access bank snapshot - aug 2010

8/9/2019 Access Bank Snapshot - Aug 2010

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ISSN 1597 8842 Vol.1 No. 45


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Access Bank Plc Equity Snapshot August 2010 www.proshareng.com Page 2

Contents

Executive Summary

03o Background Highlights from Previous Reports

o The Expectations of Management in 2010 An Insight

Fundamental Analysis05

Technical Analysis13

The Analyst Opinion15

ISSN 1597 8842 Vol.1 No. 45
http://www.proshareng.com/http://www.proshareng.com/


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Access Bank PlcISSN 1597 8842 Vol.1 No. 45

August 26, 2010 Latest Updates

Overview:

This snapshot serves as an extension of our earliercomprehensive analyst report on Access Bank Plcpublished on April 30th, 2010.(http://www.proshareng.com/reports/view.php?id=2607).

In our analyst report referred to above, the followingissues were raised for consideration by themanagement in the interest of the shareholders ofthe entity and to improve on the profile of the bankin the market, and as a comparison with its peers.

Background Highlights from Previous Reports

The managements claim of an improvement

on operating expenses was confirmed to be

true only for the bank. The group results

recorded a monthly average of N3.99bn for nine months period compared with

N3.25bn for the comparative twelve months period.

Having been cleared by the CBN, it was generally expected that the bank would

be spared the burden of the need for additional loan loss provisions or provision

for risky assets to the tune of N16.65bn; except in the course of normal business

during the period under review.

Improvements were recorded on the banks non-performing loan outlook in the

Q1 2010 figures; hence the coverage ratio thinned down to 9% from 19% of the

preceding reported period. The bank achieved an improvement in the capital

adequacy ratio (CAR) and liquidity ratio.

We raised an issue with the treatment of dividend and the issuance of a

scrip/bonus of 1 for every 10 shares held given to investors at the end of the

financial year to reward investors in the bank who might have been worried by

the negative returns the bank posted in its common year end result. Our position

on this was that the scrip issue, just as with other banks, will put more pressure

on the earnings distribution to investors in the days ahead (though number of

shares outstanding remains relative).

The technical analysis conducted in the report indicated that for the fifteen

months to April 23, 2010 the stocks recorded an appreciation of +30.55%

(over 60% change in value year on year) making it one of the Top five (5) stocks

in the banking sector which have recorded price appreciations above their

January 02, 2009 price levels.

According to the Group Managing Director of Access Bank Plc, in his presentation to the

investing public (http://www.proshareng.com/reports/view.php?id=2849) for the period under


STOCK FAST DATA

Industry: Fin. InstitutionsNSE Symbol:Access

FYE:December

Latest Results: Q2 2010

YTD Returns: 6.09%

Year High: N11.21

Year Low: N7.55

Years Ave. Price:N8.95

Shares in issue: 17.888bn

Market Cap: N144.828b

Last Traded Price:N8.01

20 Days MA: N8.37

50 Days MA: N8.31

200 Days MA: N8.63
http://www.proshareng.com/reports/view.php?id=2607http://www.proshareng.com/reports/view.php?id=2849http://www.proshareng.com/http://www.proshareng.com/reports/view.php?id=2607http://www.proshareng.com/reports/view.php?id=2849http://www.proshareng.com/


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reference; it was reported that Access Bank Plc had returned to a strong profitability

base, driven by an increased lending to the banks target clients.

In the said reported, the CEO stated that the Management has maintained a strategy of

balance sheet expansion with lending growing by 15% quarter on quarter. He further

stated that during the reporting period under review, Access Bank Managementcontinued to deploy the banks value chain strategy and its one-bank customer

proposition to expand its market share of high quality assets and low cost deposits.

Further highlights raised in the Managing Directors speech are as follows:

Championing International Financial Reporting Standards adoption in Nigeria;

Introduction of 1 year fixed rate term deposit product in Nigeria;

Launching of the Groups International Private Banking Service;

Growing exposure to Real Economy risk assets leveraging on government

sponsored lending programs; and

Standard & Poors (S&P) Nigerian A- rating affirmed

The Expectations of Management in 2010

Management Expectation Expressed Our Assessment/Evaluation

Expansion of the banks marketshare of the top corporate segmentThis could not be seen in the grossearnings of the bank

Maintaining a high level of capitaland liquidity. The liquidity ratio dipped from 41% to 40%

Cost of risk reduction The loan loss provision declare could notsupport this

Developing further leading role intalent acquisition and talent development.

Maintaining leading role in Treasury,Trade Finance and Electronic cashmanagement.

Building further on the cost

efficiency of the Group.

