Access Bank Plc: Doing well


Access Bank Plc: Doing well

By Folakemi Emem-Akpan



Our analysis shows that Access Bank Plc is now enjoying the fruits of a better management.  Its ability to generate income during the 2015 financial year improved, as well as its profit retention ability. The bank seems to be weathering Nigeria’s shaky economy pretty well, and its shareholders smiled home with a dividend.

We are of the opinion that the shareholders of the bank will yet receive a dividend from their stock holdings at the end of 2016. They are however more likely to earn more through capital gains, if only they are prepared to hold on to their stockholdings for a while. The bank enjoys tremendous goodwill, but this is not exactly evident in the valuation of its stock. It is currently undervalued, and is exchanging for less than it should on the floor of the Nigerian Stock Exchange.

For its investors and shareholders also, the 2016 financial year seems to be shaping up as well as 2015 did.


Core operations

As was the trend in the banking industry for the 2015 financial year, Access Bank earned more income from both core banking and non-core operations in 2015 than it did in 2014, pushing its gross earnings to an all-time high of N337.4 billion. Profit for the year, at N65.9 billion, was also higher than the N43 billion profit recorded in the preceding year.

Clients patronised Access Bank a little more in matters regarding loans and advances.  The bank’s loan portfolio increased by 25.7 per cent to N1.41 trillion. Despite this, average lending rate decreased over the preceding year’s, while average deposit interest rate increased. So while it charged its lenders less, it paid its depositors a better interest.

Because of this, the bank’s net interest margin further slipped in 2015 to 50.7 per cent. This means that the bank underperformed in its core banking operations of lending and borrowing for the review year when compared with the prior year. It is important to note here that this was the case with most banks for the 2015 financial year. The core reason for this is that most banks reduced their average lending rate and increased their average interest rate on deposits, thereby constricting the net interest margin.

Earnings per share, at 265 kobo, higher than the 189 kobo recorded the preceding year’s. Meanwhile, dividend per share increased to 55 kobo from 35 kobo in 2014.


Profitability ratios

As previously mentioned, Access Bank recorded both a higher turnover and profit in 2015. It was thereby able to have improved profitability ratios on almost all fronts. First to achieve a progression was the profit margin of the company, growing to 22.2 per cent in 2015 from 21.2 per cent in 2014. What this means is that for every N100 earned by the bank in the course of the year, N22.20 made it to the profit position, as compared to N21.20 for the year preceding 2015.

Assets deployed also earned more in 2015 than it did in 2014. Return on assets (ROA) for the year stood at 2.9 per cent in 2015, as compared to 2.5 per cent in 2014.

For the 2015 financial year, Access Bank deployed equity valued at N367.8 billion and for every N100 equity deployed, the bank made an after-tax profit of N17.90, a vast improvement on the profit of N15.50 made in 2014.

During the course of the year, the number of employees in its employ increased to 3,876 from 3,704. It seems the increase in employee number paid off because earnings per employee improved to N87.0 million on the average, up from N66.3 million in 2014. This is an indication of employee productivity and company efficiency.


Other ratios

The proportion of the bank’s loans classified as non-performing in the course of the year was 1.5 per cent, lower and therefore better than 2.2 per cent in 2014 and 2.7 per cent in 2013. This is one of the lower and therefore better ones in the banking industry.

In terms of capital adequacy, Access Bank performed better in 2015 than it did in 2014, as its result for the year was a little higher than the preceding year’s. Its equity (a company’s primary and cheapest source of funding) could finance about 20 per cent of the loans and advances it gave out to borrowers, up from the 18.4 per cent recorded in the erstwhile year.

Having a debt to equity ratio of six shows that the bank is using N6.00 of liabilities in addition to each N1.00 of stockholders equity. In other words, the bank is using N7.00 of total capital for every N1.00 of equity capital. A little high but still within acceptable limits, it also matches what was normal in the banking industry in 2015.


Sustainable growth

The bank gave a total dividend of 55 kobo per share held for its 2015 financial year, and the retention ratio in 2015 was lower than that of 2014, with the bank dedicating a higher proportion of after-tax profit to dividend payout than in the prior year.  Analysis shows that sustainable growth for 2015 was 15.5 per cent, lower than 23.8 per cent before, and this translates to mean that the bank’s growth ceiling, utilizing only its own source of funding for growth, dropped. Meanwhile, actual growth was 37.6 per cent, higher than both the preceding year’s actual growth and the review year’s sustainable growth. The bank is currently operating at operational points higher than its potential. While this is good, if it persists, it might have to look for external sources of funding to continue to operate.


Stock value

On January 21 2017, the market price of Access Bank was N7.00, and this fell within the median line for banking stocks. Despite this, we find the stock to be undervalued i.e. it is currently being sold at a lesser price than it should; therefore prospective investors might want to buy now.

Net assets per share is N12.72, easily two times more than the current market price, and book value to market value ratio is much less than one, another clear indication of undervaluation. P/E ratio and earnings yield also point to an analysis of undervaluation.

We recommend a buy at this price.


Unaudited results

Access Bank’s result for the 2016 third quarter shows both top line and bottom line growth. Gross earnings improved by nine percent over the corresponding figure in 2015, and profit advanced by 19 per cent, Capital adequacy ratio was 19 per cent, higher than the mandated minimum while proportion of non-performing loans was at a sensible 2.1 per cent. If the bank continues in this vein, it should have a good showing come year end 2016.


Unique strategies

In recent years, Access Bank’s commitment to innovation and sustainable banking practices has distinguished it amongst other banks. The bank continues to reinvent itself with a view to delivering superlative services that exceed customers’ expectations. It has an aim to become the World’s Most Respected African Bank.



While we are of the opinion that there will be further improvements in the bank’s profit making ability and therefore retention and sharing to shareholders, we advise the shareholder to exercise caution and not be in a hurry to see drastic changes. Lasting changes take time.

Access earned value

Source: ACCESS BANK’s 2015 financial report

*ACCESS BANK’s 2016 quarter three unaudited results

*The Nigerian Stock Exchange


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