Professional Documents
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45
Contents
• Executive Summary
03
o Background Highlights from Previous Reports
o The Expectations of Management in 2010 – An Insight
• Fundamental Analysis
05
• Technical Analysis
13
Overview:
Industry: Fin. Institutions
This snapshot serves as an extension of our earlier NSE Symbol: Access
comprehensive analyst report on Access Bank Plc FYE: December
published on April 30th, 2010. Latest Results: Q2 2010
(http://www.proshareng.com/reports/view.php?id=2607). YTD Returns: 6.09 %
Year High: N11.21
In our analyst report referred to above, the following
Year Low: N7.55
issues were raised for consideration by the
management in the interest of the shareholders of Year’s Ave. Price: N8.95
the entity and to improve on the profile of the bank Shares in issue: 17.888bn
in the market, and as a comparison with its peers. Market Cap: N144.828b
Last Traded Price: N8.01
• Having been cleared by the CBN, it was generally expected that the bank would
be spared the burden of the need for additional loan loss provisions or provision
for risky assets to the tune of N16.65bn; except in the course of normal business
during the period under review.
• The technical analysis conducted in the report indicated that for the fifteen
months to April 23, 2010 – the stocks recorded an appreciation of +30.55%
(over 60% change in value year on year) making it one of the Top five (5) stocks
in the banking sector which have recorded price appreciations above their
January 02, 2009 price levels.
According to the Group Managing Director of Access Bank Plc, in his presentation to the
investing public (http://www.proshareng.com/reports/view.php?id=2849) for the period under
In the said reported, the CEO stated that the Management has maintained a strategy of
balance sheet expansion with lending growing by 15% quarter on quarter. He further
stated that during the reporting period under review, Access Bank Management
continued to deploy the bank’s value chain strategy and its one-bank customer
proposition to expand its market share of high quality assets and low cost deposits.
Further highlights raised in the Managing Director’s speech are as follows:
This edition of the Access Bank Plc equity snapshot focuses on its H1 2010 results for the
period ended 30th June, 2010; recently released.
A comparison of the results with the bank’s first quarter results for the period ended 31st
March, 2010 was conducted as an aide memoiré, as well as a review with the previous
year’s comparable period results for the period ended 31st March, 2009.
ACCESS BANK P
ASSETS:
Cash and balances with CBN
Treasury bills
Due from other banks
Loan and advances
On-Lending Facilities
advances under finance lease
Investment securities
Investment in Subsidiaries
Investment Properties
Investment In Associates
Other Assets
Access Bank Plc Equity Snapshot August 2010 www.proshareng.com Page 7
Gross Earnings
Revenue and Profitability: Gross earnings in Q2 recorded a decline by -19.47% to
We hope this will be reversed in the coming periods, given the reason provided by the
Other Income
Operating Income
Operating Expenses
Loan loss Expenses
Write back/(allowances) for other assets
Group's share of associate's (loss)/profit
Access Bank Plc Equity Snapshot August 2010 www.proshareng.com Page 8
The profit should have been higher but for the allowances made for assets and
investments (loan loss provisions) to the tune of N23.821bn made in Q2. The bank
eventually doled out a N0.20k interim dividend to its numerous shareholders.
Improvements in the company’s profit margin (according to the management) could also
be traced to the benefit of its one-bank strategy which, it was claimed, added to the
bottom line. Subsidiaries with marginal losses are also expected to break-even by end of
the year, according to the management.
The profit after tax (PAT) declared in Q2 reflected a drag when compared with the
N4.021bn reported in Q1 to March 31st, 2010.
Cost to Income Ratio: The bank’s efficiency ratio measured by cost to income ratio
(exclusive of loan loss provisions) showed a level of improvement to stand at 79%
compared with 81.54% reported as at 31st March 2010. The rate closed at 106.66% as
at December 31st 2009.
The improvement recorded, according to the Management, was attributed to the benefit
accruing from the cost and revenue synergies of the bank’s regional expansion even as
expense growth rate decelerated from an average of 40% to 11% in H1 2010.
The Management has expressed its commitment to bringing down the cost to income
ratio to 60% by the end of the year.
We are of the view that actualisation of this objective will be a plus for the bank and its
entire shareholders as such would translate to higher profit/returns.
Capital adequacy ratio measures the capital strength of the bank for continuity, relating
to its business obligations and liabilities. Access Bank Plc’s capital adequacy ratio (CAR)
assumed a decline to 29% in Q1 2010 from 34% recorded in the half year reporting
period of H1 2009. It therefore declined by 28% in June 2010.
