Access Bank FY2020 Audited Results: Finding Balance; Rising Assets, Sliding Equity Returns
Access Bank Plc's stardust execution of exquisite mergers and acquisition plays has been reflected in the emerging continental banking giant's asset base growth over the last three years. As the largest deposit money institution (DMB) in Nigeria by customer size, the bank has reinforced the execution of its five-year strategic plan by recently getting approval from regulators both in Nigeria and South Africa for the acquisition of the South African Grobank Limited.
Its FY2020 audited result shows a resilient performance despite a pandemic, with a slight decline in the cost-to-income ratio (CIR) and a significant rise in impairment charges.
Key Highlights/Takeaways
Gross earnings increased Year-on-Year (Y-o-Y) by +14.69% from N666.75bn in 2019 to N764.72bn in 2020 (fell by -7.60% in USD terms to US$2.01bn in 2020).
Profit before tax grew marginally Y-o-Y by +12.51% from N111.93bn in 2019 to N125.92bn in 2020 (declined by -9.36% in USD terms to US$330.50m in 2020).
Impairments charges on loans significantly increased Y-o-Y by +211.52% from N20.19bn in 2019 to N62.89bn in 2020 (up by +150.97% in USD terms to US$165.07m in 2020).
A Y-o-Y uptick of +7.89% in basic earnings per share from continuing operations from 279kobo in 2019 to 301kobo in 2020.
Total loans up Y-o-Y by +17.83% from N3.06trn in 2019 to N3.61trnn in 2020.
Total deposit up by +20.28% Y-o-Y from N5.44trn in 2019 to N6.55trn in 2020.
Total equity increased Y-o-Y by +23.78% from N606.74bn in 2019 to N751.04bn in 2020 (marginal decline in USD terms, grew by -0.28% to US$1.97bn in 2020).
The total dividend for the year ended December 31, 2020, is 80k0bo against 65kobo per share paid in 2019.
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Share Price and Traded Volume - The Seesaw
The movement in the price of shares of Access Bank in 2020 reflected the uncertainty that trailed the year. The share price fell to its lowest levels in March 2020 which was the peak of the lockdowns and restrictions induced by the COVID-19 pandemic, there was a rebound in share price in the third and fourth quarter although not at the high pre-pandemic levels. The share price of the bank closed the year negative; it fell by -15.50%. The bearish trend has continued in its year-to-date (YTD) performance, declining by -5.33% as of 31st March 2020.
The volume of shares traded in 2020 dived, but so a reversal to close at +110.62% higher by year-end. The bank's lowest traded volume was in July 2020 while December recorded its highest traded volume. However, the upswing in volume has seen a hard break reversal YTD, declining by -92.85% as of 31st March 2020 (see chart 1 below).
Chart 1: Access Bank's Share Price and Volume of Share Traded
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Source: NSE, Proshare Research
Profitability-The Carousel Ride
The group's gross earnings have been on an upward trajectory, in 2020 gross earnings grew Y-o-Y by +14.69% from N666.75bn in 2019 to N764.72bn. The growth is largely attributed to a +26.37% rise in net fee and commission. Interest income declined by -6.15% while interest expense declined Y-o-Y by -12.85%.
In 2019, gross earnings had the highest percentage growth of +26.10% while 2020 recorded the lowest growth.
The growth in gross earnings was reversed in US dollar terms, declining by -7.60% from US$2.17bn in 2019 to US$2.01bn in 2020 using the official CBN rate (I & E FX Window) at the different periods. This was a result of the devaluation of the domestic currency (see chart 2 below).
Chart 2: Access Bank's Gross Earnings 2016 - 2020 (N'bn)
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Source: Access Bank's Financial Statement, Proshare Research
Profit before tax (PBT) grew Y-o-Y by +12.51% from N111.93bn in 2019 to N125.92bn in 2020. Net gains on financial instruments through profit or loss was the major driver of the rise in PBT, it grew Y-o-Y by +85.61% from N66.10bn in 2019 to N122.69bn in 2020. There was a significant upsurge in fair value gains on fixed income securities and equity investment, increasing Y-o-Y by +260.57% and +154.58% respectively.
In 2018, PBT had the highest percentage growth of +32.01% while 2017 records the highest percentage decline of -13.47% change in PBT.
