Access Bank, Nigeria’s largest lender by asset recently released its financial scorecard for the full year (FY) ended December 31, 2021. The full year earnings of the bank which has now transitioned to a holding company (HoldCo) [Access Holdings Plc] had beaten some analysts’ estimates.
The full year 2021 scorecard
The Group recorded Gross Earnings increase by 27percent year-on-year (y/y) to N971.9billion in Full Year (FY) 2021, (FY 2020: N764.7billion), with interest and non-interest income contributing 62percent and 38percent respectively. Profit Before Tax (PBT) for the period rose by 40percent y/y to N176.7billion (FY 2020: N125.9billion). Profit After Tax (PAT) also grew by 51percent y/y to N160.2billion from N106billion in FY 2020.
The assets base of the Group remained strong and resilient with Total Assets of N11.7trillion as at December 2021, a growth of 35percent y/y from N8.7trillion as at FY 2020. Customer Deposits totaled N7trillion as at December 2021 (December 2020: N5.6trillion). Net Loans and Advances totaled N4.4trillion as at December 2021 (December 2020: N3.6trillion). Non-Performing loans (NPL) ratio stood at 4percent as at December 2021 (December 2020: 4.3percent).
A final dividend of 70kobo for every share subject to withholding tax will be paid to shareholders of the bank whose names appear in the register of members as at the close of business on April 19, bringing the total dividend for 2021 financial year to N1. At the bank’s 33rd annual general meeting held on Monday March 28, the shareholders approved the payment of this dividend.
The Board of Directors had paid an interim dividend of 30 kobo per ordinary share of 50 kobo each (Half Year 2020: 25 kobo) each on the 35,545,225,622 issued ordinary shares of 50kobo each. Withholding Tax was also deducted at the time of payment. The Group’s basic earnings per share increased to 458kobo in 2021 from 301kobo in 2020. The Register of shareholders will be closed on April 20 while on April 28; dividend will be paid electronically to shareholders.
Holding Company (HoldCo) Structure
In preparation for the eventual delisting of Access Bank Plc from the Daily Official List of Nigerian Exchange Limited (the Exchange) and listing of the Holding Company, Access Holdings Plc on the Exchange, trading in the shares of Access Bank (the Bank) was suspended last Thursday March 24.
On Monday March 28, the entire 35,545,225,622 issued shares of Access Bank were delisted from the Daily Official List of Nigerian Exchange Limited (NGX) while Access HoldCo’s entire issued share capital of 35,545,225,622 ordinary shares of 50 Kobo each were same day listed on the Daily Official List of NGX at N9.95 per share.
Access Holdings Plc shares had gained 30kobo or 3.02percent on first listing to N10.25 (nearing its 52-week high of N10.6) at the close of trading session on Monday from preceding trading day’s N9.95. Investors had on Monday traded 15.457million units of Access Holdings shares valued at N156.404million.
The delisting of Access Bank and listing of Access HoldCo on NGX is pursuant to the Scheme of Arrangement between Access Bank Plc and the holders of its fully paid ordinary shares of 50 Kobo each as approved by the Securities and Exchange Commission (SEC) and sanctioned by the Court.
Management speaks on results
While commenting on the result, Herbert Wigwe, the then Chief Executive Officer, Access Bank Plc who is now the Group Managing Director/ Chief Executive Officer of Access Holdings Plc said “2022 is pivotal for our franchise, as we conclude our 2018-2022 corporate strategic plan. In the year, we will focus on a disciplined implementation of our strategy to drive efficiency and operational excellence across all segments, expand revenue and increase profitability, with enhanced focus on risk management practices and a disciplined cost containment structure.”
He said: “As we go into our next 5-year strategy cycle, we are realigning the franchise for growth, by transitioning into a Holding Company (HoldCo). This will enable us to unlock and capture available non-banking opportunities in the market that would lead to the diversification of our earnings, drive efficiency, and grow scale while maintaining our moderate risk management approach”.
“Our diversified business model yielded positive sustainable results, guided by a robust risk management framework, as we grew the business cautiously and recorded sound prudential ratios. This year’s results reinforce our resolve to generate sustainable returns despite challenging market conditions” he added.
He said, “The Group achieved a 27 percent year-on-year (y/y) growth in gross earnings to N971.9billion (FY 2020: N764.7billion), leading to an improvement in the Profit After Tax to N160.2billion (FY 2020: N106billion). Consequently, our Return on Average Equity (ROAE) stood at 17.8percent, tracking in line with our commitment to stakeholders”.
Having met regulatory requirements and obtained the Court Sanction, the bank expects the HoldCo to become operational in this first half (H1) of 2022. “This will lead to the delisting of Access Bank Plc’s shares on the Nigerian Exchange (NGX) and listing of Access HoldCo shares”, Wigwe added.
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He further said, “We sustained robust capital and liquidity positions, well above regulatory levels with a Basel II Capital Adequacy Ratio of 24.5percent and a Liquidity Ratio of 51percent. This positions the Bank to support our customers across various markets and adequately execute our expansion strategy.”
