Recently at the Nigerian Stock Exchange, Access Bank plc released its audited results for the full year ended December 31, 2015 and proposes a final dividend of 30 kobo per share bringing the total dividend for the year to 55 kobo.
The full year results
Profit Before Tax (PBT) for the period rose to N75.0bn, representing a 44percent y/y growth when compared to N52.0bn in 2014. Profit After Tax (PAT) was up 53percent in FY 2015 to N65.9bn from N43.1bn in FY 2014.
The results at the Nigerian Stock Exchange (NSE) show the Bank’s gross earnings totaled N337.4bn in Full Year (FY) 2015, 38percent increase year-on-year (y/y) (FY 2014: N245.4bn), with interest income and non-interest income contributing 62percent and 38percent, respectively.
Interest Income grew by 17percent y/y to N207.8bn in FY 2015 from N176.9bn in FY 2014 as a result of improved income from lending activities and increased yield on investment securities.
Access Bank plc reported Return On Average Equity (ROAE) of 20.4percent in FY 2015, from 16.5percent in FY 2014, indicative of the Bank’s commitment to maximising shareholder returns.
Non-Interest Income stood at N129.4bn, up 89percent in FY 2015 from N68.4bn in FY 2014, largely attributable to strong gains on forex (FX) trading income, which reflects management’s ability to diversify the Bank’s revenue sources.
Operating Income increased to N234.8bn in FY 2015 – 39percent growth y/y on the back of increased earnings compared with N168.4bn in the corresponding period of 2014.
Loans and Advances were up 25percent to N1.41trn in December 2015, from N1.12trn in December 2014 owing largely to risk-conscious growth in target sectors of the economy.
Customer Deposits totaled N1.68trn in the period, 16percent increase from N1.45trn in December 2014 driven by enhanced customer engagement and an accelerated deposit mobilisation drive. Total Assets closed at N2.59trn for the year – up 23% y/y from N2.10trn in December 2014, thus reflecting overall business growth.
Capital Adequacy Ratio (CAR) improved by 110bps to 19.5percent when compared to 18.4% in December 2014, benefitting from the capital injection following the Rights Issue during the year.
Credit quality improved in the year as the percentage of non-performing loans to total gross loans stood at 1.7%, which represents a 50bps improvement over 2.2% recorded as at December 2014.
Coverage Ratio (with regulatory risk reserves) stood at 279.8% as at December 2015 from 159.1% in December 2014. Cost of Risk stood at 1.0% from 1.2% in FY 2014; Impairment Charges increased to N14.2bn from N11.7bn in FY 2014, driven by specific and collective impairment recognized during the year due to macroeconomic headwinds.
Net Interest Margin (NIM) declined to 5.9% in FY 2015 from 6.8% in FY 2014, as Cost of Funds (CoF) increased by 60bps y/y to 5.2% from 4.6% in FY 2014 owing to a higher interest rate environment in the first half of the year. Cost-to-Income Ratio (CIR) remained relatively flat y/y at 62.0% in FY 2015 (FY 2014: 62.2%).
Analysts comment
Olalekan Olabode lead team of equity analysts at Vetiva Capital Management Limited said, “Access Bank reported impressive earnings growth across the key line items, ending the year on a strong note after posting the strongest year-on-year (y/y) top and bottom line growth amongst our coverage banks.”
“In line with the trend observed in the first three quarters of the year, Non-Interest Income was largely supported by gains on Investment Securities and Foreign Exchange. Whilst we await further earnings breakdown, we believe this must have been driven by gains from the Swap and Derivative contracts valued at nominal amount of about $2 billion (in line with earlier quarters)” Vetiva analysts added.
“We have updated our model and revised our forecast to reflect the positive surprise. Whilst we expect Non-Interest Income to remain strong in the coming quarters (accounting for 32percent of Gross Earnings versus our coverage banks’ average of 23percent), we estimate a 17percent moderation in FY’16 – following the strong 90percent year-on-year rise recorded in FY’15,” the analysts further said.
Also in their reaction to Access Bank plc full year results, Olubunmi Asaolu team of research analysts at FBNQuest said, “Given the extent of the positive surprise in the Q4 results, we expect to see some upgrades to consensus earnings forecasts. Our estimates are under review. We rate Access shares outperform”.
“Compared with our estimates, the overall picture across the board was very strong. PBT and PAT beat our forecasts respectively. Both revenue lines surpassed our expectations and loan loss provisions were half of what we had modelled. We believe consensus forecasts were close to our estimates”, FBNQuest analysts added.
The analysts further noted that they expect the market’s attention to be on the non-interest income line, given how much it has boosted Access Bank’s results through 2015 due to FX swap gains. “Although the impact is gradually waning, it is still significant.”
“We note that the unwinding of the positions does not necessarily imply a significant fall off in revenue is imminent since the freed-up funds would be channeled into boosting funding income”, FBNQuest analysts said.
Share performance
Access Bank plc, a full service commercial bank with headquarters in Nigeria also operates across Sub-Saharan Africa, the UK, Asia and the Middle East. As at Tuesday, the bank’s market capitalisation stood at N110.794billion with shares outstanding at 28,927,971,631 units. At the NSE last Tuesday, Access Bank share price which attained a 52-week high of N7.02 and a 52-week low of N3.48 shows an uptick at N3.83.
Management comments
Commenting on the results, Herbert Wigwe, Group Managing Director / Chief Executive Officer, Access Bank plc said “This year’s results reinforce our resolve to generate sustainable returns despite challenging market conditions. We achieved strong financial progress in 2015 as the Group recorded a 44 percent growth in profit before tax to N75 billion from N52 billion in 2014, with significant contribution from our securities trading business.”
“Guided by a robust risk management framework, our diversified business model yielded positive results as we grew the business cautiously and recorded sound prudential ratios. During the year, we successfully raised capital by way of Rights Issue which has significantly strengthened our capital base and now provides us with sufficient headroom to harness opportunities in key growth sectors of the economy.
“In addition, the recent upgrade of our national scale credit rating to ‘A’ by Fitch Ratings – even in an extremely difficult environment – will enable growth in the market share of our customers’ businesses and solidify our position as a top player in the industry. We also made remarkable headway in redesigning our systems and processes to enhance service delivery across all customer touch points, with emphasis on tailored customer interactions. Leveraging innovation, we introduced products and solutions which have enhanced our brand equity and recorded significant customer adoption and migration to our digital platforms.
“In the coming year, we will remain resilient in the execution of our bold strategy for increased growth and profitability. Though market conditions will remain challenging, we will focus on innovation, proactive risk management and data analytics as catalysts for diversifying income streams and enhancing retail expansion, so as to maximize shareholder value in 2016 and beyond,” Wigwe added.
Iheanyi Nwachukwu
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