Last Update03 Jun 25
Subject: Access Holdings Plc Poised for Re-Rating as Analysts See Over 60% Upside Potential
Access Holdings Plc is attracting renewed attention from equity analysts, who believe the stock is significantly undervalued relative to its Tier-1 banking peers, with upside potential ranging between 44% and 63%.
Key Points Driving Analyst Optimism:
Valuation Gap: Despite its evolution into a diversified financial services group, Access Holdings is still priced like a traditional bank, with a market capitalization of approximately N1.2 trillion. Analysts argue this undervalues its portfolio of cash-generating subsidiaries, which span asset management, pensions, insurance, and international banking.
IT and Digital Infrastructure Investments: Access Holdings has made strategic investments in its core banking and digital platforms, positioning it to expand net interest margins and grow fee and commission income. These enhancements are seen as instrumental to sustaining long-term profitability.
Growing International Footprint: The group’s cross-border banking capabilities are expanding rapidly, with trade finance activities launched in Morocco and Egypt, and further expansion planned via Access Malta. These initiatives will enhance foreign exchange earnings and support non-interest revenue, which is expected to grow 15.3% to N1.5 trillion in FY 2025.
Strategic Acquisitions: Access Bank recently completed its acquisition of National Bank of Kenya, marking a strategic milestone in East Africa. Combined with its existing footprint in the UK, France, and soon Malta, the acquisition strengthens Access’s pan-African presence and supports broader trade and remittance flows.
Synergy Potential: The Access ARM Pension merger (N3.3 trillion in AUM, 2.1 million accounts) and upcoming insurance cross-sell opportunities are seen as key drivers of non-interest income and operational leverage.
Attractive Dividend Record: The group’s interim dividend of N1.00/share, up from N0.45/share in H1 2024, reflects confidence in earnings strength and provides an additional yield-based incentive for investors.
Target Price Estimates: Dynamic Portfolio Limited places fair value at 25.00, suggesting a 15% upside because of Profit margins (26.5%) are lower than last year (41.5%) and Shareholders have been substantially diluted in the past year
Apel Securities Limited places fair value at N31.67, suggesting a 44% upside.
CardinalStone Securities sees fair value at N35.84, implying a 63.3% upside from the current level.
Outlook:
Access Holdings is transitioning into a financial conglomerate with diversified revenue streams, extensive geographic coverage, and scalable digital infrastructure. With analysts pointing to a significant valuation discount, rising non-interest income, and cross-border expansion, the stock offers a strong value proposition. Investors seeking exposure to a growth-oriented, dividend-paying financial institution with pan-African ambitions may find Access Holdings well-positioned for outperformance in the coming quarters.
Access Holdings posted a pre-tax profit of ₦222.78 billion in Q1 2025, up 9.89% year-on-year, demonstrating a resilient bottom line amid a turbulent cost environment and margin compression. This performance was powered largely by robust non-interest income, offsetting the steep erosion in net interest margins.
🔑 Key Highlights – Q1 2025 vs. Q1 2024:
- Pre-tax Profit: ₦222.78 billion ▲ +9.89% YoY
- Interest Income: ₦980.68 billion ▲ +58.28% YoY
- Interest Expense: ₦760.47 billion ▲ +71.32% YoY
- Net Interest Income: ₦220.21 billion ▼ -20.13% YoY
- Net Fee & Commission Income: ₦146.22 billion ▲ +68.35% YoY
- FX/Fair Value Gains: ₦214.39 billion ▲ +79.82% YoY
- Earnings per Share (EPS): ₦4.88 ▲ +12.18% YoY
- Loans & Advances: ₦10.96 trillion ▼ -4.58%
- Total Assets: ₦39.09 trillion ▼ -5.81%
- Customer Deposits: ₦23.03 trillion ▲ +2.25%
📉 Margin Squeeze from Rising Funding Costs
Access Holdings delivered strong top-line growth through higher interest income, but its profitability was squeezed by surging funding costs. Interest expenses jumped over 71% year-on-year, leading to a shrinking net interest margin. The bank retained just 22.45% of interest income after funding, lagging significantly behind peers like GTCO (80.11%) and Zenith Bank (70.58%).
This margin compression reflects the elevated cost of customer and interbank deposits (₦696.89 billion) and borrowing expenses (₦63.58 billion), amid tighter market liquidity.
💡 Diversified Revenue Base Shields Profitability
Despite the margin squeeze, Access Holdings’ diversified income streams proved critical. Non-interest income, especially from credit-related fees (+70.11% to ₦75.52 billion), e-banking charges (+44.83%), and foreign exchange/fair value gains (+79.82% to ₦214.39 billion), acted as a cushion for the earnings line.
This non-core income strength offset the drag from net interest income, showcasing Access Holdings’ ability to weather high-cost environments through its fee-based businesses and treasury operations.
🏦 Balance Sheet Stability Amid Asset Contraction
Although total assets contracted 5.81% to ₦39.09 trillion—driven by lower loan books, investment securities, and balances with the CBN—the group maintained strong liquidity. The 2.25% growth in customer deposits to ₦23.03 trillion is notable, especially in a tightening liquidity landscape, and supports ongoing lending and capital adequacy.
Loan volumes dipped by 4.58%, reflecting cautious risk-taking in a high-rate environment, but this may also signal a strategic capital optimization play.
📊 Outlook: Cautious Optimism with Eyes on Cost of Funds
Access Holdings’ Q1 performance underscores a core profitability challenge masked by exceptional trading and fee income. While short-term earnings resilience is commendable, the real test lies in whether the bank can control funding costs and restore net interest margin strength in subsequent quarters.
Nonetheless, its strong non-interest revenue mix, growing deposit base, and dominant market position provide a solid foundation for medium-term growth, even if core lending remains pressured.
The bank's earnings story going forward hinges on how effectively it recalibrates its funding structure and asset mix in a persistently tight monetary landscape.
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