The cost to income ratio trend seems to

support this Eliminating the negativeperformance contributions of our Bankingsubsidiaries through the banks One Bankstrategy.

The claim of improvement in thesubsidiaries contribution seems to supportthis.

This edition of the Access Bank Plc equity snapshot focuses on its H1 2010 results for theperiod ended 30th June, 2010; recently released.

A comparison of the results with the banks first quarter results for the period ended 31st

March, 2010 was conducted as an aide memoir, as well as a review with the previousyears comparable period results for the period ended 31st March, 2009.



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In arriving at our objective conclusion, we employed fundamental and technical analysisapproaches to examine in a snapshot, the bank's financials as well as its price trend. Ageneral review of the comments made above by the CEO was validated with the resultsreleased and the analysts presentation - http://www.proshareng.com/reports/view.php?id=2851.

http://www.proshareng.com/reports/view.php?id=2851http://www.proshareng.com/http://www.proshareng.com/reports/view.php?id=2851http://www.proshareng.com/


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Fundamental Analysis

Company

Peer Gross Earnings

Sec

BanksMarket Pric

Aug

Access Bank Plc

FCMB 7.15

Fidelity Bank Plc 2.55

Peer



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Financials Reviewed

ASSETS:

Cash and balances with CBN

Treasury bills

Due from other banksLoan and advances

On-Lending Facilities

advances under finance lease

Investment securitiesInvestment in Subsidiaries

Investment Properties

Other Assets

Deferred Tax Asset

ACCESS BA



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Profit and Loss Account

AC

Revenue and Profitability: Gross earnings in Q2 recorded a decline by -19.47% to

close at N49.409bn from N61.351bn recorded in June 30th, 2009; and against the growth

by +4.34%; to close at N27.778bn posted in Q1 of the period ended 31st March, 2010.The decline recorded in the gross earnings could be attributed to the differing rates of

decline recorded in almost all the income components.

We hope this will be reversed in the coming periods, given the reason provided by the

bank as the foundational basis for the drop in gross earnings - the slow economic

recovery and tight credit conditions.



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The profitability outlook of the bank however improved quite significantly during the

period - profit after tax grew by +155.78% to close at N6.667bn, an outstanding

recovery from the loss of N11.952bn recorded in the preceding year comparable period.

The profit should have been higher but for the allowances made for assets and

investments (loan loss provisions) to the tune of N23.821bn made in Q2. The bankeventually doled out a N0.20k interim dividend to its numerous shareholders.

Improvements in the companys profit margin (according to the management) could also

be traced to the benefit of its one-bank strategy which, it was claimed, added to the

bottom line. Subsidiaries with marginal losses are also expected to break-even by end of

the year, according to the management.

The profit after tax (PAT) declared in Q2 reflected a drag when compared with theN4.021bn reported in Q1 to March 31st, 2010.

Cost to Income Ratio: The banks efficiency ratio measured by cost to income ratio(exclusive of loan loss provisions) showed a level of improvement to stand at 79%compared with 81.54% reported as at 31st March 2010. The rate closed at 106.66% asat December 31st 2009.

The improvement recorded could be spotted in interest expenses components whichdeclined by -39.87%. The management of the bank will have to do a lot more to trimdown this as a means to profitability boost in the coming periods.

The improvement recorded, according to the Management, was attributed to the benefitaccruing from the cost and revenue synergies of the banks regional expansion even asexpense growth rate decelerated from an average of 40% to 11% in H1 2010.

The Management has expressed its commitment to bringing down the cost to incomeratio to 60% by the end of the year.

We are of the view that actualisation of this objective will be a plus for the bank and itsentire shareholders as such would translate to higher profit/returns.



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Return on Assets andEquities: Access Banks Return on Assets (ROA) and Return onEquity in the period under review closed higher at +0.90% and +3.82% respectivelycompared with +0.60% and +2.37% reported at the end of Q1 2010.

Capital Adequacy Ratio

Capital adequacy ratio measures the capital strength of the bank for continuity, relatingto its business obligations and liabilities. Access Bank Plcs capital adequacy ratio (CAR)assumed a decline to 29% in Q1 2010 from 34% recorded in the half year reportingperiod of H1 2009. It therefore declined by 28% in June 2010.

The continuous loan loss provision could be the cause for this trend. If the bankintensifies work on its risk-based management of its assets; it might need to retain afocus on the components of its asset quality that contributes to its strong CAR. Thoughaccording to the management, the CAR is strong and well in excess of regulatoryminimum, and is adequate to support business growth and expansion.



