The share price of Access Bank, Nigeria’s largest bank by assets, declined by the most in five months as investors sold the bank’s shares after an unexpected cut in interim dividend and a fall in earnings in the second quarter of 2022.
Access Bank’s share price fell 5.14 percent to N8.30 on Friday, the biggest loss since April 20, 2022. Its share price declined by 6.21 percent last week compared to the previous week.
Analysts say investors are reacting negatively to the lender’s Q2 financial results, which showed pre-tax profit and net profit fell 12.5 percent to N32.66 billion and 9.6 percent to N30.8 billion respectively.
Investors are also reacting to the lower interim dividend proposed by the board. An interim dividend of N0.20 per share was proposed compared to N0.30 per share in the first half of 2021. The proposed interim dividend was below analysts’ expectations.
“We expected the market to react negatively to the decreased dividend,” Ope Ani, a senior analyst at Coronation Merchant Bank, said.
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“The Q2 results were unimpressive, in our view, with earnings falling to a six-quarter low,” Ani said in a note to clients.
Despite the share price dip however, most investment banks have retained their BUY rating on the bank, citing high prospects for future growth.
The major culprits of the earnings slip in Q2 were the weak growth in net interest income as well as increased loan loss provisioning.
Net interest income rose by 3.9 percent in the second quarter of 2022 compared to the same period last year while loan loss provisions jumped 43.7 percent.
While there’s some disappointment over the unexpected cut in the interim dividend, analysts say it may be due to the group’s need to conserve capital in order to fund its upcoming acquisitions and the expansion of its Holdco operations.
Nevertheless, the solid performance in the first quarter of 2022 made up for the poor outing in Q2, which meant H1 earnings were ahead of market expectations.
The group reported marginal growth in pre-tax profits (+0.4 percent compared to the first half of 2021) and net profits (+1.5 percent) in the first half of 2022.
The bank’s Rest of Africa business also made for good reading as it grew profit before tax (PBT) by 175.1 percent compared to last year and contributed 64.2 percent to the group’s PBT in the first half of 2022. That’s up from a contribution of 23.4 percent in the first half of 2021.
Like United Bank for Africa, the performance highlights the diversification benefits of having pan-African operations, analysts say.
