Access Bank Compensate Investors through Rights Issue

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the Group Managing Director, Access Bank Plc, Herbert Wigwe,

From Benjamin a ameh, Lagos

The pricing of the rights issue is a discount to the bank’s book value of N12, which revealed the inherent value for investors as per investment analysts, at N6.90 per unit of shareholding shows shareholders’ interest growth in efforts to raise N52.6 billion through a rights issue.
The present economy crisis around the globe including Nigeria can be referred to trying period in an operations environment due to the oil price volatility and the corresponding pressure on the economy

The activities of financial sector regulators are contributing to the banking operations, for instance, many experts are pointing accuse fingers in a direction toward over regulated sector more than before in the Nigerian banking history adding that there is need for banks to create alternative revenue streams in the face of this headlong regulatory in the industry over the years.

The ultimate needs to improve shareholders’ return are paramount for banks to be aggressive and also accentuated the race for capital adequacy and increased competition for large ticket transactions. It therefore, become a relieved idea to shareholders in Access Bank when the bank opened its on-going rights issue where it seeks to raise N52.6 billion from existing shareholders.
The right issue opened on January 26, run till March 4, 2015 through bank is offering its 7.628 billion ordinary shares of 50 kobo each at N6.90 per unit to raise the funds that will enable the bank pursue its desired expansion and boosts its cash reserves.
In assessing the Rights Issue of the bank revealed that although offer price N6.90 is higher than current market price of the shares. The bank sees the rights issue as an opportunity to reward its loyal shareholders.
Even some analysts have added their voice that given the strong fundamentals of the bank, they consider this investment to be potentially profitable as per below finding.
“At a Price to Book Value of 0.61x, dividend yield of 8.70 per cent and earnings yield of 14.61 per cent, it is good especially for investors with a medium to long term investment horizon. Capital adequacy ratio and non-performing loans (NPLs) of 19 per cent and 2.7 per cent outperform the benchmark of 15 per cent and five per cent respectively. We believe that the group’s focus on shifting its loan book to customers with lower risk ratings, away from customers with higher risk ratings will help it to further reduce its NPLs. This should, in addition to the bank’s steady growth of its loan book, result in an increase in its after tax profits thereby creating more value for shareholders.”

They therefore explained that Access Bank’s share price is currently well below book and intrinsic value. Average broker consensus is a “buy” with a target price of N11.84. Stock is currently trading at a 126% discount to the broker consensus target price

According to the statements inserted in rights issue documents, disclosed, the usages of Proceeds towards upgrade the bank’s information technology platforms and branch network for better services and to improve the working environment. Also to augment the bank’s working capital, support risk assets growth and improve its distribution channel infrastructure which will brings the provision of more efficient services to clients.

Speaking on the issue, the Group Managing Director, Access Bank Plc, Herbert Wigwe, gave details how the proceeds from the rights issue, among others,  would enable it provide better services, upgrade its  branch networks and improve its working environment.
Wigwe’s words:   The funds raised would provide Access Bank with additional capacity to further consolidate its leading corporate banking business as well as additional capital headroom to support our increasing market share in the SME and retail segments.

He explained that the capital raising is in line with the bank’s five-year corporate strategy plan to be one of the top three banks in the country and the world’s most respected African bank.
This, according to him, will be anchored on four critical pillars – capital, human capital, governance and risk management.
“It will also enable the bank to be more competitive and meet the funding needs of its blue chip customers that meet its credit risk criteria,” he said.

Managing director made it cleared that despite the challenges in the nation’s banking sector with regulatory changes and increased competition, your Bank has continued to sharpen its execution skills, thereby ensuring a solid platform to build on.

Sometimes ago, shareholders of the bank, gave the management of the bank go-ahead for the rights issue and also authorised that the share capital of the bank be increased from N13 billion made up of 24 billion ordinary shares of 50 kobo and 2 billion preference shares of 50 kobo each, to N20 billion by the creation of 14 billion ordinary shares of 50 kobo each.

In the same vein: the Chairman of the bank, Gbenga Oyebode, speaking at the meeting where the resolutions were made, said despite the challenging conditions in the nation’s banking sector with regulatory changes and increased competition, the bank continued to sharpen its execution skills, thereby ensuring a solid platform to build on.
In his words:  I am pleased to inform you, our esteemed shareholders, that the results of the foundation laid in 2013 are already evident as seen from our recently released half year results which showed a 7 percent growth in profit after tax to N22.6 billion.
He added that the bank’s mid term strategy (2013-2018) seeks to optimize the vast opportunities existing primarily in Nigeria and also in the Sub-Saharan African region, and that in furtherance of its objectives of ranking as one of the top three banks in its chosen market, management had identified certain sectors and market segments as growth opportunities for the next five years.
Access Bank is recognised as one of leading commercial bank in Nigeria with an extensive distribution network in Sub Saharan Africa and the UK.
Currently, the bank has seven subsidiaries, 3,192 staffers, 366 branches, 1,042 ATMs and 11,846 POS to its kit. Its Capital Adequacy Ratio stood at 2 per cent.
In 2002, Access Bank was 65th out of 89 banks and the bank has 90,000 customers at the period, had a return on equity of 0.9 per cent and cost to income ratio of 93 per cent, while gross income stood at N2.6billion. Assets was estimated at N11.3 billion, market capitalisation was N25 billion, while the number of branches was 32.

In 2007, the banks fortune improved significantly as it moved to ninth position out of 25 consolidated banks with records of 600,000 customers; its return on equity was 25 per cent while its cost to income ratio was put at 62 per cent. The gross income stood at N27.9 billion while loan portfolio hits N108billion, deposits anchored on N205 billion while assets was N409billion. Its market capitalisation for the period was N342 billion. It grew the number of its branches to 118.
The bank rose to the fifth position out of the nation’s 21 banks in 2012 with 6.5 million customers.
Its return on equities rose to 18 per cent, while cost to income ratio was 61 per cent. A gross income of N208.3 billion, market capitalisation stood at N241 billion. Access Bank during the period under review approved N609 billion loans, grew deposits to N1,201 billion, with N1,745 billion worth of assets and 349 branches.


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