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Access Bank Plc recently released its third quarter (Q3) results for 2017, a reflection of the bank’s ability to generate sustainable earnings despite the challenging operating environment.
The nine months scorecards
In the nine months period ended September 30, 2017, the bank reported 33percent growth in gross earnings to N365 billion from N275 billion in the corresponding period of 2016.
This growth according to the bank was driven primarily by the strong performance on core revenue lines. Access Bank Plc is a full service commercial bank with headquarters in Nigeria and operations across Sub-Saharan Africa, the UK, Asia and the Middle East.
Overall, the group delivered increase in pre-tax profits from N69billion in September 2016 to N72.9billion in September 2017 and closed the period with a 4percent year-on-year growth in profit after tax. Profit after Tax (PAT) grew to N56.4 billion in 2017 from N54.1 billion in 2016.
The bank’s third-quarter performance showed that operating costs reduced significantly by 18percent quarter-on-quarter to N49.5 billion in September, reaffirming the bank’s commitment to rein in costs and improve operating efficiency. Capital and liquidity buffers of 20.5percent and 46percent, respectively, are well above the minimum regulatory requirement.
Management comments
Herbert Wigwe, Group Managing Director/CEO, Access Bank Plc said, “We continue to gain momentum in our efforts to achieve more diversified earnings, as we strengthen our retail and digital offerings. I am excited at the prospects in the coming months.”
He noted that the reporting period marks the last quarter in the last year of the 2013 – 2017 strategic period adding that the Bank remains committed to improving the quality of its balance sheet.
“The Board and Management remain extremely grateful to our more than 8 million customers, shareholders and dedicated employees for enabling us achieve several milestones within this period. We look forward to the next five years, with confidence in our ability to deliver superior service and optimised shareholder value,” Wigwe stated.
Looking at its performance at the Nigerian bourse, the bank’s share has been on demand as price and volume of transactions rose from a low of N9.50 and 1,101,790 units respectively as at October 20 to N9.82 and 4,682,230 units as at October 30.
Investment analysts’ comments
In their note to investors, Cordros Capital analysts said Access Bank Plc nine months results came in line with their expectations, adding that; “We believe management is still on course to deliver its 2017F return-on-equity (ROE) guidance of 20percent (versus 17.4percent in FY-16).”
According to the Lagos-based investment firm, “we believe ACCESS is poised to outperform in 2017F, driven by (1) the significant growth reported in interest income and (2) foreign exchange (FX) trading gain booked in 9M-17. Based on our last target price (TP) of N12.06, we have a BUY recommendation on the stock.”
“ACCESS released its 9M’17 result maintaining the modest earnings run rate from prior quarters. Top line came in mildly ahead of our estimate at N365billion (Vetiva estimate: N361 billion). In line with prior trends, top line was driven by strong growth in Interest and Non-Interest Income, up 36percent and 28percent year-on-year (y/y) respectively. We highlight that most of the line items came much in line with our estimate”, said Olalekan Olabode-led team of research analysts at Lagos-based Vetiva Capital.
For Access Bank Plc shares, Vetiva analysts maintained Hold rating. Their Hold rating is given to stocks that they consider correctly valued with little upside or downside, and where potential return between +5 and+14.99percent is expected to be realized between current price and analysts’ target price. The analysts revised their target price (TP) for Access Bank Plc share to N9.59.
According to Kayode Tinuoye’s team of research analysts at United Capital Plc, “These results track behind our estimates, largely due to lower-than-expected non-interest income (9M earnings per share (EPS) is 65percent of our FY-17 forecasts).”
According to United Capital analysts, “the bank compensated for the weak earnings in Q4 with better asset quality and lower OPEX (though still below the management’s guided run rate).” “Access now trades at a price-to-book value (P/BV) of 0.6x versus 1.2x for tier I banks. While this valuation remains attractive, we think earnings will continue to be challenged for the rest of the year. We maintain our HOLD rating on the shares with a new target price of N9.4 (previously N10.3)”.
United Capital analysts ‘hold’ rating for Access Bank share is based on their valuation and subjective view, adding that the total return upside on the stock’s current price is less than the cost of equity. Their expected total return on the bank stock is greater than or equal to the Standing Deposit Facility (SDF) rate of the Central Bank of Nigeria (which is currently MPR –500basis points (bps) that is 10 percent. The analysts consider this as the minimum return that may deserve their holding of a risk asset, like equity.
In their first reaction to the bank’s nine months results, Olubunmi Asaolu-led team of analysts at FBNQuest gave a Neutral rating for Access Bank shares. By that rating, the analyst expects the stock to perform in line with the Nigerian Stock Exchange (NSE) All Share Index (ASI) over the next 12 months or the specified investment horizon.
Iheanyi Nwachukwu
