M&A Metrics Strengthened as Access Bank Release Q1 Result
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 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, while 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 4% year on year decrease in personnel expenses ₦12.786 billion.
In reflection of its merger with Diamond bank, the group’s total assets, liabilities and equity value sizes expanded by 84%, 90% and 23% respectively from first quarter of 2018 level to ₦6.43 trillion, ₦5.85 trillion and ₦576.47 billion in the first quarter of 2019.
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 first quarter of 2019.
What this means is that the bank has cash to play around with and depositors and 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 first quarter of 2018 to 19.5% in first quarter of 2019.
However, non-performing loan ratio quadrupled to 10% from 2.5% in the comparable period in 2018. Analysts see this as red signal and what it means is that more and more of the bank loans are facing risk of default.
Access Bank Plc loans to deposits ratio receded from 85% to 65% as against 80% benchmark set by the Central Bank of Nigeria. This would ordinary increase the ability to book more loans in 2019.
Cost to income ratio diluted with the merger. In the first quarter of 2018, Access Plc expended N62 on every N100 income generated.
Post merger result however showed that cost went down as the bank reported to have spent N53.2 on every N100 generated in the first quarter of 2019.
What does this translate to for investors?
Stock price will pick up as the bank proof that its fundamentals have become robust and its competitive stand strong too.
Issue with one of its shareholders, Etiebet, could be a drag if not resolve quickly because of the weight of the allegation and the calibre of 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 against 77k) for shareholders in the first quarter, which means that if this performance is sustain, dividend payment may increase – that however depends on the board of directors among other things.