How to Invest in the Best Nigeria Bank Shares - Is Access Bank Stock a Buy at N19.4?

00:54:00
https://www.youtube.com/watch?v=t0Z8vizUpPk

Summary

TLDRThe video provides a detailed breakdown of Access Bank's financial standing and investment potential. It opens with an explanation of the business model, identifying Access Bank as a predominantly loan-driven business, but with significant investment activities. It explains how Access Bank generates funds mainly through customer deposits and evaluates its profitability by comparing the net interest margin with the cost of funds, finding it profitable due to favorable margins. The analysis also highlights potential risks, such as the dependency on foreign exchange gains for profitability, while acknowledging the strategic benefits of geographic diversification. Suggestions are made that improving operational efficiency could enhance profitability. The presenter forecasts an EPS growth and suggests that Access Bank may be undervalued in the market, offering a potential upside of 26% if it meets projected earnings. The video provides a comprehensive guide on assessing whether Access Bank's stock is a worthwhile investment by combining fundamental and technical analysis, while also urging viewers to consider their risk tolerance before investing.

Takeaways

  • 📊 Access Bank is a loan-driven but also invests significantly.
  • 💰 Its main income source is interest on loans and securities.
  • 📈 The bank shows profitability with a net interest margin above cost of funds.
  • 🌍 Diversification in foreign subsidiaries aids earnings through forex gains.
  • 🔎 Investors should note the reliance on forex gains for profit.
  • 🔍 Operational efficiency needs improvement for better profitability.
  • 🔮 Potential 26% upside if projected earnings are realized.
  • 📉 Access Bank's P/E ratio is low, indicating it might be undervalued.
  • 🔋 Increasing customer deposits reflect growing confidence.
  • 📅 Estimated fair value placed at NGN 24.5 per share.

Timeline

  • 00:00:00 - 00:05:00

    Welcome to Coach Go Platform's investment guide on banking stocks. We will explore whether Access Bank is a buy, overvalued, or undervalued, using 2023 financial statements for a fundamental analysis and also assess the technical aspects. Access Bank is offering a rights issue priced above market value, suggesting it's undervalued. Our goal is to help you decide if it's wise to invest in Access Bank now.

  • 00:05:00 - 00:10:00

    The importance of thorough analysis before investing is emphasized, discouraging haste based on market rumors. We'll explore the type of business Access Bank runs and how it generates funds. We'll also examine how Access Bank is making its money, its cost of funds, profitability, efficiency, and customer confidence.

  • 00:10:00 - 00:15:00

    Access Bank is a loan-driven business, similar to Fidelity, but with less loan exposure. Its total deposit in 2023 was 19.7 trillion, with loan exposure at 8.9 trillion, mainly from customer deposits, indicating confidence. The analysis also includes cost of funds and sources of income, highlighting Access Bank’s focus on customer deposits over debt instruments.

  • 00:15:00 - 00:20:00

    Access Bank’s profitability and efficiency are tracked by net interest margin and cost of funds. Its net interest margin must be greater than the cost of funds to be considered profitable, which it is at 4.87% compared to a cost of 4.65%. Despite profitability, the bank is inefficient with high operating costs, particularly in personnel expenses.

  • 00:20:00 - 00:25:00

    In 2022, Access Bank's efficiency ratio of 163% showed it wasn't profitable without exchange gains. However, in 2023, the ratio improved to 91%, still above ideal levels. The bank aims to manage costs without affecting staff morale, needing to reduce the efficiency ratio below 50% while it continues to capitalize on its international diversification to counter domestic currency devaluation.

  • 00:25:00 - 00:30:00

    Customer confidence in Access Bank, indicated by deposits, has grown positively. The projected deposit for 2024 is 34 trillion, showing substantial growth, fueling the bank's loan-driven model. Access Bank aims to cement customer trust, yielding cheaper funds from deposits rather than debt issuance. This positions it advantageously in a competitive financial landscape.

  • 00:30:00 - 00:35:00

    Access Bank's shares appear undervalued with a P/E ratio below industry average, hinting at a potential 26% upside if projections for 2024 materialize. The current earnings per share (EPS) is predicted to reach 25 Naira, supporting a potential rise in share price to 24.5 Naira based on 2024's financial performance.

  • 00:35:00 - 00:40:00

    Technical analysis of Access Bank’s stock suggests a bullish opportunity if prices break above 20 Naira, potentially reaching previous highs around 30 Naira if current business momentum continues. A breakout could attract new buyers and support significant price elevation.

  • 00:40:00 - 00:45:00

    The detailed review evaluates Access Bank's performance relative to market conditions, guiding investors on potential ROI based on systematic analysis. Although a modest price projection is shared, substantial gains might be realized if the bank exceeds EPS expectations, signaling strong buy signals under right conditions.

  • 00:45:00 - 00:54:00

    Investors are encouraged to analyze Access Bank using both fundamental and technical metrics for informed buy/sell decisions. The discussion enhances understanding of banking stocks within this framework, advocating joining the investment community for further insights.

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Mind Map

Video Q&A

  • What is the video about?

    The video is about investing in banking stocks, specifically Access Bank, including fundamental and technical analysis.

  • What does the presenter analyze in the video?

    The presenter analyzes Access Bank's 2023 financial statement, business model, profitability, efficiency, and market valuation.