Again, there was a reversal in the growth recorded in Naira terms. PBT declined by -9.36% in US dollar terms, from US$364.64m in 2019 to US$330.50m in 2020 (see chart 3 below).
Chart 3: Access Bank's Profit Before Tax 2016 - 2020 (N'bn)
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Source: Access Bank's Financial Statement, Proshare Research
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Impairment Charge-Braving the COVID Bust
The impairment charges of the lender recorded a leap driven by the harsh COVID-19-induced economic realities in 2020. Impairment charges on financial assets grew Y-o-Y by +211.52% from N20.19bn in 2019 to N62.89bn in 2020 (see chart 4 below).
Chart 4: Access Bank's Impairment Charges 2016 - 2020 (N'bn)
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Source: Access Bank's Financial Statement, Proshare Research
Asset Quality-Taking Loan Delinquency Seriously
The group's FY2020 audited result showed an improvement in the non-performing loans (NPL) ratio, NPL improved from 5.80% in 2019 to 4.30% in 2020. The lower ratio reflected the hard knuckle approach to loan recovery adopted by the group which is fast gaining the reputation as Nigeria's toughest loan recovery machine. The bank has one of the toughest loan asset portfolio managers and a delinquent asset recovery team. The toughness of asset managers has enabled the bank to push its nose ahead of sector rivals concerning improved asset quality.
The group witnessed its highest NPL ratio in 2019 while 2018 advertised its lowest NPL ratio just before its move to merge with Diamond Bank Plc. in 2019 (see chart 5 below).
Chart 5: Access Bank's Non-Performing Loan Ratio 2016 - 2020
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Source: Access Bank's Financial Statement, Proshare Research
Total Assets- Dashing up Staircases
Access bank's growth in total assets has been steady over the last five years, although Y-o-Y growth has been irregular. In 2020, the money lender's total assets grew Y-o-Y by +21.51% from N7.14trn in 2019 to N8.68trn in 2020. This was majorly on the back of +74.97% growth in derivative financial assets.
In 2019, the banking group recorded its highest percentage growth in total assets of +44.19% change while 2017 records the lowest percentage growth of +17.75% in total assets.
Total loans and advances grew Y-o-Y by +17.83% from N3.06trn in 2019 to N3.61trn in 2020, on the back of a +154.04% rise in loans and advances to banks.
The DMB's total deposit also grew Y-o-Y by +20.28% from N5.44trn in 2019 to N6.55trn in 2020. This was driven by a +31.29% rise in deposits from customers while deposits from banks declined by -19.22% in 2020 (see chart 6 below).
Converting to US dollar terms, total assets declined slightly by -2.11% from US$23.27bn in 2019 to US$22.78bn in 2020.
Chart 6: Access Bank's Total Assets 2016 - 2020 (N'trn)
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Source: Access Bank's Financial Statement, Proshare Research
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Total Equity- Shoring up Shareholder's Booty
The lending group's shareholder's fund grew by +23.78% from N606.74bn in 2019 to N751.04bn in 2020. Regulatory risk reserve and fair value reserve were major drivers of the rise in total equity. Both grew Y-o-Y by +156.61% and +6133.55% respectively.
In US dollar terms, there was a marginal decline in total equity, fell by -0.28% from US$1.98bn in 2019 to US$1.97bn in 2020 (see chart 7 below).
Chart 7: Access Bank's Total Equity 2016 - 2020 (N'bn)
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Source: Access Bank's Financial Statement, Proshare Research
Return on Equity- A Dip But Still Keeping Faith
The credit provider recorded a decline in return on equity (ROE), dipping from 17.7% in 2019 to 15.60% in 2020. In 2018, ROE was at its highest at 19.0% while 2017 recorded the lowest ROE of the group in the last five years (see chart 8 below).
Chart 8: Access Bank's Return on Equity 2016 - 2020
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Source: Access Bank's Financial Statement, Proshare Research
Monitoring the Merger Master
Nigeria's master of banking sector mergers would perhaps receive closer scrutiny than before in 2021 as its foray into South Africa will colour the outlook of Nigerian banks venturing continent-wide on the back of the African Continental Free Trade Agreement (AfCFTA).
Investors may not have been too gung-ho about return on equity (ROE) in 2020, but if the banking group's continental gambit pays off, then the smiles may be broad and fixed between 2021 and 2023.
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