EUR 56.22 For Business Accounts Only

ACCESS BANK PLC COMAPNY UPDATE - Key takeaways from Investor Day

• ACCESS organized its first investor conference in Nigeria tagged “Leading through Innovation – A path to competitiveness and sustainability” during which management gave an update on the bank’s medium term strategy and shared its near term targets with analysts and investors. We have penned down our key takeaways from the meeting and discuss our view going forward.
• Bold guidance amidst tough operating conditions
  No gainsaying, the challenges that have clouded 2016 so far will likely remain the key theme across the banking sector in 2017. The demand/supply imbalance in the crude oil market will continue to put pressure on prices and the resulting impact on the currency of oil dependent emerging market economies would likely remain. Default across sector might not materially change for the better, credit growth will remain tepid as banks scramble for safe haven assets, and capital buffers will take increasing prominence. Management alluded to the challenging times ahead and highlighted strategies to navigate the headwinds onward. 2017 strategy will be largely focused on (1) Asset Quality Drive (2) FX Liquidity Management (3) Advancement in Digital Banking (4) Enhancement in Balance Sheet Efficiency, and (5) Improvement in Cost Management.
  
• Ticking the boxes of promises made
  Access Bank currently prides itself as a Nigerian corporate bank leader and a high performing diversified banking leader and strives to become the world’s most respected African bank in 2018 with best in class technology in Africa, Industrialized global operating model, and expanded footprint in the most attractive African markets. Whilst the bank’s ambition to be the World’s Most Respected African Bank appears to be a tall order at the moment, ACCESS’ past record is a testament to its ability to deliver on its growth promises.
  
• De-risking key in the near term
  From the discussion with management, we gathered that ACCESS bank continues to focus on de-risking its business, building a consolidated business, expanding its international network, and driving efficiency through technology innovation in a bid to successfully navigate the tough operating environment. Asides restructuring existing loans, the bank has been cautious about risk asset creation - maintaining a zero exposure to the troubled Power sector whilst restricting credit to quality names across other sectors.
  
• We maintain our BUY rating on ACCESS
  Having listened to management discuss its near term plans, we maintain our positive view on ACCESS. However, we discount a few optimistic targets of the bank as it relates to significant moderation in CoF, margin expansion, efficiency improvement, and contained CoR. That said, we believe the bank is well positioned to successfully navigate the headwinds ahead. We have revised our expectations across a few line items (particularly NPL formation in FY’17 and FY’18) and updated our valuations accordingly. We maintain our BUY rating on ACCESS at a target price of ₦9.16 (Previous: ₦9.45). ACCESS trades at FY’16 P/E and P/BV ratios of 2.2x and 0.4x compared with Tier I bank’s averages of 3.3x and 0.6x respectively.