  • What is the significance of the fair value gain in Access Bank's report?

    The fair value gain significantly influences Access Bank's profit, masking inefficiencies in some operational areas.

  • How does Access Bank generate most of its income?

    Access Bank generates most of its income from interest on loans and investment securities.

  • What does the video suggest about customer confidence in Access Bank?

    Customer confidence in Access Bank is growing, as evidenced by increasing customer deposits.

  • What is a major risk factor for investing in Access Bank?

    A major risk factor is its reliance on foreign exchange gains for profitability.

  • What potential returns does the video suggest Access Bank might offer?

    The video suggests Access Bank might offer a 26% upside potential if certain conditions are met.

  • Why might Access Bank be considered undervalued?

    Access Bank might be considered undervalued because its P/E ratio is lower than the industry average.

  • What tools does the presenter use for analysis?

    The presenter uses P/E ratio, technical analysis, and compares financial indicators like net interest margin.

  • What is the presenter's conclusion on investing in Access Bank?

    The presenter provides a modest estimation of an upside potential, encouraging viewers to make informed decisions.

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  • 00:00:03
    welcome to another interesting section
  • 00:00:05
    on how to invest in banking stocks this
  • 00:00:09
    is coach go platform and if this is the
  • 00:00:12
    first time you're visiting my channel
  • 00:00:14
    canly hit the subscription button and
  • 00:00:16
    turn on the notification Bell because I
  • 00:00:19
    have decided to give you loads of
  • 00:00:21
    content on this channel So today we're
  • 00:00:24
    going to look at assess bank so people
  • 00:00:26
    have been asking me after watching my
  • 00:00:28
    video on
  • 00:00:30
    Fidelity Bank so whether assets bank is
  • 00:00:33
    actually a buy or whether assets bank is
  • 00:00:36
    undervalued overv valued or fairly
  • 00:00:39
    valued so here I'm going to show you the
  • 00:00:42
    real numbers and help you take decisions
  • 00:00:46
    so meaning that I'm going to show you
  • 00:00:48
    how the financial position of assets
  • 00:00:50
    bank is right now now everything I share
  • 00:00:52
    with you right here is based on my own
  • 00:00:54
    personal opinion but then I think the
  • 00:00:55
    numbers would also help you see um the
  • 00:00:59
    pros and cons of investing in assets
  • 00:01:01
    bank and whether there's an opportunity
  • 00:01:03
    in the bank or not you most likely see
  • 00:01:05
    them at the end of the section so here
  • 00:01:07
    I'm going to carry out two types of
  • 00:01:09
    analysis we going to carry out a
  • 00:01:11
    detailed fundamental analysis of assets
  • 00:01:14
    Bank using their 2023 financial
  • 00:01:17
    statement remember we are investing not
  • 00:01:19
    trading and then we're now going to be
  • 00:01:21
    looking at the technical side assets
  • 00:01:24
    Bank shares by looking at the chart but
  • 00:01:26
    here's the interesting part um on
  • 00:01:29
    Nigerian Stock Exchange websites where
  • 00:01:31
    you can actually invest in all
  • 00:01:34
    the ongoing Bank public offer and the
  • 00:01:37
    one that actually coming very soon bank
  • 00:01:40
    is actually offering a right issue of
  • 00:01:45
    19.75 this is it right here and it's
  • 00:01:47
    going to close in August
  • 00:01:50
    19.75 but then what is the price of
  • 00:01:53
    asset Bank in the market says bank is
  • 00:01:55
    currently priced at
  • 00:01:58
    19.4 so you then wonder why is the right
  • 00:02:02
    issue more expensive than the market
  • 00:02:05
    price of the bank well the bank had
  • 00:02:07
    actually released the statement and
  • 00:02:09
    they've said it in the statement that
  • 00:02:11
    assets bank is considered undervalued so
  • 00:02:14
    I think that's with their own projection
  • 00:02:16
    that's what they think and for me I
  • 00:02:18
    don't know why the reason is actually
  • 00:02:20
    best known to them but for you as an
  • 00:02:22
    investor you really don't need to know
  • 00:02:24
    whether the market price is more than
  • 00:02:26
    the right issue or right issue more than
  • 00:02:28
    the market price first thing you want to
  • 00:02:30
    check is whether assets bank is grossly
  • 00:02:33
    undervalued at either 19.75 or 19.4 so
  • 00:02:39
    that's the first thing you want to know
  • 00:02:41
    you want to look at your estimated fair
  • 00:02:43
    value what's your projection on assets
  • 00:02:45
    Bank shares before you decide to go with
  • 00:02:47
    the right issue if you already own
  • 00:02:49
    shares with an assets bank or you go
  • 00:02:51
    with the market price if you do not own
  • 00:02:54
    if it is the first time you're buying
  • 00:02:56
    assets back but you want to consider
  • 00:02:58
    adding it to your portfolio so this
  • 00:03:00
    video I'm going to show you everything
  • 00:03:01
