Access Bank Plc is a good stock to buy as it has potential to sustain overall growth and profitability in the period ahead.

Analysts at United Capital Plc, a publicly quoted investment banking group, at the end of comprehensive analysis of full-year earnings report of Access Bank for the year ended December 31, 2020 and the outlook for the bank, placed buy rating on the first tier bank.

Analysts stated that Access Bank has shown resilience in a tough environment and the structure and diversity of its operations should sustain top-line and bottom-line growths in the current business year.

“We expect Access Bank to sustain top and bottom-line expansion in 2021. While non-interest income growth should taper going forward, as the economy stabilises, we imagine that rebounding asset yields, supported by massive balance sheet size and gains from expansion activities, should spur interest income growth,” United Capital stated.

According to analysts, the well-diversified nature of the loan book of the bank is expected to sustain asset quality and thus keep non-performing loans and cost of risk within prudential limits.

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With these, analysts stated that they expected pre and post tax profits to remain broadly stable in 2021, after the bank grew pre-tax profit by 13 per cent from N111.9 billion in 2019 to N125.9 billion in 2020.

Analysts said while there were concerns about the retracement in the yield environment which has resulted in a significant spike in risk-free rate assumption and reduced the appetite for riskier assets such as equities, Access Bank’s shares remain a good buy with possibility of double-digit capital appreciation of about 14 per cent.

Analysts noted that with its string of acquisitions and expansion across the African continent, including Cameroon, Kenya, Zambia and South Africa, the management of the bank plans to leverage the African Continental Free Trade Area agreement to expand its footprint to 20 countries across Africa.

“As such, in addition to the already concluded acquisitions, plans are currently in place to enter Morocco, Algeria, Egypt, Ivory Coast, Senegal, Angola, Namibia and Ethiopia. A sum of $60 million was paid to acquire south Africa’s Grobank, a major milestone in the bank’s foray into the south African market and a critical factor in driving intra-African trade by widening its trade finance operations,” United Capital stated.

According to the equities research report, on the proposed reorganisation of the bank into a holding company structure, the management of the bank plans to also accomplish an expansion plan outside Africa by setting up representative offices in China, India and Lebanon, using its London operation as an anchor for growth.

The Access Bank Group will be organised into Nigeria, Rest of Africa and international, Payment Business, Consumer Lending and Agency Banking and Insurance Brokerage.

“The overall objective of the structure will be to create new revenue lines at minimal risk, diversify earnings, and support international expansion,” the report stated.

The audited report and accounts of Access Bank for the year ended December 31, 2020 showed that gross earnings rose by 15 per cent to N764.7 billion in 2020 as against N666.8 billion in 2019. Top-line analysis indicated that interest and non-interest income contributed 64 per cent and 36 per cent respectively. Non-interest income doubled by 112 per cent from N129.91 billion in 2019 to N275.50 billion in 2020. Net interest income stood at N262.95 billion in 2020 as against N277.23 billion in 2019. Segmental analysis showed growths across business groups and locations.

Nigerian, home-market business recorded 11.1 per cent increase in turnover to close 2020 at N635.7 billion. The ‘Rest of Africa’ business group grew its top-line by 44.2 per cent to N89.0 billion while Europe business turnover increased by 17 per cent to N49.3 billion in 2020. Profit before tax rose by 13 per cent from N111.9 billion in 2019 to N125.9 billion in 2020. After taxes, net profit grew by 13 per cent to N106 billion from N94.1 billion posted in 2019. The bottom-line was boosted by 32 per cent growth in operating income which offset the rise in Impairment charges and operating expenses.

The assets base of the group remained strong and resilient with total assets of N8.68 trillion in 2020, a growth of 22 per cent from N7.14 trillion recorded in 2019. The bank’s customer deposits grew by 31 per cent to N5.59 trillion in 2020 compared with N4.26 trillion in 2019, with savings account deposits of N1.31 trillion.

Net loans and advances totaled N3.61 trillion in 2020 as against N3.06 trillion in 2019. Non-performing loans (NPL) ratio improved to 4.3 per cent in 2020 compared with 5.8 per cent in 2019, riding on the back of N105 billion write-off and recoveries in the period. Shareholders’ funds closed 2020 at N751 billion, an increase of 24 per cent on N607 billion recorded in 2019. Capital adequacy ratio (CAR) improved from 20 per cent in 2019 to 21 per cent in 2020 while liquidity ratio (LR) stood at 46 per cent in 2020 as against 47 per cent in 2019, still substantially above regulatory thresholds.