Earnings Improve as Access Bank Releases Post-Merger Q1 Scorecard
Access Bank Plc has released its first post-merger financial report for the first quarter of 2019 to the investing public. The group’s gross earnings and profit after tax (PAT) rose by 16.4% and 86%, respectively, to ₦160.12 billion and ₦41.15 billion in the first quarter of 2019 compared to the corresponding period in 2018.
The increase in gross earnings was mainly driven by a 27% year-on-year increase in net interest income from ₦44.65 billion in the first quarter of financial year 2018 to ₦56.84 billion in the first quarter of 2019.
Meanwhile, the increase in PAT, in addition to the effect of the surge in gross earnings, was boosted by a 191% year-on-year increase in net foreign exchange income to ₦6.21 billion and a 4% year-on-year decrease in personnel expenses to ₦12.786 billion.
In reflection of its merger with Diamond Bank, the group’s total assets, liabilities, and equity values expanded by 84%, 90%, and 23%, respectively, from the first quarter of 2018 to ₦6.43 trillion, ₦5.85 trillion, and ₦576.47 billion in the first quarter of 2019.Access Bank upbeat on post-merger performance, says it awaits full synergy
Consequent upon the above, the group’s EPS for the first quarter 2019 surged by 81% to 139K (or ₦1.39) compared to the corresponding period in 2018.
In light of the above and the favourable macroeconomic outlook for 2019, we anticipate a higher Dividend payout by Access Bank for 2019 financial year. Hence, we maintained our price of ₦11.30 for Access Bank.
The bank’s liquidity position improved from 46.30% in the first quarter of 2018 to 47.6% at the end of the first quarter of 2019.What this means is that the bank has cash to play around with, and depositors and the deficit-spending unit of the economy would have a balanced equation for cash needs.
The group capital adequacy ratio increased 20 basis points, from 19.30% in the first quarter of 2018 to 19.5% in the first quarter of 2019.However, the non-performing loan ratio quadrupled to 10% from 2.5% in the comparable period in 2018. Analysts see this as a red flag, meaning that more and more of the bank’s loans are at risk of default.
Access Bank Plc’s loans-to-deposits ratio declined from 85% to 65%, below the 80% benchmark set by the Central Bank of Nigeria. This would ordinarily increase the ability to book more loans in 2019.
The cost-to-income ratio was diluted with the merger. In the first quarter of 2018, Access Plc expended N62 on every N100 of income generated. Post-merger results, however, showed that costs decreased, as the bank reported spending N53.2 for every N100 generated in the first quarter of 2019.
What does this translate to for investors?
The stock price will pick up as the bank proves that its fundamentals have become robust and its competitive position strong as well. The issue with one of its shareholders, Etiebet, could be a drag if not resolved quickly, given the weight of the allegation and the calibre of the person trying to pull the plug.
Apart from that, Access Bank Plc management has doused general doubt around the “marriage made in heaven” consummated at the “Broadstreet” with Diamond Bank – albeit in the short term.The bank earned more (139k vs 77k) for shareholders in the first quarter, which means that if this performance is sustained, dividend payments may increase, though that depends on the board of directors, among other things.