    you need to know about assess bank and
  • 00:03:04
    how the bank has fed and then some of
  • 00:03:07
    the numbers and what they say about
  • 00:03:09
    asset bank and then I'm going to say
  • 00:03:11
    that share this in line with my uh guide
  • 00:03:15
    what I use to analyze Fidelity Bank so
  • 00:03:18
    like I told you before I'll try as much
  • 00:03:20
    as possible to see how I can talk about
  • 00:03:22
    banks that are coming up to raise money
  • 00:03:25
    and then the one that you most likely be
  • 00:03:27
    paying attention to the one that are
  • 00:03:28
    grossly on valid and the one you should
  • 00:03:31
    most likely be careful but then I'm not
  • 00:03:33
    going to Dem Market any Bank my point is
  • 00:03:36
    I'll tell you the numbers and then it's
  • 00:03:37
    left for you to take buy or sell
  • 00:03:39
    decision so here's a disclaimer now the
  • 00:03:42
    ideas share in this video are based on
  • 00:03:45
    my personal research and calculations
  • 00:03:48
    please note this is important whatever I
  • 00:03:50
    share here based on my personal research
  • 00:03:52
    and recommendation and kindly do your
  • 00:03:55
    due diligence before you invest in this
  • 00:03:57
    company stock now note something that
  • 00:04:00
    the stock market comes with a lot of
  • 00:04:02
    risk due to uncertainty so please
  • 00:04:05
    whatever you do in the stock market
  • 00:04:06
    please make sure that they align with
  • 00:04:08
    your risk profile and please vet
  • 00:04:10
    whatever vet whatever comments I'm going
  • 00:04:13
    to pass based on your personal risk
  • 00:04:15
    profile if you're a risk hars investor
  • 00:04:17
    please do that if you're an aggressive
  • 00:04:20
    risk taker pleas also align with it but
  • 00:04:22
    then my job like I said is to show you
  • 00:04:25
    the numbers while you take your buy or
  • 00:04:28
    sell decision on the stock so here is
  • 00:04:30
    what you're going to learn in this video
  • 00:04:32
    it's going to be a detailed um course
  • 00:04:35
    it's going to be a detailed breakdown so
  • 00:04:38
    and I think that if you want to invest
  • 00:04:40
    in assets bank or you're serious about
  • 00:04:42
    investing in a company then you should
  • 00:04:44
    be ready to see everything or take your
  • 00:04:47
    time to watch this video because at the
  • 00:04:49
    end of the day you most likely find
  • 00:04:51
    Value in this video don't just rush to
  • 00:04:53
    take buy or S decision one of the
  • 00:04:55
    problems I noticed in the market before
  • 00:04:58
    now is that people like to trade or
  • 00:05:00
    invest based on ASA and I think that was
  • 00:05:02
    why they lost money in 2008 so please if
  • 00:05:05
    you're going to invest in any comp take
  • 00:05:07
    your time that 30 minute one hour time
  • 00:05:10
    one hour you're going to spend to watch
  • 00:05:12
    a video or watch a guide from any coach
  • 00:05:15
    or anybody you know would save you a lot
  • 00:05:17
    people are always in the haste looking
  • 00:05:19
    for the next hottest stock without
  • 00:05:20
    taking their time to do their due
  • 00:05:23
    diligence so that's why I don't rush my
  • 00:05:26
    video I make sure I break it down by
  • 00:05:28
    numbers and show you so if you're
  • 00:05:30
    serious with investing in a stock then
  • 00:05:32
    you should subscribe to my video because
  • 00:05:35
    that's what I do my video is database my
  • 00:05:37
    video in my video I like to work with
  • 00:05:39
    data I like to work with numbers so that
  • 00:05:41
    when I show you what a company Financial
  • 00:05:44
    is saying you most likely U see the fact
  • 00:05:47
    behind the figure so first thing is what
  • 00:05:51
    type of business is asset Bank running
  • 00:05:53
    so we're going to learn the type of
  • 00:05:54
    business asset bank is running is asset
  • 00:05:56
    Bank a loan business investment business
  • 00:05:59
    or or hybrid I already explained this in
  • 00:06:02
    my previous video on Fidelity Bank so I
  • 00:06:04
    will drop a link to watch that video on
  • 00:06:05
    Fidelity Bank if you miss it so that you
  • 00:06:07
    can learn more on what the what kind of
  • 00:06:12
    business banks are actually doing and
  • 00:06:13
    how to know whether a bank is actually a
  • 00:06:16
    long driven business investment or
  • 00:06:18
    hybrid and then the second one is we're
  • 00:06:19
    going to look at how assets Bank
  • 00:06:21
    generate fund that's key assets Bank
  • 00:06:24
    generate fund ass B of it fund via
  • 00:06:26
    deposit or debt we will look at that to
  • 00:06:30
    and then how is assets Bank making its
  • 00:06:32
    money is assets Bank making money from
  • 00:06:34
    interest or fees and commission we
  • 00:06:36
    discuss that and all this I will tell
  • 00:06:38
    you the implication and then is asset
  • 00:06:41
    Bank really profitable and efficient
  • 00:06:44
    that's key that's a core question you
  • 00:06:46
    need to ask yourself is this bank really
  • 00:06:47
    profitable you know you don't want to
