• Friday, March 29, 2024
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Access Bank grows post merger’s Q1 PAT by 86% to N41bn

Access Bank reiterates support for African creativity

Signs of good things to come for shareholders of the new Access Bank emerged last week when the tier one bank announced its first post merger results, which showed that profit after tax for the period rose by 86 percent from N22.12 billion in March 2018 to N41.15 billion as at March 2019. Net interest income rose from N44.63 billion last year to N56.84 billion same period this year, representing an increase of 27 percent. The made recorded such feat despite 6 percent increase in interest expense from N50.94 billion in 2018 to N53.94 billion same period this year.

But net fee and commission income marginally declined from N13.92 billion in March last year to N13.07 billion this year. Profit before tax trended upwards by 64.4 percent from N27.4 billion at the end of the first quarter of 2018 to N45.1 billion by March 2019.

However, analysts are cautious in concluding that the first quarter results are enough to predict the healthiness of the merger between Access Bank and the defunct Diamond Bank.

“Firstly, interest income was driven by a surge in interest income from financial assets (at FVOCI) which increased to N25.5bn from N4.6bn in the prior year. Depending on the type of financial assets (not stated), incomes reported at FVOCI are subject to vagaries of the economic cycle, and can consequently print lower in the subsequent quarter. Secondly, the Q1-19 result is unaudited, and thus, should be taken with a pinch of salt.

Again, Net Interest Margin (NIM) eased 2bps to 5.6% while Cost of Funds (COF) decreased 140bps to 4.4%. Also, impairment charges fell 32.0% y/y and OPEX was stable at N55.1bn. As such, Cost to income Ratio moderated to 53.2% (vs. 62.0% in Q1-18).  However, all these metrics did not factor in the DIAMOND merger.  Accordingly, PBT and PAT jumped 64.4% and 86.1% to N45.1bn and N41.1bn respectively, while annualized ROE and ROA came in at 30.9% and 2.9%”, analysts at the United Capital, one of the leading investment banks in the country said, in a note to clients.

When the appraised the capital adequacy ratio of the bank, they expressed divergent views.

“Also, Capital Adequacy Ratio (CAR) reduced from 20.1% in FY-2018 to 19.1%. We think these ratios are slightly bloated given that some (such as COR and COF) of them are pegged against P&L item which does not account for DIAMONDBNK’s operations during the period. Meanwhile, others (such as CAR & NPL) may have been understated given that this result is not audited”, United Capital stated.

The share price of Access Bank closed last Thursday at N6.85 per share which amounted to 0.7 percent increase in its share price year to date. Analysts at United Capital also enjoyed investors to consider their investments worthwhile in view of hold rating placed on it.

‘Our views on ACCESS remain modest given that the numbers above are yet to capture the full impact of the merger. For instance, the annualized ROE of 30.9% is clearly unsustainable given that OPEX is yet to account for the merger and interest income for financial asset (FVOCI) which may or may not be reversed, depending on the nature of the asset.

“Accordingly, we maintain a cautious outlook on PBT and PAT for 2019. While we maintain that CAR and NPL ratios may be bullish due to a possible understatement of Risk-Weighted Asset (RWA) pending audit, the management has stated that maturing Eurobond for DIAMOND in May will be fully paid-down. Overall, we retain our HOLD rating on ACCESS pending H1-19 audited earnings report”, United Capital opinionated through a note to clients.

 

 

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