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Liquidty Ratio

This measures the liquidity position against immediate obligation and liabilities of thebank. The ratio declined from 41% in Q1 to 40% as at June 30 th, 2010. Meanwhile, thebanks liquidity outlook was considerably maintained at 40% achieved this quarteragainst 27% growth recorded in half year 2009.

Deposit Growth

The deposit growth measures clients patronage which translates to market share of theentity within the industry. Access Banks deposit growth grew by 15% in Q2 for theperiod ended June 30th 2010.

When compared with the 59% growth achieved in preceding year comparable period toJune 30th 2009. The decline in growth trend recorded in deposit growth negates topobjective set by the management for the year; we hope this can be improved on before

the financial year runs out.



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Loan and Advances

Loan and Advances remains one of the instruments considered to measure the lendingrate of a commercial bank, which further reveals the position of core business of thebank. Access Bank Plc recorded negative growth of-4% in Q2 for the period ended June30th 2010 as against a positive growth of 28% recorded in Q2 2009.

The gradual decline since half year 2008 revealed that the bank has not been active interms of lending most probably due to risk aversion. This must have impacted negativelyon net interest income generated for the period.

The chart below explains how the operational activities has been funded during theperiod under review; deposit from customers represented the bulk of the fundingcomponents with 59% contribution followed by shareholders fund with 23% stake incontribution to funding. Other liabilities and dues to other banks had 10% and 8%respectively.



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Non Performing Loan Ratio

The non performing loan ratio measures the ratio of loans that are on the doubtful orbad category in the book of the bank. The chart below reveals the pictorial performance

of activities of the banks in its loan book. The spike in NPL ratio to 12% from 10%recorded in Q1 still reveals issues in the loan quality of the bank.

The chart below highlights sectoral performance of the non-performing loans. This chartrevealed the sector(s) where the non performing loans were invested.



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Technical Analysis

The share price of Access Bank Plc in the last nineteen months has recorded a +9.73%

appreciations from the N7.30 price it attained at the end of January 2nd, 2009 closing

at N8.01 (as at Friday, 27th August, 2010). However, in the preceding year to the

period (2008), the companys share price declined by -70.54% from N24.00 it closed atthe end of the first trading day of the year to close and ended up with N7.07 by

December 31st, 2008.

The share price of the company in the year 2009 reached the peak ofN10.85 on June

1st2009 while it touched the lowest point on February 2nd, 2009 at N3.54.

In the year 2009 alone, the stock price closed with +4.20%appreciations from N7.30 of

January 2nd, 2009 to close at N7.60 by December 31st, 2009. The year to date

appreciation of Access Bank Plc closed at +6.09%as at 26th August, 2010 to close at

N8.01 from N7.55 it closed on January 4th 2010. Access Bank Plc stock price

performance stands far below the performance of the NSE All-Share Index

which recorded a +16% YTD growth.



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In the year 2010 to date performance analysis, Access Bank Plc performed below the

ASI with +6.90% growth compared with +16% ASI appreciations for the same

comparable period.

Technically, and as can be seen from the graph below, Access Bank Plc share price now

trades below its 20 days, 50 days and 200 days moving averages of N8.37, N8.31 and

N8.63 respectively.

Thus, the Access Bank Plc share has to trade above its 200 days moving average and

sustain it to show indications that the stock is getting ready to assume a bullishoutlook/trend.

The stock price assumed a bearish trend on August 10 th 2010 when it started trading

below its 200 days moving average and has been in the mode till date.



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Analyst Opinion:

Access Bank Plcs Q2 2010 review showed that the bank is making progress in itsbottom-line, with profit growing on a quarter to quarter basis; recovering from N11.952bn loss position to close at N6.653bn profit in Q2 2010 to June 30th, 2010.

As impressive as that seems, it would not be out of place to review the improvements inearnings against the declines recorded in some of the income components of the entity.

The loan loss expense that appeared in the Q2 2010 report was unexpected; since themanagement previously stated there had been full provisions for all known non-performing loans. The only reason for this would have to be the CBN directive forhandling margin loans due to expire on September 1, 2010.

The continuous provisioning for risk(y) assets in its Q2 and as repeated in Q1 2010return creates the impression of a judgment made in anticipation of a future loan loss; acontradiction of sorts.

Be that as it may, we remain encouraged by the indices shown in the managementreturns for the quarter and the plans/initiatives laid out by the banks management tofurther strengthen the profitability drive in the coming periods.

We hope the management will make good its objective of trimming down the cost toincome ratio in the coming reporting periods as this will raise the profitability profile ofthe entity and translate this to increasing returns to investors.

This we believe will further reposition the bank amongst the comity of banks in thecountry.

End.



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access bank snapshot - aug 2010

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