  • 00:06:49
    just categorize as a bank and then
  • 00:06:52
    assume that it's going to be making
  • 00:06:53
    money like other Banks so you need to
  • 00:06:55
    punch the number and know whether the
  • 00:06:57
    bank is really profitable and then there
  • 00:06:59
    are I'd like to look at we need to look
  • 00:07:01
    at the cost of fund of assets bank and
  • 00:07:03
    then we're going to look at the net
  • 00:07:04
    interest margin of assets bank and as
  • 00:07:06
    well as the expense to income ratio
  • 00:07:09
    which is the efficiency so we need to
  • 00:07:11
    know whether asset bank is really
  • 00:07:13
    efficient then we'll look at the
  • 00:07:16
    customer confidence is customer
  • 00:07:18
    confidence growing or reducing that's
  • 00:07:20
    key I know when I discussed that of
  • 00:07:22
    Fidelity Bank I share the importance of
  • 00:07:24
    customer confidence because when
  • 00:07:26
    customer confidence continues to improve
  • 00:07:28
    on the bank it will definely reflect on
  • 00:07:30
    it total deposit people want to keep
  • 00:07:32
    money with a bank they love or they
  • 00:07:34
    trust if they don't like a bank they
  • 00:07:36
    take their money out so when you look at
  • 00:07:37
    the trend of customer deposit over time
  • 00:07:40
    that also says a lot so don't always
  • 00:07:42
    ignore that part of a bank statement
  • 00:07:44
    people just focus on profit before tax
  • 00:07:47
    profit after tax ending per share
  • 00:07:48
    dividend that's all but you forgot that
  • 00:07:50
    the number one thing is customer
  • 00:07:52
    confidence because when customer decide
  • 00:07:54
    to take their money off a bank that's
  • 00:07:56
    even the end of that bank so make sure
  • 00:07:58
    you look at the customer conf is very
  • 00:08:00
    important then the final one is the fair
  • 00:08:02
    value of assets Bank using PE ratio so
  • 00:08:06
    I'm going to look at my estimated
  • 00:08:08
    projection of assets bank and if assets
  • 00:08:11
    bank is able to meet up to certain
  • 00:08:12
    metric or certain projection then I
  • 00:08:15
    think their share price should rally to
  • 00:08:17
    a particular extent and then I I'm going
  • 00:08:19
    to look at that from the p ratio side
  • 00:08:22
    and also using technical analysis so why
  • 00:08:26
    you are thinking of whether assets back
  • 00:08:28
    is a buy or not by looking at this
  • 00:08:30
    breakdown you would most likely be able
  • 00:08:33
    to take a buy or sell decision on the
  • 00:08:35
    bank store like I told you my job is to
  • 00:08:37
    show you the numbers and then why yours
  • 00:08:40
    is to know whether it fits into your R
  • 00:08:42
    profile or not like I'm not doing this
  • 00:08:45
    video to Dem Market any Bank my idea is
  • 00:08:47
    just to tell you whether a bank what the
  • 00:08:50
    numbers are and then you take your buy
  • 00:08:51
    of the S decision if a bank is not good
  • 00:08:53
    I will not tell you it's not good if a
  • 00:08:55
    bank is perfect I will not tell you
  • 00:08:56
    whether it's perfect my own like I said
  • 00:08:57
    is to tell you the numbers and based on
  • 00:08:59
    the numbers I will then share my own
  • 00:09:02
    comments so let's start now what about
  • 00:09:05
    business is asset Bank running very very
  • 00:09:08
    key what type of business is asset Bank
  • 00:09:11
    running when you want to assertain the
  • 00:09:13
    business of a bank now pay attention to
  • 00:09:16
    the customer deposits you know how do
  • 00:09:18
    you know what a bank is doing it's easy
  • 00:09:21
    by looking at how they use your money
  • 00:09:23
    it's simple when you go to the bank to
  • 00:09:26
    deposit money you need to ask yourself
  • 00:09:28
    what exactly is this Bank doing with
  • 00:09:30
    this money if a bank is actually giving
  • 00:09:33
    most of its money out as loan to
  • 00:09:36
    businesses and other customers and then
  • 00:09:39
    the remaining one they are keeping it or
  • 00:09:41
    they investing investing it in in
  • 00:09:44
    Securities like Bond treasury bill then
  • 00:09:46
    that bank is a loan driven bank but if
  • 00:09:49
    the bank is investing the buck of your
  • 00:09:51
    deposit in treasury bill Bond commercial
  • 00:09:54
    paper private placement then that bank
  • 00:09:57
    is an investment driven bank so what I
  • 00:09:59
    do is to call up the total deposit of
  • 00:10:02
    that bank so here is assets Bank
  • 00:10:05
    financial statement right here so what I
  • 00:10:08
    need to do is to call up the deposit of
  • 00:10:10
    assets bank so right here look at the
  • 00:10:12
    deposit now we're looking at assets Bank
  • 00:10:14
    results um in 2023 versus 2022 so this
  • 00:10:19
    is assets Bank financial statement now
  • 00:10:21
    this is the liability so under the
  • 00:10:23
    ability you find a deposit of assets
  • 00:10:25
    bank so here I'm looking at two deposits
  • 00:10:28
    deposit from Financial institions and
  • 00:10:30
    deposit from customers deposit from
