Analysts See 48% Upside in Access Holdings at N25.68 Dec Target Price
48% upside means an investment of N1 million in Access Holdings PLC stock could appreciate to N1.480 million if the prediction materialises. Equities analysts at Meristem Securities have estimated N25.68 as target price for Access Holdings Plc as the pan-African lender continue to maintain its industry leadership in terms of asset size.
At a reference price of N17.40, analysts said in the equity report that they expect 48.37% upside potential in Ticker: ACCESSCORP when the price hit the December 2024 target price. In 2023, Access Plc beat earnings performance with double digit year-on-year growth in top and bottom line.
The financial services group grew its gross earnings to its highest level by 87.01% year on year to N2.59 trillion – which Meristem Securities said is highest in the banking sector. “This remarkable growth is credited to improvements in both income and non-income streams”, analysts said in the equity report.
Details from Access Holdings financial report showed that interest income expanded by 99.93% year on year to N1.65 trillion from N827.47 billion in 2022, a performance that reflects a high interest rate environment and elevated yields in investment securities.
The group reported that interest earned on loans and advances grew by 62.73% year on year. Also, interest earned on investment securities jumped by 165.00% year on year.
Leveraging its robust retail banking arm and recent acquisitions, the group attained +57.58% year on year growth in its loan portfolio, bolstered by loan repricing, Meristem Securities Limited said in its equities report.
The financial services company’s non-interest income also rose sharply in the period, up by 67.90% year on year to N939.38 billion from N559.54 billion in the comparable year 2022.
“This growth was driven by heightened activity in investment securities and gains from fees and commission income, attributed to higher transactions on its online banking channels,” Meristem analysts stated.
The report stated that Access Holdings bankingsubsidiary,y known for the strength of its treasury department in facilitating trading activities aided surge in the company’s bottom line. This is evinced in the 66.94% year on year growth in trading income to N628.93 billion – which accounted for 66.94% of non-interest income.
“In 2024, we foresee a rise in asset yield driven by several factors, including expanded lending activities, higher average lending rates, and increased yields on investment securities.
“Additionally, initiatives aimed at growing the group’s assets under management and leveraging its non-banking subsidiaries are anticipated to drive substantial growth in non-interest income.
“ As a result of these anticipated developments, we project a substantial +29.83% year on year increase in gross earnings to N3.37 trillion in 2024”, Meristem Securities stated.
Analysts said the upward adjustment in the interest payable on savings deposits from 10% to 30% of the Monetary Policy Rate resulted in an uptick in the cost of funds to 5.37% from 4.05% in 2022. Despite this, net interest margin rose by 132bps to 4.97% from 3.95% in 2022.
The Pan African lender saw a spike in operating expenses in 2023, up by 38.44% year on year to N767.22 billion from N554.21 billion in the prior period. This was primarily driven by escalations in various cost components amidst high inflation rate across African markets.
Specifically, personnel expenses grew by 43.97% year on year to offset inflationary pressures while regulatory expenses and IT expenses rose by 30.48% and 74.90%, respectively.
Meristem Securities said the addition of new subsidiaries in Angola, Cameroon, and France during the period incurred additional costs.
Despite these, the cost to-income ratio improved, dropping to a record-level of 51.31% from 76.83% in 2022, on the back of improvements in the group’s core operations and various cost optimization initiatives.
Access Holdings grew profit after tax by +305.05% year on year to N619.32 billion from N152.90 billion in 2022. The financial services behemoth’s board of directors declared final dividend of N1.80, bringing total dividend for the period to N2.10 while earnings per share jumped to N17.23 from N4.33 in 2022.
ACCESSCORP grew deposits by 65.63% year on year to NGN15.32 trillion, according to details from the group financial statement. Analysts said this growth trajectory was propelled by both real expansion in the deposit base and the favourable impact of foreign exchange (FX) rate unification.
“The growth in deposits bolstered the bank’s ability to create more loan assets for non-cyclical sectors, as such, loans to customers advanced by 57.58% with the loans-to-deposits ratio standing at 53.48% from 56.21% in 2022”.
In 2023 scorecard, the Pan African lender’s non-performing loan (NPL) and NPL coverage ratios also improved to 3.08% and 62.10%, respectively, from 3.40% and 55.92% in 2022.
The improved asset quality came on the back of proactive monitoring and the group’s disciplined approach to risk management, according to the equity report.
“ we note the negative impact of the Naira devaluation on the bank’s risky assets as risk weighted assets grew by 50.33% to N9.46 trillion versus N6.29 trillion in 2022”, Meristem analysts said in the report.
Despite this, the capital adequacy ratio (CAR) improved to 21.09% from 20.20% in the prior year, owing to a more significant +56.59% growth in total regulatory capital. ACCESSCORP maintains a robust liquidity position, with the liquidity ratio comfortably exceeding the regulatory threshold at 49.90%.
The group’s key prudential metrics are considered adequate and are expected to remain above the regulatory limits in 2023. Meristem Securities analysts forecast 2024 earnings per share to surge to N14.28 in 2024.
“Considering our outlook for persistent inflationary pressures, we foresee a continued rise in operating expenses as the group continues to expand its reach across Africa.
“Nevertheless, it is expected that the substantial rise in operating income will counterbalance the impact of higher personnel expenses and operational costs. Thus, our forecast points to a 22.98% year on year growth in profit after tax, reaching N761.63 billion in 2024,” Meristem Securities stated. #Analysts See 48% Upside in Access Holdings at N25.68 Dec Target Price
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