Access Bank: Greenwich maintains a Buy rating on stock

Analysts at Greenwich Trust Limited are bullish on Access Bank stock as firm stated that lender’s share price is trading at discount to its fair value estimate.

Quoted at ₦6.35 on Wednesday on the Nigerian Stock Exchange, lender’s market capitalisation settled at ₦225.712 billion on 35,545,225,622 shares outstanding.

Based on Greenwich’s estimates of ₦13.87 to a share, it means Access stock has more than double upside to its current price.

The Bank which released its unaudited financials recently bolstered earnings performance despite weaker macroeconomic condition in 2020.

Lender’s Q1 2020 earnings report showing an upward performance in topline which was supported by the collective growth in interest income and non-interest income.

Though, the growth in topline was unable to result to a sustained increase in bottom-line.

The bank’s gross earnings grew by 31.85% from ₦160.12 billion in Q1 2019 to ₦211.12 billion in Q1 2020.

This was driven by a 19.04% spike in interest income from ₦110.77 billion in Q1 2019 to ₦131.86 billion.

Greenwich attribute the growth to 46.44% increase in interest on loans and advances to customers and 67.74% increase in the cash and balances with bank.

Also, enhancing the gross earnings growth was the 57.92% rise in non-interest income, majorly due to the enhancement in trading gains from investment securities.

Interest expense advanced by 10.60% to ₦59.65 billion, resulting from the growth in interest expense on borrowed funds (114.03%) and deposit from financial institutions by (28.21%).

However, interest expense on customers’ deposit and debt securities issued dropped by 0.86% and 22.67% respectively.

Consequently, net interest income inched up by 27.05% to ₦72.21 billion from ₦56.83 in the corresponding period of 2019.

Analysts at Greenwich stated that the rise of 319.54%, 181.40% and 75.98% in trading gains from investment securities, other operating income and fees and commission led to an impressive growth in non-interest income.

Lender’s unaudited financial shows that non-interest income jerked up from ₦46.78 billion to ₦72.98 billion in Q1 2020.

In the period, the bank recorded a foreign exchange loss of ₦54.71 billion.

The positive growth amongst the respective non-interest income lines were driven by the bank’s strengthened drive in its e-business services, derivative instruments gains, bad debt recovery, and disposal income on property plant and equipment.

Access Bank recorded a 63.77% increase in operating expenses from ₦55.14 billion in Q1 2019 to ₦90.31 billion due to the rise in AMCON fees and administrative expense.

Cost pressure affected Q1 2010 result as lender’s cost to income ratio settled at 61.11% in Q1 2020 from 55.01% in Q1 2019.

Then, its operating income grew by 36.27%. However, profit before tax increased by 2.64% from ₦45.10 billion to ₦46.29 billion in Q1 2020.

Overall, profit after tax settled lower by 0.53% to ₦40.92 billion from ₦41.14 billion in Q1 2019.

Net loans and advances in the period under review increased by 2.61% to ₦3.14 trillion from ₦3.06 trillion in FY 2019.

Total assets expanded by 1.87% to ₦7.28 trillion from ₦7.14 trillion in FY 2019.

Also, customer deposits rose by 4.70% to ₦4.45 trillion from ₦4.25 trillion in FY 2019.

Our blended target price is ₦13.87. We recommend a BUY at current market price, as the stock trades at a discount to our fair value estimate.

Access Bank: Greenwich maintains a Buy rating on stock By Julius Alagbe