  • 00:10:33
    financial institutions and deposit from
  • 00:10:35
    customers so when you add these two
  • 00:10:36
    numbers together they will give you the
  • 00:10:39
    total deposit so right now assets bank
  • 00:10:41
    deposit as at 20 December 2023 is 19.7
  • 00:10:46
    trillion that's exactly what assets bank
  • 00:10:48
    deposit is and then when you look at the
  • 00:10:50
    trend of assets bank deposit you will
  • 00:10:53
    see the Improvement in customer deposits
  • 00:10:56
    and deposit from financial institutions
  • 00:10:58
    customer deposit move from 9.2 to 15.3
  • 00:11:02
    trillion you can see here and deposit
  • 00:11:04
    from financial institution move from 2
  • 00:11:05
    trillion to 4.4 trli like I told you
  • 00:11:08
    before deposit helps you to check
  • 00:11:10
    customer conf confidence if it continues
  • 00:11:12
    to increase then it's positive so here
  • 00:11:16
    depos 19.7 now what is the loan exposure
  • 00:11:20
    loan exposure is 8.9 how did I arrive at
  • 00:11:23
    8.9 when you go back to assets Bank
  • 00:11:26
    financial statement you will see right
  • 00:11:28
    here we have loan and advances to bank
  • 00:11:30
    and also loan and advances to customer
  • 00:11:33
    so when you add these two together 8
  • 00:11:35
    trilon
  • 00:11:36
    880 billion then it will give you
  • 00:11:40
    8.9 so that's the total loan exposure of
  • 00:11:44
    assets bank and there one the investment
  • 00:11:46
    Securities of assets bank now the
  • 00:11:49
    investment Securities of assets bank is
  • 00:11:51
    where you look at the investment that
  • 00:11:52
    generates interest income so here you
  • 00:11:55
    see an investment like here we are
  • 00:11:57
    seeing 5.34 two so here you can see the
  • 00:12:01
    investment Securities of 5.3 that's
  • 00:12:04
    investment of assets bank now from this
  • 00:12:08
    deposit how much is the bank giving out
  • 00:12:11
    as loan so that is what loan to deposit
  • 00:12:14
    ratio which is around
  • 00:12:17
    45.1% then investment to deposit is 27%
  • 00:12:20
    so it means that asset bank is T towards
  • 00:12:24
    loan business so asset bank is a loan
  • 00:12:26
    driven business but there are extent of
  • 00:12:29
    loan exposure is not as deep or as
  • 00:12:32
    suspended as Fidelity so assets bank
  • 00:12:35
    loan exposure is 45% Fidelity is
  • 00:12:38
    77% so that means Fidelity is into loan
  • 00:12:41
    more than assets bank but then when you
  • 00:12:44
    look at it in terms of figure or
  • 00:12:46
    absolute figure ass be more but then I'm
  • 00:12:48
    looking at it in terms of percentage
  • 00:12:50
    that percentage helps you to look at how
  • 00:12:53
    intentional the bank is when it comes to
  • 00:12:56
    investing in loan business or investment
  • 00:12:59
    security so assets Bank of is an
  • 00:13:01
    investment that is a loan driven
  • 00:13:03
    business but then I'm looking at the
  • 00:13:05
    percentage here 45% that's below 50%
  • 00:13:09
    that's below 50% so meaning that the
  • 00:13:11
    bank needs to T up its loan to deposit
  • 00:13:15
    ratio very very key loan to deposit
  • 00:13:18
    ratio assets Bing to show up loan to
  • 00:13:20
    deposit ratio because TBN loan to
  • 00:13:22
    deposit ratio as at 2019 was around 65%
  • 00:13:25
    but I realized that they have reduced it
  • 00:13:26
    to 50% but then asset Bank is still
  • 00:13:28
    below loan loan to deposit ratio so ass
  • 00:13:32
    man need to show up its loan to deposit
  • 00:13:34
    ratio investment is 27% more than that
  • 00:13:38
    of Fidelity Bank so meaning that assets
  • 00:13:39
    bank is
  • 00:13:41
    intentionally investing in Securities
  • 00:13:44
    more that means they actually exposing
  • 00:13:47
    um pushing more funds to treasury bill
  • 00:13:50
    bonds and every related risk-free asset
  • 00:13:53
    so but here asset bank is generally a
  • 00:13:56
    loan driven business but then a little
  • 00:13:57
    bit into investment with this
  • 00:14:00
    significant exposure because 27% is
  • 00:14:02
    significant from my perspective so we've
  • 00:14:05
    established the business of assets bank
  • 00:14:07
    and that's a loan driven business now
  • 00:14:09
    why is that important when you know the
  • 00:14:11
    business of a bank you can easily
  • 00:14:12
    identify the risk that the bank is
  • 00:14:15
    exposed to credit risk interest rate
  • 00:14:18
    risk and all that so this is what you
  • 00:14:20
    need to know then the other part is how
  • 00:14:23
    does ass Bank generate funds how does
  • 00:14:26
    asset Bank generate funds you know Banks
  • 00:14:29
    don't just make money from deposits Bank
  • 00:14:32
    also issue debt instruments like
  • 00:14:34
    commercial papers some of them Euro Bond
  • 00:14:37
    so you need to know how they make how to
  • 00:14:40
    generate this fund why is that important
  • 00:14:42
    the reason is important is that there
  • 00:14:44
    are kind of sources that are expensive
  • 00:14:46
    compared to the other sources so look at
  • 00:14:49
