The rights offer by Access Bank is likely to be treasured for a lifetime by shareholders and investors, pivoting them beyond the gloom in the equities market.
It is offering N53 billion rights issue of 7.62 billion shares at 50k each, valued at N6.90 per share, which opened on January 26 and it is expected to close on March 4.
Existing shareholders, the first line of beneficiaries, are expected to pick their rights in the ratio of one new share for every three already held.
Access Bank is optimistic that the offer will be successful, based on the underlying fundamentals that it is one of the top three banks in the country with impressive performance but whose share is lowly priced.
Highlights of fundamentals
At the presentation of the facts behind the offer on the trading floor of the Nigerian Stock Exchange (NSE ) on Thursday, February 2, Access Bank Group Managing Director, Herbert Wigwe, provided a glimpse into the financials showing performance indices trending upwards.
Overall customer base improved from slightly over one million in 2012 to 7.8 million at present, the second largest among banks.
In 2012, Access emerged in the top five banks in Nigeria, with one of the best income ratios.
“Our income performance in 2014, though not released, witnessed significant improvement in loans growth, asset quality, shareholder returns and other indices,” Wigwe said.
For the nine months to September 30, 2014 the Return on Average Equity (ROE ) rose 15.7 per cent and asset quality 2.5 per cent.
“Today, when you look at the different indices, they are trending upwards. In terms of capital adequacy ratio, return on equity, non-performing loans ratio, we are one of the top three in the industry. By 2017, we will be one of the top three banks in the country,” Wigwe told stockbrokers.
Based on the 2013 figures (2014 audited result is being awaited), operational efficiency improved according to plan, with cost to income ratio of 63.1 per cent, from 75.9 per cent in 2013.
Loans and advances increased 17 per cent to N949 billion from N811 billion in full year 2013, total assets N2 trillion, up 11 per cent from N1.8 trillion in full year 2013. Customer deposits rose 9 per cent to N1.45 trillion, from N1.33 trillion in full year 2013.
Asset quality ratios stood at NPL ratio down 20bps to 2.5 per cent, from 2.7 per cent in December 2013; coverage ratio (with regulatory risk reserves) of 139 per cent, up from 122 per cent in December 2013.
Access Bank has 366 branches, 6.9 million customers, 1,042 automated teller machines (ATMs), 11, 846 POS machines, and 21 per cent capital adequacy ratio – about 4 per cent higher than regulatory requirement of 16 per cent for systemically important banks (SIBs), which threshold only Access Bank and 2 others have crossed.
Audited H1 2014 financial performance also reflects improved fundamentals. Gross earnings rose 16 per cent to N117 billion, profit after tax jumped 4 per cent to N27 billion.
Operating income increased by 22 per cent to N83 billion (H1 2013: N68 billion), underlined by higher earnings contribution from interest and non-interest income.
Net interest margin jerked up 6.9 per cent, from 5.7 per cent in H1 2013, reflecting lower cost.
As profitable as the bank is, the offer price is N6.90 per share. Its audited half year 2014 result showed a N27 billion profit, after it absorbed the fixed cost of doing business.
Seeking stockbrokers’ support
As part of activities to sensitise the investing public on the offer, the management of Access Bank visited the NSE to present the facts behind the offer. It was received by NSE Chief Executive Officer (CEO), Oscar Onyema, and his team.
Wigwe commended stockbrokers for building a robust platform for raising capital.
He recalled how the bank raised funds through the bourse in 2002 and 2007, which contributed to its transformation from number 69 in ranking to a top 5 player in the financial services.
He expressed joy that the market has developed an impressive level of integrity and transparency in its operations to ensure sustainable service.
To be successful or not to be
Wigwe explained to the market operators why the rights offer is something to treasure by shareholders and investors.
He said the issues that affected Access share pricing have been resolved or are being resolved. “Therefore, the right time to take advantage and buy Access shares is now because the price can only trend upwards as the market rebounds,” Wigwe insisted.
Access corporate history points to sustained strategic growth, rising from 69th position in 2002 to top five in 2012 following the acquisition of Intercontinental Bank.
“We are entering the third phase of corporate strategic growth to become number one, two or three, and the world’s most respected African bank by 2017.”
Access, the first bank to issue local bond in 2002, raised N15 billion, which it used to expand to join the top three banks in 2007. In 2007, it raised N136 billion in initial public offer (IPO) required for another strategic growth, which was actualised by 2012.
Another N150 billion was raised through direct foreign investment (DFI). Today, Access Bank has set out on another five plan to become top three bank in the country and the most respected bank in Africa.
“We raised Euro bond of $400 million which boosted our capital and gave us the headroom to support additional growth. It also implies the bank has huge dollar liquidity as long term funds top lend to multinationals and oil majors which may need credit facilities,” Wigwe recounted.
It is expected that the force of transformation behind the institution will see it emerge as the most diversified bank in Africa, underscored by three critical pillars – robust risk management, capital adequacy at all times, and sound corporate governance.
Success strategy for the offer
“We are basically speaking a lot more to institutional investors, family offices, high net worth individuals, and people who have understanding of long term future of Access,” Wigwe said, in explaining the strategy the bank has adopted to ensure the success of the offer.
“There are traditional shareholders who have been there over time. One of these people, in fact, bought Access shares at N17.00 per share. They understand where we are coming from, and are ready to take up their rights because they know that this slight distortion in share price value will be corrected.
“More than any other Nigerian bank, we have the highest number of foreign investors. We have the good ones, we have the hedge fund investor shareholders, and we have those who have brought money.
“The problem is that, much as it is good, if they hear there is fire in Maidugiri, they throw away the shares. So, we have suffered more than anybody else from all of this. But it is not a problem. We believe that overtime, the fundamentals will determine the market price.
“If you work around the demand and supply end and you have strong institutional local shareholder base, the price will firm up. And that’s what’s going to happen. We are absolutely confident we are going to raise the money.”