Access bank shareholders are beginning to reap the efficiency benefits of the diamond bank merger as Nigeria’s largest bank by assets saw some traction in that regard in its first year of operations after the merger.
According to the bank’s investor presentation document March 2020, Access bank disclosed that it expects to record N153.9 billion from cost saving and loss recovery strategies from the diamond bank merger between 2019 and 2021 and as of 31 December 2019 the bank had recorded 39 percent of the said sum or N59.9 billion.
Access bank’s gross earnings for FY 2019 stood at N666.75 billion as against the N528.74 billion, which was recorded for FY 2018 showing a 26.1 percent increase as net interest income recorded for FY 2019 grew to N277.2 billion from N173.6 billion recorded for FY 2018 representing a massive 59.7 percent increase.
Read also: COVID-19: Access Bank creates mobile banking App for seamless transactions
Access bank in FY 2019 earned NGN97.51 billion compared to the NGN94.98 recorded in FY 2018, showing a 3 percent increase in Profit After Tax (PAT). However, the banks total number of outstanding shares in FY 2019 stood at 33.53 billion as against 28.93 billion in FY 2018 due to the merger which was a cash and stock deal, giving Diamond shareholders equity in Access Bank.
While investors in Access had benefited from a stock rally post-merger, the outbreak of coronavirus and oil price crash has wiped out almost all the gains made by Access shareholders post-merger.
As at completion of the merger in April 2019, Access bank’s stock price stood at NGN5.7 and closed the FY 2019 at NGN9.27, returning 62 percent to investors. However the stock price has now declined about 38 percent month to date, closing at N6.4 Friday.
Analysts say the selloff could be related to foreseen difficulty for banks to deliver strong earnings growth this year due to economic growth concerns, coronavirus induced state lockdown and weaker oil prices which will have impact on asset quality of banks’ loans and other risk assets. Banks are yet to cut their earnings guidance but analysts say it’s only a matter of time before they do.
It could also be a chance for investors who missed the earlier rally in the shares to buy in at a lower price.