    this now total deposit of assets bank is
  • 00:14:52
    19.7 trillion which is fine now total
  • 00:14:55
    depth instrument depth instrument is 2.4
  • 00:14:58
    now automatically it shows you that
  • 00:15:00
    assets Bank generates most of its money
  • 00:15:03
    from um customer deposit that's that's
  • 00:15:07
    clear now it is not about whether it's
  • 00:15:10
    customer deposit or depth instrument but
  • 00:15:13
    then which of them is cheaper which of
  • 00:15:15
    them is extremely cheaper now we call it
  • 00:15:18
    the cost of fund call it the cost of
  • 00:15:20
    fund so if you go to assess Bank um
  • 00:15:23
    financial statement and then you look at
  • 00:15:27
    the interest expenses you know when you
  • 00:15:29
    borrow money you're supposed to pay
  • 00:15:30
    interest on that loan so that is the
  • 00:15:33
    interest expense head you see right here
  • 00:15:36
    now this interest expenses covers what
  • 00:15:39
    the bank is paying you as a customer for
  • 00:15:42
    the on the deposit you have with them
  • 00:15:44
    and what they are paying their debth
  • 00:15:46
    holders or creditors so I like to break
  • 00:15:49
    this down to see where the buck of the
  • 00:15:52
    money is coming from and what the
  • 00:15:53
    numbers are saying overall interest
  • 00:15:55
    expenses increased from
  • 00:15:57
    467 milon in 2022 to 958 so let's look
  • 00:16:02
    at Note 8 to establish um this
  • 00:16:06
    particular let's know where the number
  • 00:16:07
    is coming from so I'm going to drill
  • 00:16:09
    down to Note 8 on assets Bank record so
  • 00:16:14
    we're looking for Note 8 right here so
  • 00:16:17
    let's look at Note
  • 00:16:19
    8 okay this is Note 10 Note 8 should be
  • 00:16:23
    up yes this is Note 8 now look at Note 8
  • 00:16:26
    you see this is the interest expenses of
  • 00:16:28
    9 958 now this will tell you where the
  • 00:16:33
    buck of the money is coming from and the
  • 00:16:34
    break down now from this you see the
  • 00:16:37
    money paid to financial institutions for
  • 00:16:40
    on the deposit they have with assets
  • 00:16:42
    bank is 320 the money paid to you and I
  • 00:16:45
    as a customer is 505 I can see here
  • 00:16:48
    depth instrument issued lead liability
  • 00:16:52
    and interest bearing borrowing and other
  • 00:16:54
    borrowed funds now can you see this is
  • 00:16:57
    very very important important now let's
  • 00:17:00
    now look at the breakdown here cost of
  • 00:17:02
    fund is the amount that the bank is
  • 00:17:07
    paying on the depbt that it's carrying
  • 00:17:10
    that's the interest it pays on Dept it
  • 00:17:12
    carries and the depbt of a bank could be
  • 00:17:14
    the total deposit which is what you and
  • 00:17:16
    I pay into the bank that's pay into our
  • 00:17:18
    serving account current account of fixed
  • 00:17:20
    deposit and then the depbt from other um
  • 00:17:25
    C Credit holders like Bond uh maybe the
  • 00:17:28
    bank and is sell Bond like private Bond
  • 00:17:30
    or Corporate Bond commercial papers and
  • 00:17:33
    all that so when you now compare the
  • 00:17:35
    interest on that
  • 00:17:38
    particular
  • 00:17:40
    deposit with the deposit itself now cost
  • 00:17:43
    of deposit is 4.1% that means if you
  • 00:17:46
    compare the interest the bank pays
  • 00:17:48
    that's 5 320 plus 505 right here divided
  • 00:17:53
    by total deposits here that will give
  • 00:17:56
    you 4.1 now when you then look at
  • 00:17:59
    interest is paid on a debth which is
  • 00:18:02
    what here we look at debt Securities
  • 00:18:05
    issues 51 and interest interest bearing
  • 00:18:08
    borrowing of 79 so when you compare that
  • 00:18:11
    with the total depth of 2.4 that would
  • 00:18:14
    give you 5.2 now what does that mean it
  • 00:18:17
    means that it's more expensive to
  • 00:18:20
    issue corporate bond EUR Bond commercial
  • 00:18:24
    paper done to raise this money via
  • 00:18:27
    customer deposit this is the reason
  • 00:18:29
    every Bank want to push their marketers
  • 00:18:31
    to raise as much fund as possible this
  • 00:18:34
    is reason a bank banks are pushing their
  • 00:18:36
    customers to want to deposit more they
  • 00:18:38
    want to invest in promo they want to
  • 00:18:40
    push their marketers give them Target
  • 00:18:42
    why because it's cheaper to raise fund
  • 00:18:44
    via customer deposits than to issue
  • 00:18:47
    depth instrument so cust fund of bank is
  • 00:18:51
    4.1 for deposit and 5.2 for debt
  • 00:18:55
    instrument so the bank prefers customer
  • 00:18:56
    deposit just like every other too now
  • 00:19:00
    how does asset Bank make most of its
  • 00:19:03
    money you know as a bank when you
  • 00:19:05
    understand the type of business you run
  • 00:19:07
    then I should be able to know where most
  • 00:19:10
    of the money should be coming from if
  • 00:19:11
    you tell me that you are a loan driven
  • 00:19:13
    bank or an investment driven Bank the
  • 00:19:16
    buck of your money should be coming from
  • 00:19:17