The continuous loan loss provision could be the cause for this trend. If the bank
intensifies work on its risk-based management of its assets; it might need to retain a
focus on the components of its asset quality that contributes to its strong CAR. Though
according to the management, the CAR is strong and well in excess of regulatory
minimum, and is adequate to support business growth and expansion.
This measures the liquidity position against immediate obligation and liabilities of the
bank. The ratio declined from 41% in Q1 to 40% as at June 30 th, 2010. Meanwhile, the
bank’s liquidity outlook was considerably maintained at 40% achieved this quarter
against 27% growth recorded in half year 2009.
Deposit Growth
The deposit growth measures client’s patronage which translates to market share of the
entity within the industry. Access Bank’s deposit growth grew by 15% in Q2 for the
period ended June 30th 2010.
When compared with the 59% growth achieved in preceding year comparable period to
June 30th 2009. The decline in growth trend recorded in deposit growth negates top
objective set by the management for the year; we hope this can be improved on before
the financial year runs out.
Loan and Advances remains one of the instruments considered to measure the lending
rate of a commercial bank, which further reveals the position of core business of the
bank. Access Bank Plc recorded negative growth of -4% in Q2 for the period ended June
30th 2010 as against a positive growth of 28% recorded in Q2 2009.
The gradual decline since half year 2008 revealed that the bank has not been active in
terms of lending most probably due to risk aversion. This must have impacted negatively
on net interest income generated for the period.
The chart below explains how the operational activities has been funded during the
period under review; deposit from customers represented the bulk of the funding
components with 59% contribution followed by shareholders fund with 23% stake in
contribution to funding. Other liabilities and dues to other banks had 10% and 8%
respectively.
The non performing loan ratio measures the ratio of loans that are on the doubtful or
bad category in the book of the bank. The chart below reveals the pictorial performance
of activities of the banks in its loan book. The spike in NPL ratio to 12% from 10%
recorded in Q1 still reveals issues in the loan quality of the bank.
The chart below highlights sectoral performance of the non-performing loans. This chart
revealed the sector(s) where the non performing loans were invested.
The share price of Access Bank Plc in the last nineteen months has recorded a +9.73%
appreciations from the N7.30 price it attained at the end of January 2 nd, 2009 – closing
at N8.01 (as at Friday, 27th August, 2010). However, in the preceding year to the
period (2008), the company’s share price declined by -70.54% from N24.00 it closed at
the end of the first trading day of the year to close and ended up with N7.07 by
December 31st, 2008.
The share price of the company in the year 2009 reached the peak of N10.85 on June
1st 2009 while it touched the lowest point on February 2nd, 2009 at N3.54.
In the year 2009 alone, the stock price closed with +4.20% appreciations from N7.30 of
January 2nd, 2009 to close at N7.60 by December 31st, 2009. The year to date
appreciation of Access Bank Plc closed at +6.09% as at 26th August, 2010 to close at
N8.01 from N7.55 it closed on January 4th 2010. Access Bank Plc stock price
performance stands far below the performance of the NSE All-Share Index
which recorded a +16% YTD growth.
Technically, and as can be seen from the graph below, Access Bank Plc share price now
trades below its 20 days, 50 days and 200 days moving averages of N8.37, N8.31 and
N8.63 respectively.
Thus, the Access Bank Plc share has to trade above its 200 days moving average and
sustain it to show indications that the stock is getting ready to assume a bullish
outlook/trend.
The stock price assumed a bearish trend on August 10th 2010 when it started trading
below its 200 days moving average and has been in the mode till date.
Access Bank Plc’s Q2 2010 review showed that the bank is making progress in its
bottom-line, with profit growing on a quarter to quarter basis; recovering from N11.952
bn loss position to close at N6.653bn profit in Q2 2010 to June 30th, 2010.
As impressive as that seems, it would not be out of place to review the improvements in
earnings against the declines recorded in some of the income components of the entity.
The loan loss expense that appeared in the Q2 2010 report was unexpected; since the
management previously stated there had been full provisions for all known non-
performing loans. The only reason for this would have to be the CBN directive for
handling margin loans due to expire on September 1, 2010.
The continuous provisioning for risk(y) assets in its Q2 and as repeated in Q1 2010
return creates the impression of a judgment made in anticipation of a future loan loss; a
contradiction of sorts.
We hope the management will make good its objective of trimming down the cost to
income ratio in the coming reporting periods as this will raise the profitability profile of
the entity and translate this to increasing returns to investors.
This we believe will further reposition the bank amongst the comity of banks in the
country.
End.
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