1. Investment Strategy Note
Access Bank Eurobond Investment note
Equity Research
Access Bank 10.5% 2021 bond review
Brief Overview – Access Bank Plc. one of the leading commercial bank in Nigeria,
recently completed its US$ 300 million Eurobond issuance due October 2021 at a yield
of 10.75%. This new issuance is expected to help refinance the bank’s US$ 350 million
Eurobond due in 2017. Also currently in issue is the US$ 400 million Eurobond due in
2021 bringing the total value of the bank’s bond that will fall due in 2021 to US$700
million.
Yield trend and outlook in the Eurobond Market
Corporate Eurobond yields in Nigeria has spiraled upwards over the past 2 years due
to the consistent decline in crude oil prices as well as persistently weak economic
fundamentals. In the past quarter however, demand improved in the Eurobond
market partly due to improved outlook on crude oil prices and renewed interest from
local investors seeking FX edge against a depreciating naira. We expect the yields in
the bond market in the short term to remain volatile given the current economic
condition, persistent FX scarcity and generally weak economic outlook. Yields in the
corporate Eurobond market currently range from 6.5% to 22.1% across different
maturities
Access Bank 2017 and 2021 Eurobonds Yield trend
Company
Information
Address The Plaza, Victoria Island
Website www.accessbankplc.com
MD Herbert Wigwe, FCA
FYE December
NSE Sector Financial Services
Stock Data
Bloomberg Ticker: ACCESS:NL
Market Price (N) 5.63
Shares Outs (Mn) 28,927
Market cap (N’Mn) 163,443
Bond Data
Description: 7.25 JUL 25, 2017
Coupon: 7.25%
Maturity Date 25-July-2017
Offer Yield 4.74%
Description:
9.25/6M USD
LIBOR+7.677 JUN 24, 2021
Coupon: 9.25%
Maturity Date 24-June-2021
Offer Yield 11.45%
24 October 2016 Analyst:
Clement Adewuyi*
Clement.Adewuyi@cardinalstone.com
Team lead:
Oluwatosin Ojo, CFA*
Tosin.Ojo@cardinalstone.com
0
5
10
15
20
25
2021 2017

2. Investment Strategy Note
Access Bank Eurobond Investment note
Equity Research
Performance History
Access bank has consistently and innovatively grown its revenue even in the face of
tough macro-economic conditions. The bank’s gross revenue and after tax profit grew
at a yearly average of 24.8% and 40.9% to N337.3 billion and N65.9 billion respectively
from 2011 to 2015. Total asset and Net asset as at FY’15 increased to N2.6 trillion and
N363.9 billion growing at a yearly average growth rate of 12.3% and 21.1% from N1.44
trillion and N169.1 billion in 2011 respectively.
Gross earnings trend: 2011-2015 (N’Million) Earnings (profit after tax) Trend: 2011-2015 (N’Million)
Earnings Outlook
Net income from currency swap asset may shrink on higher funding cost
Access bank currently has about $800 million dollars in currency swap asset and with
the successful issuance of the $300 million Eurobond, the bank will be able to
refinance 86% of its $350 million Eurobond liability that will be due in 2017. The new
issuance was however raised at a much higher yield of 10.5% against the 7.5% of the
2017 bond. With the increase in interest expense on its Eurobond liability, the income
spread on the swap asset will likely shrink to 3.5% (Yield of 13.5% on swap asset minus
funding expense of 10.5%) from 6.5% (Swap yield of 13.5% minus funding expense of
7.5%. We expect this to moderate the growth in non-interest income in 2017. We
expect gross earnings and after tax earnings in FY’2016 to rise by 6.3% and 7.5% to
N358.7 billion and N70.8 billion respectively.
97,617
161,437 145,961
176,918
207,803
41,332
46,809 60,825
68,623
129,450
2011 2012 2013 2014 2015
Interest Income Non-interest income
16,708
42,861
36,298
42,967
65,869
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2011 2012 2013 2014 2015

3. Investment Strategy Note
Access Bank Eurobond Investment note
Equity Research
Access bank Ghana IPO may improve income from its Ghana subsidiary
Access bank is listing its Ghana subsidiary on the Ghana Stock Exchange (GSE) and will
be offering a stake of 25% worth $26 million to the public. The bank intends to use the
proceeds from the IPO to consolidate and expand its operation in Ghana. We believe
the expansion of the Ghana subsidiary as well as improved corporate governance and
operational efficiency from listing will enhance the subsidiary contribution to earnings
onward (currently contributes 6.4% to group earnings).
Asset Quality and Capital Adequacy
Access Bank has one of the strongest asset quality metrics in the industry. The bank’s
non-performing loan (NPL) ratio resisted the impact of Naira devaluation as it only
increased marginally to 1.9% in H1’16 from 1.7% in H1’15. This was far better than
peer average of 7% in H1’16. With a coverage ratio of 184%, the bank also adequately
provisioned for its NPLs. Contrary to industry trend, Access bank’s capital adequacy
ratio improved marginally to 19.6% in H1’16 from 19.5% in H1’15 despite Naira
devaluation. The bank’s balance sheet structure ensured that the resultant growth in
risk weighted assets (+20.8%) as a result of devaluation was offset by the 21% growth
in total regulatory capital (impact of devaluation on Tier 2 capital - Eurobonds).
Performance Analysis Access Peer Average FBNH Guaranty UBA Zenith
NIM 6.4 7.2 7.2 8.4 5.9 8.0
NPL 1.9 6.8 22.8 4.4 2.4 2.3
Cost to Income ratio 53.7 51.1 47.4 34.9 63.0 56.7
Capital Adequacy Ratio 19.6 18.2 15.4 18.3 18.5 19.0
RoAE 19.8 20.1 12.0 35.8 18.0 14.8
RoAA 2.7 2.9 1.6 5.7 2.2 2.1
Credit Rating: Access bank issuer rating of B and B1
Fitch and Moody’s currently have a long term rating of B and B1 on Access Bank debt
respectively. Both rating agency also labelled the bank’s outlook stable. The rating B
and B1 generally implies that the rating agencies believe the issuer’s bond (Access
Bank) is highly speculative and subject to high risk of credit default. In our opinion, the
high risk of credit default is linked to the FX scarcity that currently plaques Nigeria.
However, the high volume of asset ($800 million) held in dollar currency by the issuer
(Access Bank) offers some level of comfort. Other Access Bank peers like UBA,
Guaranty, and Zenith also have a B1 rating from Moody’s and Fitch. FBNH however is
rated B2 with a negative outlook, this is attributed to FBNH’s weak loan book and high
provisioning cost.

