Access Bank Deepens Credentials With Improved First Quarter Results | Independent Newspapers Limited
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Access Bank Deepens Credentials With Improved First Quarter Results

Posted: Apr 27, 2016 at 5:13 am   /   by   /   comments (1)


Kirk Leigh


Building on a stellar 2015 full year report despite economic headwinds occasioned by oil price dip and faltering naira exchange rate, local lender, Access Bank, has harnessed potentials in retail banking to galvanise top and bottom line results in the 2016 first quarter in what analysts say is an example of resilience to challenging market conditions.

The tier one bank grew earnings 5 percent to N80.3 billion from N76.8 billion. Much of the rise is attributable to a decent 19 percent rise in interest income to N55.5 billion from N46.4 billion, which indicates increased activity in the bank’s lending activity.

Indeed loans and advances grew 1.7 percent in the quarter to N1.47 trillion from N1.4 trillion. But customer deposits had a faster growth rate at 4 percent from N1.68 trillion to N1.8 trillion, setting up loans to deposit ratio of 82 percent, down from 84 percent but still higher than the central bank threshold of 80 percent.

While the loans deposit figure suggests better control of credit risk items over the equivalent quarter in 2015, it shows that the bank gave out fewer loans in absolute terms in the period under review.

By managing down impairment charges in the period to N2.4 billion from N3.9 billion is suggestive of the bank’s avoidance of the booby trap which took many a bank unawares in the last financial year, causing them to put out profit warnings having been badly hit by falling oil price.

The bank deemphasised non-interest earning in the period, cutting the item 19 percent to N24.7 billion from N30.4 billion in the equivalent quarter. This is an indication that while the bank is notching up on maturity transformation, it is soft peddling on fee-based earnings.

Rising interest income and falling non-interest income resulted in beefed up operating income of N59.4 billion, a 10 percent improvement over the previous performance of N54 billion.

The bank’s pretax returns responded to the bank’s better-cost management relative to the equivalent quarter, rising 37 percent to N22.6 billion from N16.5 billion.

Cost-to-Income Ratio was managed down to 57.9% from 62.2%. This is even as operating declined 13 percent from N39.4 billion to N33.6 billion in what the bank says is “reflecting the positive impact of the implementation of the bank’s strategic cost reduction initiatives”.

It was inevitable for net profit to rise given the preceding scenario but it was the 42 percent rise that made it remarkable. Profit after tax jumped to N19.4 billion from N13.7 billion.

Since the result announcement on Monday, the bank’s share price has appreciated by 13 kobo, rising from N3.87 to N4 at the end of trading Tuesday afternoon.

In the last financial year, year-on-year Access Bank Plc grew revenues 37.59 percent from N245 billion to N337 billion while net income improved 54.03 percent from N42 billion to N65 billion.

Year-on-year, growth in dividends per share fell 8.33 percent while earnings per share excluding extraordinary items rose 42.67 percent. Additionally, when measured on a five year annualized basis, dividend per share growth is in-line with the industry average relative to its peers, while earnings per share growth are the highest in its industry, according to the Financial Times.

In 2015, Access Bank increased its cash reserves by 53.22 percent, or N81 billion. Cash flow from financing totaled N151 billionn or 44.76 percent of revenues. In addition the company used N178 billion for operations while cash from investing totaled N108 billion.

According to FT, “As of April 22, 2016, the consensus forecast amongst 15 polled investment analysts covering Access Bank Plc advises that the company will outperform the market. This has been the consensus forecast since the sentiment of investment analysts improved on January 27, 2014. The previous consensus forecast advised investors to hold their position in Access Bank Plc.

“The 14 analysts offering 12-month price targets for Access Bank Plc have a median target of 7.36, with a high estimate of 8.95 and a low estimate of 4.25. The median estimate represents an 88.59% increase from the last price of 3.90”.

Commenting on the bank’s 2015 showing, an analysts’ report by FBN Capital, the investment banking subsidiary of FBN Holdings, indicated that Access Bank has strong upside potential to reach a share price of N8.30. The analysts’ report, signed by Olubunmi Asaolu, a chartered financial analyst, marked up the forecast price for Access Bank based on the bank’s “better-than-expected fourth quarter 2015 results.

“The main drivers behind our earnings upgrade are increased funding income and a reduction to our operating expenses forecasts,” FBN Capital, also known as FBN Quest, stated.

Herbert Wigwe, the bank’s CEO is upbeat on his bank’s performance for the rest of the year.

“In the coming year, we will remain resilient in the execution of our bold strategy for increased growth and profitability. Though market conditions will remain challenging, we will focus on innovation, proactive risk management and data analytics as catalysts for diversifying income streams and enhancing retail expansion, so as to maximize shareholder value in 2016 and beyond”, he says.










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