“To actualize our vision of becoming the world’s most respected African Bank and Africa’s Payment Gateway, we have taken strategic strides to create indelible footprints across the African continent. These include our most recent additions in South Africa, Botswana, and Guinea We also strengthened our business in Mozambique and Zambia, with noticeable improvement in rankings and market share.
“In the year, we successfully issued the first Additional Tier 1 (AT1) Eurobond out of Nigeria. The $500 million instrument enhances our capital ratios and provides significant headroom for growth and the execution of our strategic objectives. We also issued a $500 million Senior Unsecured Eurobond during the period, elongating the duration of our FX balance sheet and strengthening our liquidity,” Wigwe said.
HoldCo structure drives board changes
Further to the completion of the Scheme of Arrangement between Access Bank (the Banking Subsidiary) and holders of its fully paid ordinary shares of 50 Kobo each resulting in the listing of Access Holdings Plc (Access Holdings) as the parent entity of the Bank and related group companies on the Nigerian Exchange Limited (the Exchange) and the delisting of the Bank; the Board of Access Holdings on Monday announced the following changes to the Board of the Banking Subsidiary.
Roosevelt Ogbonna was appointed the Managing Director/Chief Executive Officer of Access Bank. His appointment which underscores the effectiveness of the Group’s robust succession planning arrangement follows the appointment of the incumbent, Herbert Wigwe, as the Group Managing Director/ Chief Executive Officer of Access Holdings Plc.
Ogbonna has since 2017 been Access Bank’s Deputy Managing Director. Prior to 2017, he was appointed Executive Director, Commercial Banking Division, in October 2013. He is a through-bred and consummate professional with over two (2) decades of banking experience having joined Access Bank in 2002 from Guaranty Trust Bank.
Analysts speak of scorecard and transitioning into Holdco structure
“Access Bank’s audited FY’21 results showed significant improvements in earnings across all income lines, culminating in a 22percent year-on-year (y/y) growth in Gross Earnings to N931 billion, exceeding our estimate of N868 billion,” said Joshua Odebisi, equity research analyst at Lagos-based Vetiva in a March 24 note.
He added that based on Access Bank’s full year (FY) 2021 performance “and our new expectations for 2022, we have revised our Full Year 2022 forecasts”.
The analyst said Access stock is a BUY, because they consider it highly undervalued, but with strong fundamentals, adding that potential return in excess of or equal to 15percent is expected to be realized between the current price and the analyst’s target price of N14.95.
“The bank’s N1/share dividend payout exceeded our expectation of an 85 kobo total dividend for the year. Although the payout ratio of 22percent is slightly lower than the previous year (27percent), the improved earnings expectation for the coming year and subsequent period has driven up our valuation of the stock to N14.95 (previous: N11.79).
“However, we do note that Access Bank’s dividend payout remains below peer average of 35percent. Applying this average to our scenario analysis yields a total dividend of N1.77 for 2022 and a price target of N18.99. The stock is currently trading at a 50percent discount to our target price and P/E and P/B values of 2.1x and 0.3x respectively, below peer averages of 3.8x and 0.5x,” the Vetiva analysts added.
“Given the bank’s expanded operations and significant growth seen in its subsidiaries across Africa and the UK, we expect the bank’s transition to a Holdco structure, which is due to be completed sometime in quarter-two (Q2), to further bolster earnings and asset growth, as the subsidiaries are given bigger targets and more incentive to extract value from their respective markets.
“With management keen to emphasise the long-term potential of many of the markets which the bank entered in 2021 such as Botswana and South Africa, we expect to see further improvements across these and other markets in the bank’s network in the near to medium term.
“Thus, we project FY’22 Gross Earnings of N1.04 trillion (Previous: N920 billion), driven by an improved Interest Income forecast of N688 billion (Previous: N652 billion) and Non-Interest Revenue (NIR) of N356 billion (Previous: N268 billion),” the Vetiva analyst further added.
Also, Ope Ani, senior analyst at Coronation Research in a March 21 note rated Access stock a BUY with Price Target (TP) of N12.88 which represented an upside potential of circa 26percent when compared to N10.25 it closed on Monday March 28. The analyst said they expect the market’s focus to shift to the increased dividend and the still-attractive yield.
Speaking further on the Access Bank’s results for the full year 2021, Coronation Research analyst said “The results were impressive, in our view, beating our and the market’s expectations following a late surge in trading revenues in fourth-quarter (Q4) 20 21. In addition, the increased dividend implies a still attractive dividend yield – more than the current yield on the 1-year T-bill.”
“The bank has entered the final year of its five-year corporate strategy. As it transitions into a Holdco structure, we expect the diversification benefits of this to strengthen its investment case. Finally, the valuation remains compelling, in our view. Accordingly, we maintain our BUY recommendation on the stock”, Coronation Research analysts said.