4. Investment Strategy Note
Access Bank Eurobond Investment note
Equity Research
Risk: New issue in a price discovery phase
The newly issued Access bank $300 million Eurobond just started trading and it is
currently in the phase of price discovery which means the current yield of the security
might not efficiently reflect the true value of the security. If the yield on the bond is
eventually priced higher by market participants, there will be a huge loss in value to
the investor who bought at lower yield. Below are the current yields of other Nigeria
corporate bonds.
Other Nigeria corporate bonds
Corporate Bond Time to maturity Year Coupon Offer Yield Offer Price
Access Bank 1 9 months 2017 7.25 4.74 101.82
Guaranty Trust Bank 2-Years 2018 6.00 5.73 100.51
Fidelity Bank 2-Years 2018 6.88 17.35 86.38
Zenith Bank 3-Years 2019 6.25 6.77 98.83
Diamond Bank 3- Years 2019 8.75 20.72 77.00
First Bank 4-Years 2020 8.25 12.51 87.00
Access Bank 2 5- Years 2021 9.25 11.45 91.79
Ecobank 5-Years 2021 8.75 11.76 86.63
First Bank 2 5-Years 2021 8.00 14.33 78.17
Final recommendation
From the above table, Access bank currently has a bond with similar maturity that
currently trades at a higher yield than the new issue (11.45%). However, the new issue
is a senior secured debt. Therefore, the investors in this issue will be given repayment
preference in the event of a default or bankruptcy- hence, the reason it was issued at
a premium to existing junior debt. Overall, we opine that intending investors in the
new issue should allow the bond trade for a while so as to give room for market to
appropriately price the security before investing.

5. Investment Strategy Note
Access Bank Eurobond Investment note
Equity Research
Disclosure
Analyst Certification
The research analyst(s) denoted by an “*” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for
this report, the research analysts denoted by an “*” on the cover or within the document individually certifies, with respect to each security or
issuer that the research analyst(s) cover in this research) that: (1) all of the views expressed in this report accurately articulate the research analyst(s)
independent views/opinions, based on public information regarding the companies, securities, industries or markets discussed in this report. (2)
The research analyst(s) compensation or remuneration is in no way connected (either directly or indirectly) to the specific recommendations,
estimates or opinions expressed in this report.
Analysts’ Compensation: The research analyst(s) responsible for the preparation of this report receive compensation based upon various factors,
including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among
other business units, Investment Banking and Asset Management.
Investment Ratings
CardinalStone employs a 3-step rating system for equities under coverage: Buy, Hold, and Sell.
Buy ≥ +15.00% expected share price performance
Hold +0.00% to +14.99% expected share price performance
Sell < 0.00% expected share price performance
A BUY rating is given to equities with strong fundamentals, which have the potential to rise by at least +15.00% between the current price and the
analyst’s target price.
An HOLD rating is given to equities with good fundamentals, which have upside potential within a range of +0.00% and +14.99%,
A SELL rating is given to equities that are highly overvalued or with weak fundamentals, where potential returns of less than 0.00% is expected,
between the current price and analyst’s target price.
CardinalStone Research distribution of ratings/Investment banking relationships as of September 31, 2016
Rating Buy Sell Hold Negative Watch
% of total recommendations 59% 21% 20% 0%
% with investment banking
Relationships
50% 0% 50% 0%
Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on any security
recommended herein. You can contact the analyst named on the front of this note for further details.
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6. Investment Strategy Note
Access Bank Eurobond Investment note
Equity Research
Company Disclosure:
CardinalStone may have financial or beneficial interest in securities or related investments discussed in this report, which could, unintentionally,
affect the objectivity of this report. Material interests, which CardinalStone has with companies or in securities discussed in this report, are disclosed
hereunder:
Company Disclosure
Access Bank Plc
a. The analyst holds personal positions (directly or indirectly) in a class of the common equity securities of the company
b. The analyst responsible for this report as indicated on the front page is a board member, officer or director of the Company
c. CardinalStone is a market maker in the publicly traded equities of the Company
d. CardinalStone has been lead arranger or co-lead arranger over the past 12 months of any publicly disclosed offer of securities of
the Company
e. CardinalStone beneficially own 1% or more of the equity securities of the Company
f. CardinalStone holds a major interest in the debt of the Company
g. CardinalStone has received compensation for investment banking activities from the Company within the last 12 months
h. CardinalStone intends to seek, or anticipates to receive compensation for investment banking services from the Company in the
next 3 months
i. The content of this research report has been communicated with the Company, following which this research report has been
materially amended before its distribution
j. The Company is a client of CardinalStone
k. The Company owns more than 5% of the issued share capital of CardinalStone
l. CardinalStone has other financial or other material interest in the Company
Important Regional Disclosures
The analyst(s) involved in the preparation of this report may not have visited the material operations of the subject Company (ies) within the past
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