Access Bank Plc is proving to be a stock to hold at all times. Against the nation’s economic recession and the depression at the stock market, the bank is on a growth trajectory that continues to deliver better returns to shareholders. Capital Market Editor, Taofik Salako, reports on the inextricable link between the bank’s operational performance and share pricing trend.
Access Bank Plc’s share price ended 2016 with a full-year capital appreciation of 21 per cent, ranking among few stocks with such highly contrarian performance in a year marked with general depreciation in share prices and relapse of the national economy into recession. The benchmark indices at the Nigerian stock market indicated average full-year decline of 6.17 per cent, equivalent to net capital loss of N604 billion, continuing the losing streak that had seen equities losing N1.75 trillion and N1.63 trillion in 2014 and 2015 respectively. Only 19 companies, including three banks, recorded capital gains of 20 per cent and above in 2016, representing about 12 per cent of total listed equities. The Nigerian Stock Exchange (NSE) Banking Index, which tracks banking stocks listed on the Exchange, recorded a modest full-year gain of 2.2 per cent in 2016, driven mainly by gains by Access Bank, Guaranty Trust Bank and United Bank for Africa.
In the first quarter ended March 31, 2017, all key indices at the Exchange closed in the negative, underlining the widespread share price depreciation that marked the period. The benchmark index for the Nigerian stock market, the All Share Index (ASI), showed a three-month average return of -5.05 per cent. The NSE Banking Index closed the first quarter down by 0.03 per cent. The NSE 30 Index, which tracks the 30 most capitalised companies at the stock market, declined by 4.93 per cent within the period. Access Bank continued to play a major contrarian stock in the first quarter with above average return of 6.98 per cent.
Fundamental link to pricing
In line with the requirements at the NSE, which require quoted companies to submit their audited full-year reports not later than three months after the end of the year, Access Bank, ahead of the deadline in early March, released its audited report and accounts for the year ended December 31, 2016. With steady growths in key performance indices in 2016, the first tier bank increased dividend payout by 18 per cent to N18.8 billion. Shareholders would be receiving gross dividend of N18.8 billion for the 2016 business year as against N15.9 billion paid for the 2015 business year. Shareholders would receive a final dividend per share of 40 kobo in addition to an interim dividend per share of 25 kobo, bringing the total dividend per share for the 2016 business year to 65 kobo. The bank had paid a total dividend per share of 55 kobo, including a final dividend per share of 30 kobo and interim dividend per share of 25 kobo, for the 2015 business year. The bank has started paying the 2016 dividend on March 29, 2017, the same day the dividend was unanimously approved by ecstatic shareholders at the annual general meeting of the bank in Lagos.
Key extracts of the audited report and accounts showed that gross earnings rose by 13 per cent while pre and post tax profits grew by 20.4 per cent and 8.5 per cent respectively. Group gross earnings rose from N337.40 billion in 2015 to N381.32 billion in 2016. Profit before tax also rose from N75.04 billion in 2015 to N90.34 billion in 2016. After taxes, net profit rose from N65.87 billion to N71.44 billion. The balance sheet of the bank also emerged stronger with total assets rising to N3.48 trillion by December 2016, 34 per cent increase on N2.59 trillion recorded in 2015. Customer deposit also rose from N1.68 trillion in 2015 to N2.09 trillion in 2016. Shareholders’ funds improved by 23 per cent from N363.9 billion in 2015 to N448.2 billion in 2016.
Access Bank’s growths in recent years appear not to be a fluke. Over a five-year period, the bank has consecutively grown key profit and loss and balance sheet items. Total assets have risen consistently from N1.75 trillion in 2012 to N1.84 trillion, N2.10 trillion, N2.59 trillion and N3.48 trillion in 2013, 2014, 2015 and 2016 respectively. Customers’ deposits have grown consecutively from N1.20 trillion in 2012 to N1.33 trillion in 2013 and subsequently to N1.45 trillion, N1.68 trillion and N2.09 trillion in 2014, 2015 and 2016 respectively. Shareholders’ funds have grown from N241.28 billion in 2012 to N244.5 billion, N277.4 billion, N367.8 billion and N454.5 billion in 2013, 2014, 2015 and 2016 respectively.
