Early this week (precisely Monday) Access Bank Plc released its audited results for the full year (FY) ended December 31, 2016. The Tier-1 lender’s results currently at the Nigerian Stock Exchange (NSE) beat analysts’ expectations.
Revenue and profitability
The bank’s Gross Earnings totalled N381.3billion in FY 2016, 13percent increase year-on-year (y/y) (FY 2015: N337.4billion), of which interest income and non-interest income comprise 65percent and 35percent, respectively.
Interest Income grew by 19percent y/y to N247.2billion in FY 2016 from N207.8billion in FY 2015 reflecting income growth from the core business on the back of a higher interest environment.
Non-Interest Income up 3percent to N133.4billion, in FY 2016 from N129.4billion in FY 2015; driven by growth in transaction banking income on the back of increased adoption of channels, as well as gains on disposal of an equity investment. Operating Income increased to N272.6billion in FY 2016 – 16percent growth y/y compared to N234.8billion in the corresponding period of 2015.
Profit Before Tax (PBT) for the period rose to N90.3billion, representing a 20 percent y/y growth compared to N75.0billion in 2015. Profit After Tax (PAT) was up 8 percent in FY 2016 to N71.4billion from N65.8billion in FY 2015. Return on Average Equity (ROAE) of 17.4 percent in FY 2016, from 20.4 percent in FY 2015.
Dividend
The board of Access Bank Plc proposes a final dividend of 40kobo against 30kobo in 2015, up 33.33percent. The proposed final dividend is in addition to the 25kobo interim the bank has already paid. Analysts note that the final dividend implies a yield of around 6percent.
Balance sheet
Access Bank Plc Loans and Advances were up 32 percent to N1.86trillion in December 2016, from N1.41trillion in December 2015; Customer Deposits up 24 percent y/y, from N1.68trillion in December 2015; Total Assets of N3.48trillion indicates an increase of 34 percent y/y from N2.59trillion in December 2015. Capital Adequacy Ratio (CAR) improved by 170 basis points (bps) to 21.2percent, compared to 19.5percent in December 2015.
Asset quality
Non-performing loan (NPL) ratio of 2.1percent, an increase from 1.7 percent recorded in December 2015 reflects the impact of the challenging macro on the bank’s loan book. Coverage Ratio (with regulatory risk reserves) stood at 169 percent as at December 2016 from 279.8 percent in December 2015. Cost of Risk stood at 1.2 percent from 1 percent in FY 2015; Impairment Charges increased to N21.9billion from N14.2billion in FY 2015, due to the impact of some declining macro variables.
Operational efficiency
Net Interest Margin (NIM) increased to 6.2 percent in FY 2016 from 5.9 percent in FY 2015, as Cost of Funds (CoF) decreased by 90bps y/y to 4.3 percent from 5.2 percent in FY 2015. Cost-to-Income Ratio (CIR) at 58.8 percent in FY 2016 (FY 2015: 62percent).
Operational highlights
The bank in 2016 successfully raised $300 million senior unsecured notes listed on the Irish Stock Exchange. Awards and Recognition: Best Bank Transformation in the Euromoney 2016 Awards for Excellence; EMEA Finance 2016 African Banker Awards: Best Bank (Nigeria); Corporate Social Responsibility (Pan-Africa); 2016 Business Day Banking Awards: Bank of the Year; Outstanding Business Sustainability in the 2016 Karlsruhe Sustainable Finance Awards; and Bank of the Year, Nigeria in The Banker Awards 2016.
Management speaks
Herbert Wigwe, GMD/CEO, Access Bank Plc said: “Access Bank Plc reported strong sustainable growth across all four business lines despite a weak and volatile macro-economic backdrop. The full year 2016 results demonstrate the effective execution of our strategy underpinned by a robust risk management framework. With strong business fundamentals, our position in the top tier was further consolidated in the industry.”
“Our robust and proactive risk management practices and focus on high quality corporates ensured that we maintained an non-performing loan (NPL) ratio of 2.1percent; well below the industry average, whilst retaining a healthy balance sheet growth. Prudential ratios remained strong and well above the regulatory limits, with capital adequacy and liquidity ratios of 21 percent and 42 percent respectively, giving us the necessary headroom for growth,” the GMD commented.
Access Bank Plc remains cautiously optimistic about the macroeconomic environment in 2017; nonetheless, its objective of delivering sustainable shareholder value remains unchanged. “We will also continue to maintain our proactive and disciplined risk management practices and leadership in sustainability initiatives, whilst positioning ourselves strategically to take the lead in the markets we play,” the GMD said.
According to Wigwe, “The successes we recorded within the year would have not been possible without our dedicated staff, committed customers and shareholders who continually share in our vision of becoming the World’s Most Respected African Bank. As a result, the Bank was awarded several prestigious national and international awards throughout the year even at a very inauspicious time in the operating environment.”
International banking subsidiaries
Access Bank Plc has the following international banking subsidiaries: Access Bank (Gambia) Limited, Access Bank (Sierra Leone) Limited, Access Bank (Zambia) Limited, The Access Bank (UK) Limited, Access Bank (Ghana) Plc, Access Bank Rwanda, and Access Bank (D.R. Congo). Access Bank also has Access Finance BV, an offshore Special Purpose Vehicle for the issuance of the $350million 7.25 percent Guaranteed Notes Due 2017 guaranteed by the bank. The bank also operates a Representative office in China, UAE and Lebanon.
Analysts comment
According to Olubunmi Asaolu-led team of research analysts at FBNQuest, “The PBT result beat our forecast, but we suspect that consensus was closer to the result. All in all, we find Access Bank’s results healthy. The underlying results were broadly in line with our expectations, even after tax. In this environment of heightened risk for the banking sector, we believe Access Bank should be trading higher than its current valuation”, the analysts said. FBNQuest analysts said: “We rate Access shares Outperform.”
“The final dividend implies a yield of around 6percent. It is higher than our 30kobo estimate (which is the same as the 2015 final dividend). It appears consensus was looking for approximately 45kobo,” FBN Quest analysts said in their first reaction to the results.
Also in their reaction to Access Bank Plc results, research analysts at SCM Capital Limited noted the bank’s non-performing loan ratio of 2.1percent, against 1.7percent recorded in 2015 reflects the impact of the challenging macro on its loan book.
On the growth in interest income, the analysts at SCM Capital Limited said it reflects income growth from the core business of the bank on the back of a higher interest and tough operating environment.
Access Bank Plc will be hosting an audio conference call for analysts and investors today March 9, 2016 with its Executive Management to announce the Bank’s audited results for the full year ended 31 December 2016. There will be an opportunity at the end of the call for Management to take questions from investors and analysts.
Although the shares of Access Bank Plc are among the best performing stocks on the bourse year-to-date (ytd), following on from the impressive results in 2016, investment analysts expect to see further gains in the bank’s share price over the rest of the year. It was N6.48kobo Monday.
Iheanyi Nwachukwu
