Access Bank: Committed to create increased value for shareholders

Access Bank plc recently organized its first investor conference in Nigeria tagged “Leading through Innovation – A path to competitiveness and sustainability”. During the conference, the management gave an update on the bank’s medium term strategy and shared its near-term targets with analysts and investors. INVESTOR penned down key takeaways from the meeting which included how the diversity of Access Bank income streams has driven its consistent strong earnings over the past four years.

The tier-I lender’s record solid performance across key metrics reflects its resolve to create increased value for the bank’s shareholders.

Last week at its “Investor Day 2016” Access Bank plc put many investors and analysts through on some of the strategic drivers of its impressive growth in recent time.

Herbert Wigwe, Group Managing Director / CEO, Access Bank Plc while speaking to participants at the bank’s “Investor Day 2016” noted that “since 2013, Access Bank has driven its bold strategy through increased focus on the transformation of its operating model”.

This, the GMD said is in line with the bank’s goal to rank in the Top 3 position in its chosen markets and across key financial metrics by 2017; while also becoming the World’s Most Respected African Bank.

Access Bank Plc remains focused on reducing expenses and improving efficiencies across all processes whilst delivering superior service. In order to maintain and advance this current momentum, Access Bank Plc said it focuses on five strategic priorities: De-risking the business; building a consolidated retail franchise; optimising its international network; driving efficiencies through enhanced technology; and ensuring sustainable cost reduction.

Looking at head to 2017, Access Bank commits to strengthening financial stability with continued focus on long-term growth and shareholder value creation.

“Our strategy continues to drive customer growth and profitability; we have recorded four million new customers (both individual and corporate) since 2013; and we record consistent growth in PBT, largely benefitting from improved operating efficiency”, the Wigwe added.

Access Bank operates four strategic business units (SBUs) that serve over its eight million customers. These SBUs are: Corporate & Investment Banking, Business Banking, Commercial Banking, and Personal Banking.

Despite key macro themes challenging the banking landscape, Access Bank has delivered strong and consistent results, “which reflects our resolve to effectively execute our strategy and consistently deliver on our promise”.

Seyi Kumapayi, Chief Financial Officer, Access Bank Plc, said “We remain focused on growing and optimising a large and low cost deposit base. Our strong capital and liquidity position has enabled us take advantage of opportunities in key growth sectors.”

In summary, he said that Access Bank Plc strong earnings are driven by its diversified revenue streams; adding that the bank will continue to leverage on stable asset quality on the back of disciplined risk management.

“Solid capital and liquidity position enabled us take advantage of growth opportunities; and healthy margins reflect improved optimisation of our growing balance sheet,” Kumapayi further noted, while adding that Access Bank Plc capital base has remained strong in spite of a larger balance sheet and prevalent macro headwinds.

“Our capital evolution was driven by our conservative risk profile and our business model. Disciplined capital plan aligned with our 5-year rolling strategic plans included several phases of capital generation through the cycle. Our diversified business leverages our entrenched value chain strategy across all our market segments. Our digital banking platforms are also critical to enhancing our competitiveness”, he told participants at the bank’s Investor Day 2016.

The group’s financial highlights in the nine months (9M) period to September 30 2016 show Gross Earnings of N274.468billion from N257.590billion in the nine months period of 2015, an increase of 7 percent. Net Interest Income increased to N106.374billion from N75.897billion in 9M’15, an increase of 40 percent. Operating Income also increased to N199.263billion from N178.094billion, an increase of 12percent.

Profit Before Tax (PBT) increased by 19 percent to N72.004billion from N60.372billion in 9M’15; while Profit After Tax (PAT) also rose by 19 percent to N57.095billion from N48.093billion in 9M’15. Cost-to-Income (CIR) has declined by 1.9percent to 57.7 percent from 59.6percent. Loans and Advances rose to N1.837 trillion in 9M’16 from N1.409trillion as at December 2015, an increase of 30percent.

Total Assets has increase by 31 percent to N3.390trillion in 9M’16 from N2.591trillion as at December 2015; Customer Deposits has risen by 25 percent to N2.099trillion from N1.683trillion; while shareholders’ fund increased by 20 percent to N443billion from N368billion as at December 2015.

Olalekan Olabode team of equity research analysts at Vetiva Capital Management in their take-away from the bank’s investor conference said: “We maintain our BUY rating on ACCESS. Having listened to management discuss its near term plans, we maintain our positive view on ACCESS.”

“We believe the bank is well positioned to successfully navigate the headwinds ahead. We have revised our expectations across a few line items (particularly non-performing loan (NPL) formation in FY’17 and FY’18) and updated our valuations accordingly. We maintain our BUY rating on ACCESS at a target price of N9.16 (Previous: N9.45). ACCESS trades at FY’16 P/E and P/BV ratios of 2.2x and 0.4x compared with Tier I bank’s averages of 3.3x and 0.6x respectively,” Vetiva analysts said.

The bank’s 2017 strategy will be largely focused on: Asset Quality Drive, FX Liquidity Management, Advancement in Digital Banking, Enhancement in Balance Sheet Efficiency, and Improvement in Cost Management.

Vetiva analysts further stated: “ACCESS remains an asset quality champion with sector leading NPL ratio and Cost of Risk of 2.1% and 0.9% respectively (as at 9M’16). Whilst we have also observed impressive improvement in efficiency over the last few years, we highlight that management intend to continue to drive profitability through cost containment as it estimated a Cost to Income Ratio of 51% for FY’17 vs. 9M’16: 58%.”

The analysts believe that Access Bank constantly ticks the boxes of promises it made.  “Whilst most of ACCESS’ peers have grown organically in the last few decades, ACCESS has leveraged on inorganic means with the acquisition of Intercontinental Bank in 2011 pushing the bank into the tier I space. Amidst the tough operating environment and fierce competitive market, ACCESS has evolved from being one of the many Nigerian banks (ranked 65th out of 89 banks in 2002) to being a top 3 bank across many performance metrics.

“The bank currently prides itself as a Nigerian corporate bank leader and a high performing diversified banking leader and strives to become the world’s most respected African bank in 2018 with best in class technology in Africa, Industrialized global operating model, and expanded footprint in the most attractive African markets. Whilst the bank’s ambition to be the World’s Most Respected African Bank appears to be a tall order at the moment, ACCESS’ past record is a testament to its ability to deliver on its growth promises,” Vetiva stated.

“No gainsaying, the challenges that have clouded 2016 so far will likely remain the key theme across the banking sector in 2017. The demand/supply imbalance in the crude oil market will continue to put pressure on prices and the resulting impact on the currency of oil dependent emerging market economies would likely remain. Default across sector might not materially change for the better, credit growth will remain tepid as banks scramble for safe haven assets, and capital buffers will take increasing prominence. Management alluded to the challenging times ahead and highlighted strategies to navigate the headwinds onward,” the analysts added.

Iheanyi Nwachukwu