Access Bank has generated more investment profit since the beginning of the calendar than any other tier 1 lender, outperforming the broader market even amid a tight regulatory environment.
That shows why it often pays for management and board of directors to formulate policies that will help take a company to the next level.
Analysts and procrastinators had envisioned that Access Bank’s merger with Diamond Bank would spur investment, and it wasn’t long before their projections came to pass.
Recent analysis of seven banks show that only Access Bank has a positive 1 year-to Date return (YTD) and 5 year-to date return (YTD), thanks to consistent earnings growth.
What this means is that only the lender’s stock has made money as in investment so far this year.
However, a negative percentage means it has lost money so far this year.
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Access Bank has the best bank stock yield on a YTD basis with a return of +44.12 percent, that compares with United Bank for Africa (UBA), (-9.09 percent); Zenith Bank, (-18.66 percent); FirstBank Holdings, (-21.38 percent); Stanbic IBTC Holdings, (-24.31 percent); Guaranty trust Bank or GTBank (-14.37 percent), and Ecobank Transnational Bank, (-50.0 percent).
Since the beginning of 2018, the investment returns on bank stock market prices have dropped lower than historical averages as a precipitous drop-in short-term government security deal a great blow on earnings.
That’s on top of investors’ apathy towards the Nigerian stock market due to lack of policy direction on the part of the Buhari led administration, while the economy continues to grow at a slow pace since the country existed its first recession in 25 years in 2016.
The Stock Exchange Main-Board Index returned -15.17 percent to close at a level of 26,646.35 points, while it has a price to earnings ratio of 7.03 percent.
As of the 13th of December 2019, the NSE Banking-10 index had returned –11.6 percent YTD.
Analysts say the trajectory for growth for lenders will steepen as they delve into traditional business as evidenced in a tight and stringent regulatory environment.
The Central Bank of Nigeria (CBN) has hiked the minimum loans to deposit (LDR) to 65 percent, and the deadline to meet the target is December.
Forcing banks to extend credit to a high-risk industry amid the fragile state of the economy could result in deteriorating assets quality, a double for an industry reeling from exposure to oil and gas.
“Consequently, we expect the cost of risk across the industry to spike going towards 2021FY and NPL moderation to temper following an initial dip that will follow the significant loan growth,” said analysts at Cordros Capital Limited.
“Notwithstanding, NPLs will spike in the event of any stress to the system, which could easily cascade into wider systemic frailty,’’ said analysts at Cordros Capital
There are indications intense competition will intensify among operators in the industry as they scramble to increase their share of the market, paving a way for them to explore the retail end of the market.
“With the changing dynamics both within and outside the industry, we expect the competitive landscape will become even more intense as banks grapple with new players and more determined old foes,” said analysts at Cordros Capital Limited.
“In our view, this could very well be the first flash which eventually leads to consolidation in the industry as some industry players would struggle to compete,” said analysts at Cordros Limited.
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Further analysis of the financial statement of the seven lenders shows Access Bank has been recording strong earnings expansion than peers since it merged with Diamond Bank to create the largest lender by total assets.
Access Bank’s interest income expanded by 47.55 percent as at September 2019, that compares with a 5.05 percent reduction in Zenith Bank’s figure; GTBank’s (-0.056); Stanbic IBTC Holdings (3.58 percent); FBNH (0.029 percent); UBA (10.77 percent), and ETI (-11.01 percent)
Access Bank’s net income increased by 44.23 percent as at September 2019, that compares with Zenith Bank’s (+4.53); GTBank’s (-3.35); Stanbic IBTC Holdings (-7.03 percent); FBNH (15.32 percent); UBA (32.32 percent), and ETI (-12.35 percent).
Analysts at Investment House Chapel Hill Denham Limited have maintained their BUY ratings on the stock of Access Bank with a higher 12-month TP of N17.76, implying a potential total return of 107.4 percent (capital gain of 98.5 percent and FY-19E dividend yield of 8.9 percent).
“We are now more optimistic on Access achieving over 20 percent ROAE by full year, particularly given the persistently higher post-merger ROAE in the last two quarters,” said analysts at Chapel Hill Denham Limited.
