Access Bank Plc (NSE Ticker: ACCESS) earlier today released its unaudited consolidated and separate financial statements for the period ended 31 March 2020 to the Nigerian Stock Exchange and Investing public. The Group reported Gross earnings of N209.79bn, a marginal decrease from N216.96bn reported at the same period in 2019.
Access Bank Plc had towards the end of Q1 2019 merged with Diamond Bank Plc after they obtained a court sanctioned merger on 19th March 2019, from the Federal High Court of Nigeria sitting in Lagos (Suit No FHC/L/CS/90/2019). The merger made ACCESS the biggest bank in Nigeria by customer base, so our Analysts were keen to see the effect of this merger on the revenue.
A review of the company’s Q1 results over the past 4 years shows an irregular pattern in its Interest Income from Loans and advances to customer. In Q1 2017, the bank reported 57.67bn, from this revenue segment, N74.20bn in Q1 2018, N57.25bn was reported in Q1 2019, and in the first Quarter after the merger, it has reported N83.84bn Interest income from Loans and advances to customers.
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From its Fee and commission income that has more to do with customers, the bank recorded the following income from Account maintenance charge and handling commission in the last 4 quarters; N865mn in 2017, N895mn in 2018, N2.21bn in 2019 and this year, it went up to N3.88bn.
Although there were noticeable increases in the aforementioned segments, ACCESS reported it’s biggest income growth from “Channels and other E-business income” under the Fee and commission income segment. The income from channels and other E-business income which was N2.03bn in 2017, grew to N2.48bn in 2018, and further increased to N3.6bn in 2019; jumped by 217% to N11.45bn in 2020.
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With a Profit after Tax Margin of 19.51% (Q1 2019: 18.97%), the Bank reported a Profit after Tax of N40.92bn, a marginal decline from the N41.14bn reported in the same period in 2019. The Bank’s Earnings per Share declined to N1.21 from N1.39 recorded in Q1 2019.
The drop in Profit after Tax can be seen to be partly dude to increases in Personal expenses, Wages and salaries to be precise (Q1 2020: N18.57bn Q1 2019: 11.92bn). This increase in Personal expenses, although understandable because of the merger, is not commiserate with the revenue increase.
Another ticket on the expenses column that might have contributed to the inability of the Bank to grow its Profit is the “Other operating expenses”, which increased from N37.42bn in Q1 2019, to 63.55bn in 2020.
When the Net changes in fair value of financial instruments were factored into the profit and lose statement, the Bank’s Total comprehensive income for the period dropped drastically from N47.03bn in Q1 2019 to N25.04bn.
Access Bank Plc (“the Bank”) is a bank domiciled in Nigeria. The address of the Bank’s registered office is No 14/15, Prince Alaba Oniru Road, Oniru, Lagos (formerly Plot 999c, Danmole Street, off Adeola Odeku/Idejo Street, Victoria Island, Lagos). The Group is primarily involved in investment, corporate, commercial and retail banking. The Bank is listed on the Nigerian Stock Exchange.
In reacting to the ongoing Covid-19 Pandemic, the Bank has this to say, “The impact on the Group will be published in subsequent financial reports. However, the Group is confident that, based on the robust risk management in place, the going concern of the institution is not threatened and the Group will continue to operate into the foreseeable future”.
ACCESS has 35,545,225,622 outstanding shares, a market capitalization of N225.71bn, and is on the Premium Board of the Nigerian Stock Exchange.
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ACCESS is the “A” in the famous FUGAZ grouping of the top 5 banks in Nigeria. The Bank has had robust and consistent performances and amongst the most treasured stocks on the market. Although the dilution of its stock after the merger with Diamond Bank Plc, has affected the amount of dividend it can pay, and thus its dividend yield.
An analysis of its 2019 FY financial report, led us to put the fair value of the stock between N7.20 and N10.80. At the end of the last trading session on the NSE, the share price of ACCESS was N6.35, a massive discount from its fair price. We however rate this stock a HOLD, given the lack of significant positive impact of the merger with Diamond Bank.
In addition, given the prevailing economic conditions, we do not rule out the possibility of further depreciation of the stock, hence while we hold to see their H1 performance, and an opportunity might present itself where-in the stock can be bought at even a better discount.
Written by:
Basil Maduakor
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