    interest income in short if it's a loan
  • 00:19:19
    driven Bank the buck of your money
  • 00:19:20
    should be coming from interest on
  • 00:19:23
    customer deposit do you understand that
  • 00:19:26
    means what I by interest on customer
  • 00:19:28
    deposit it means that that the interest
  • 00:19:29
    income on the loan you have given with
  • 00:19:32
    customer deposits that's what it means
  • 00:19:34
    now if the bu of your money is coming
  • 00:19:36
    from fees and commission and you're a
  • 00:19:38
    loan driven bank there's a problem if
  • 00:19:41
    the buck of your money is coming from
  • 00:19:43
    fees and commission and you're
  • 00:19:44
    investment driven bank there's a problem
  • 00:19:46
    so as an investment driven bank or low
  • 00:19:48
    driven Bank The Bu of your money should
  • 00:19:50
    be coming for interest income and that
  • 00:19:51
    interest income has to be breaking down
  • 00:19:53
    into sections like here on assets Bank
  • 00:19:56
    you will see the interest income on cash
  • 00:19:59
    and
  • 00:19:59
    balances um loan and advances to
  • 00:20:02
    customers and to Banks you can say
  • 00:20:04
    investment security so for assets Bank
  • 00:20:06
    to be an investment a loan driven bank I
  • 00:20:09
    mean then you can see the bu of it money
  • 00:20:11
    should be coming from loan and advance
  • 00:20:13
    to Banks and Loan and advance to
  • 00:20:15
    customer so when you add these two
  • 00:20:17
    together it should be far more than any
  • 00:20:18
    other interest but if the buck of the
  • 00:20:21
    money is coming from fees and commission
  • 00:20:23
    then it's a problem so for assets Bank
  • 00:20:26
    you will see that interest income is
  • 00:20:27
    sitting at
  • 00:20:29
    69495 billion and then fees and
  • 00:20:32
    commission is 207 so that means the bank
  • 00:20:35
    relies a bank that relies on a loan
  • 00:20:37
    business model to generate most of it
  • 00:20:39
    flow from cor operation and what the
  • 00:20:41
    core operation that's the loan itself so
  • 00:20:43
    interest on loan advance to customers or
  • 00:20:44
    other financial institution which is
  • 00:20:46
    very okay you can see that the bck of
  • 00:20:48
    assets Bank income or gross earning is
  • 00:20:50
    coming from this interest income that
  • 00:20:52
    means the bank is on track that mean the
  • 00:20:54
    bank is actually earning most of it
  • 00:20:55
    money from its core operation which is
  • 00:20:58
    okay now any from other source is fine
  • 00:21:00
    it's okay I don't have any issue it's
  • 00:21:02
    good for a bank to where diversify but
  • 00:21:04
    then let that cor operation also be
  • 00:21:07
    generating positive cash flow for you so
  • 00:21:09
    that is also a pass Mark for assets bank
  • 00:21:12
    now the other one is is assets Bank
  • 00:21:15
    really profitable is asset Bank really
  • 00:21:19
    profitable let's look at this numbers
  • 00:21:21
    that's very key for me now the average
  • 00:21:24
    cost of fund of asset bank is 4.65 how
  • 00:21:26
    did I arrive at 4 65 you take the
  • 00:21:29
    average of the cost of deposit and cost
  • 00:21:32
    of debth instrument which is 4.1 plus
  • 00:21:35
    5.2 that will give you 9.3 9.3 divided
  • 00:21:38
    by two so the average is what we have as
  • 00:21:42
    4.65 that's the average cost that means
  • 00:21:44
    if asset bank is able to add all its
  • 00:21:47
    depth together total depth together
  • 00:21:49
    whether it's from customer deposits or
  • 00:21:51
    from the bond issues or whatever source
  • 00:21:53
    is browing the money the average
  • 00:21:56
    interest is paying on that debt is
  • 00:21:59
    4.65 now remember this money that is
  • 00:22:02
    coming in is not coming in to sit in
  • 00:22:04
    assets Bank CS it's also coming in to
  • 00:22:06
    make more money so what I do is I also
  • 00:22:08
    look at how the bank is able to make
  • 00:22:11
    more money with that money so that is
  • 00:22:13
    exactly where the net interest margin
  • 00:22:16
    comes in because when you go to the bank
  • 00:22:17
    to deposit the bank is going to pay you
  • 00:22:20
    interest on that deposit now that
  • 00:22:22
    deposit that is sitting in bank accounts
  • 00:22:24
    in your bank account he's also been
  • 00:22:25
    given out to customers as loan and
  • 00:22:27
    advances and that exactly what you have
  • 00:22:30
    here interest on loan and advances right
  • 00:22:33
    here because the money is not going to
  • 00:22:34
    be idle the bank need to make more money
  • 00:22:36
    with the money so whatever interest
  • 00:22:38
    income the bank is generating on that
  • 00:22:41
    money we also need to compare that to
  • 00:22:43
    the total amount that you have deposited
  • 00:22:45
    in that bank so if you go back to
  • 00:22:48
    our income statement of assets Bank you
  • 00:22:51
    will see right here let's look at let's
  • 00:22:55
    look at the income statement of assets
  • 00:22:56
    bank so you see right here that we have
  • 00:22:59
    interest income calculated using
