Access Bank Plc has ample opportunity to grow its business. While the loan to deposit ratio for the industry is at 80%, the bank is currently doing far less than that. Loan to deposit ratio is forecasted to drop to 69.8% for financial year 2015, from 76.4% last year.
It means when the economy opens up, Access bank will be quite liquid to support businesses to achieve pre-stated goals and increase its shareholders wealth by expanding interest earnings assets. That will probably translate to improve future earnings per share.
According to Vetiva analysts, the bank’s cost to income ratio is expected to drop to 61.9% at the end of financial year 2015 from N62.2% in 2014.
Though, the market is expecting a lower cost as portion of income but the recent high interest rate environment stands as an impediment. The good news is that it cut across the industry.
Its return on average equity is expected to increase to 19.5% in 2015 from 16.7% it previously recorded in 2014 and then significant change is envisage from the use of its resources. Return on average assets is estimated to move up to 2.5% in the year from 2.2%, widen the gap between its performance two years ago when return on average assets of the bank berthed at 2%.
So, the improvement in loans and advances as well as increased deposit collections is expected to provide a pivotal platform for earnings growth in the fourth quarter of financial year 2015.
The cumulative effects of these, is expected to translate into improve earnings which would be used to price the bank stock going forward.