The same uptrend is noticeable in profit and loss performance. Gross earnings rose from N197.08 billion in 2012 to N206.9 billion in 2013 and subsequently grew to N245.4 billion, N337.4 billion and N381.3 billion in 2014, 2015 and 2016 respectively. Pre-tax profit dipped marginally from N46.53 billion in 2012 to N45 billion in 2013 and thereafter rose consecutively to N52.02 billion, N75.04 billion and N90.34 billion in 2014, 2015 and 2016 respectively. Profit after tax followed the same trend, slipping from N39.33 billion in 2012 to N36.37 billion in 2013. Net profit thereafter rose consecutively to N42.4 billion in 2014 and N65.87 billion and N71.44 billion in 2015 and 2016 respectively. The bank has maintained unbroken dividend payment trend, reflecting improving earnings in returns to shareholders.
Positive reviews
Analysts have hailed the performance of the bank, noting that it surpassed expectations. “All in all, we find Access Bank’s results healthy. The underlying results were broadly in line with our expectations, even after tax. The capital adequacy of the bank is sound at 21.2 per cent,” FBN Capital stated in early reactions to the 2016 results of the bank.
According to FBN Capital, in the current environment of heightened risk for the banking sector, the results have shown that Access Bank should be trading higher than its current valuation at the stock market.
“Although the shares are among the best performing year-to-date, following their strong performance in 2016, with appreciation of 21 per cent against decline of 6.2 per cent by the benchmark All Share Index (ASI), we expect to see further gains over the rest of the year,” FBN Capital stated.
Exotix Partners said Access Bank’s earnings were above expectations, although the global investment and finance company remained cautious about the outlook.
Shareholders, who spoke at the recent annual general meeting, applauded the resilience of the bank and its ability to sustain impressive returns in spite of the tough operating environment.
Shareholders’ leader and founder, Independent Shareholders Association of Nigerian (ISAN), Sir Sunny Nwosu, described the bank’s performance as remarkable, noting that the increase in dividend payment was an indication of the strong fundamentals of the bank.
Another shareholder, Mr Nonah Awoh, also commended the bank and urged the management to further focus on deposit as a major boost to the bank’s revenue.
The next growth phase
The board and management of Access Bank said they believed enough solid foundations have been laid for the bank to move to the next phase of its strategic growth agenda. Chairman, Access Bank Plc, Mosun Belo-Olusoga, said the bank has, with its performance over the years, proven its resilience as its responsiveness and agility became key drivers of strong and sustainable performance in an increasingly unpredictable operating environment.
She said the board would continue to provide the stability and strategic direction the bank requires to deliver operational excellence, assurring shareholders that the bank would remain focused in its pursuit of enhancing shareholders’ value as it strives to become the world’s most respected African bank.
The management of the bank has already outlined a three-point priority for the 2017 business year as it winds down on its five-year strategic plan and begins preparations for another five-year plan.
Group Managing Director, Access Bank Plc, Mr. Herbert Wigwe, said the bank would focus on three major priorities in 2017 as it concludes its third five-year strategic plan this year.
He outlined that the bank would, in the new business year, cement its position as a dominant corporate bank and establish itself as a formidable retail bank.
He added that the bank would also leverage digital technology and innovation to create value for its customers while unlocking new revenue streams.
Wigwe said the third topmost priority of the bank in 2017 would be to deliver seamless and superior customer experience across all its service touch points.
“2017 marks the end of the rolling five-year strategy implemented in 2013. Plans for the next five-year phase have begun in earnest to position the group not only as the world’s most respected African bank but also as an emerging global player,” Wigwe said.
According to him, by diligently executing its strategy, the bank would continue to maintain improved profitability and create the capacity to continue to invest in its key areas of strength.
“I am confident that achieving these goals will set the stage for the execution of our next corporate strategic plan. As we look ahead, we remain more confident than ever of our execution capabilities to achieve our vision of being the world’s most respected African bank,” Wigwe said in a summary outlook.
In all these, where will Access Bank be in the next few years? Most analysts believe that with one of the most professional management in the industry and a highly knowledgeable and proactive board, Access Bank is on course to consolidate its growth over the next medium-term plan.
