Access Bank Plc released its FY 2018 financial statement, which shows that Gross Earnings rose to ₦528.75 billion, indicating a 15.18% growth year-on-year. Profit After Tax (PAT) also rose significantly by 56.87% (year on year) to ₦94.98 billion.
The management of Access Bank Plc has proposed a final dividend of ₦0.25 per share which represents a dividend yield of 4.27% based on the last traded price.
With regards to the Income Statement, we highlight:
Growth in Gross Earnings supported by both Interest Income and Non-Interest Income:
Access Bank’s Gross Earnings rose significantly by 15.18% due to 19.09%
increase in Interest Income and 4.75% growth in NonInterest Income. Growth in Interest Income was spurred by increase in revenue from loan and advance by 12.57% despite the fall in loan to customers by 0.12%. Also, the growth in Non-Interest Income is attributed to growth in Bad Debt Recovered by 266.23% and Income for other financial services by 2,728.35%.
Reduction in Impairment Charge boosts Profit Before Tax:
A decline by 57.48% YoY in the provision for impairment loss contributed to the PBT positively to grow it by 32.01% YoY. The decline in impairment is attributed to
enhancement in asset quality as Cost of risk fell to 0.71% from 1.77% in the FY 2018 while the Risk Asset ratio fell to 42.12% from 50.33% in FY 2018.
Operational Efficiency on the decline:
Access Bank’s Cost to Income Ratio rose by 33bps to 62.21% in 2018. However, PAT Margin rose to 17.96% from 13.09% in previous year, this is as a result of growth in total revenue of the Bank.
Sharp fall in Income Tax pushed the Profit After Tax
The Bank’s Income Tax fell by 54.61% due to a deferred tax credit of N3.55 billion resulting from temporary difference. As a result, the PAT grew by 58.07% to N94.98 billion within the year under review.
Increase in Cost of Deposit despite an increase in CASA
Despite an increase in CASA mix by 2.06% to 49.82% in 2018 the Cost of Deposit rose by 31bps to 6.63% in 2018.
Increase in Total Asset:
Access Bank’s Total Asset rose by 20.77% to N4.95 trillion in 2018 due to increase in Cash
position by 35.42%, Investment Securities by 80.13% and Derivative Financial Assets by 37.49%. It must be asserted that the growth in Cash position is as a result of increase in
total deposit by 32.07% in 2018.
Within the Prudential Guideline:
The Bank has demonstrated its effort to be one of the leading Tier 1 Bank in the country by ensuring that it operates within the CBN prudential Guidelines. For Instance:
– Reduction in Loan to Deposit ratio: The Bank reduced its Loan to Deposit Ratio from 76.59% in 2017 to 60.01% in 2018. This is far below the CBN prudential guideline of maximum of 80%.
– Capital Adequacy Ratio (CAR) of 19.90%. Even though it fell 20.10%, it is still within the guideline of 16% for Systematically Important Banks.
– Reduction in Non-Performing Loan from 4.92% in 2017 to 2.66% in 2018. This is below the regulatory minimum of 5.00%.
Increase Returns on Asset and to Shareholders:
Due to significant growth in PAT, the Returns on Average Equity (ROAE) grew to 18.96% from 12.44% in 2018 while the Return on Average Asset grew to 2.10% from 1.59% within
the year under review.
Decline in Shareholders’ Fund:
Access Bank’s Shareholders’ Fund fell by 4.05% despite a decline in Dividend Pay out from 40 kobo to 25 kobo. The fall in shareholders’ fund can be attributed to the slump in
Regulatory Reserves by 54.07% to N19.94 billion in 2018. Also, the Fair Value Reserve fell from N36.11 billion to a negative of N5.62 billion.
Overview: With the proposed Merger between Access Bank and Diamond Bank which is expected to be consummated in April 2019, the synergy is expected to reduce the cost of funding while increasing the deposit value. Also, the synergy is expected reduce the operating cost and improve operational efficiency.
The stock currently trades at a current P/B and P/E of 0.35x and 1.77x which is at a discount to peers of 0.81x and 4.05x respectively. We maintain a BUY rating on the stock.
Access Bank Plc is a full-service commercial Bank operating through a network of about 305 branches and service outlets located in major centres across Nigeria, Sub Saharan Africa and the United Kingdom. Listed on The Nigerian Stock Exchange in 1998, the Bank serves its various markets through 4 business segments: Personal, Business,
Commercial and Corporate & Investment banking.
Contact Anchoria Asset Management Limited for more information