  • 00:23:02
    effective interest rates interest income
  • 00:23:04
    on financial assets so this tells you
  • 00:23:07
    what the bank is earning from that money
  • 00:23:09
    too by lending it out so what we do is
  • 00:23:13
    we look at what the bank has ended on
  • 00:23:15
    that money less the interest expenses
  • 00:23:18
    which is what they paid you I and other
  • 00:23:21
    financial institution which is 958 so
  • 00:23:23
    the net interest income is what we are
  • 00:23:26
    interested in which is what 6 95,0 360
  • 00:23:30
    so they are all a million so this most
  • 00:23:32
    likely is
  • 00:23:33
    95.3 billion so that is the net
  • 00:23:36
    interestes income so there's something
  • 00:23:37
    we call net interest margin what is the
  • 00:23:40
    net interest margin here now look at the
  • 00:23:42
    calculation for net interest margin
  • 00:23:44
    total interest income of the bank is 695
  • 00:23:49
    which is this because you're not going
  • 00:23:50
    to assume that the bank is going to make
  • 00:23:52
    all this money it definitely pay out
  • 00:23:54
    this so interest income less interest
  • 00:23:57
    expenses will give you the net interest
  • 00:23:59
    income so that's what I calculated as
  • 00:24:02
    this in total interest income so I can
  • 00:24:05
    call it
  • 00:24:06
    total or net interest income just to
  • 00:24:09
    make it easier for you to understand so
  • 00:24:11
    net interest income is interest and less
  • 00:24:15
    interest paid interest end from loan and
  • 00:24:17
    advances to customers less interest paid
  • 00:24:20
    on deposits from customers or other
  • 00:24:22
    financial institution so for assets bank
  • 00:24:24
    is
  • 00:24:28
    interest bearing assets the interest
  • 00:24:30
    bearing asset are all the assets that
  • 00:24:33
    actually Bears interest all the asset
  • 00:24:36
    that generate interest income and in the
  • 00:24:38
    bank's book these are the assets that
  • 00:24:40
    generate interest income first one is
  • 00:24:42
    loan to customers if the bank is giving
  • 00:24:45
    you money you're going to pay the bank
  • 00:24:47
    interest right that's loan to customers
  • 00:24:50
    if the bank is also lend it to other
  • 00:24:52
    Banks that's loan to bank you can see
  • 00:24:55
    the figure loan to customer is 8
  • 00:24:57
    trillion and 37 million so if I go to
  • 00:25:01
    assets Bank record you will see that
  • 00:25:03
    here all these numbers are on assets
  • 00:25:06
    Bank financial statements you can see
  • 00:25:08
    here loan to customers you can see
  • 00:25:11
    037 right here and then loan to other
  • 00:25:15
    Banks here loan to other Banks is 88 you
  • 00:25:19
    can see the same thing right here now
  • 00:25:22
    the third interest bearing asset is
  • 00:25:24
    investment
  • 00:25:25
    Securities investment Securities look at
  • 00:25:28
    it here investment
  • 00:25:30
    Securities here this is investment
  • 00:25:32
    Securities which is 5.32 so which is
  • 00:25:36
    5.32 so when you add all this together
  • 00:25:39
    loan to customers loan to Banks
  • 00:25:42
    investment Securities they will give you
  • 00:25:44
    the total interest bearing assets
  • 00:25:47
    interest bearing asset are all the asset
  • 00:25:50
    generate interest income for assets bank
  • 00:25:52
    so right now interest bearing asset is
  • 00:25:55
    14.2 as at December 2 23 so if the bank
  • 00:26:00
    is able to generate 695 billion as
  • 00:26:03
    interest income and the asset that
  • 00:26:06
    generated this interest is 14.2 trillion
  • 00:26:08
    so by the time you do
  • 00:26:10
    695.00 divided by 14.2 trillion then
  • 00:26:14
    that will give you a net interest margin
  • 00:26:16
    of
  • 00:26:17
    4.87 4.87 now here's the rule of term
  • 00:26:21
    for me to know whether a bank is really
  • 00:26:24
    profitable its net interest margin must
  • 00:26:27
    be more than cost of fund why there are
  • 00:26:30
    no rules of term on exactly what the
  • 00:26:32
    number should be what the difference
  • 00:26:34
    should be but for me I think as long as
  • 00:26:36
    is above it I remember we're talking
  • 00:26:39
    about trillion here so it's not about
  • 00:26:42
    the numbers or the percentage but as
  • 00:26:43
    long as it's above it like for Fidelity
  • 00:26:46
    cost of fund is less than net interest
  • 00:26:48
    margin and for assets Bank cost of fund
  • 00:26:51
    is also less cost of fund is 4.65 net
  • 00:26:54
    interest margin is
  • 00:26:55
    4.87 so that is how to check whether a
  • 00:26:58
    bank is really profitable because the
  • 00:27:01
    money you mobilize from the depth
  • 00:27:05
    holders and your customers how are you
  • 00:27:07
    utilizing them how are you deploying
  • 00:27:08
    that money if that money is not being
  • 00:27:10
    used properly then you are losing so
  • 00:27:13
    this is the figure that will tell you
  • 00:27:15
    whether the bank is really profitable
  • 00:27:17
    that's why I have to stress this really
  • 00:27:19
    profitable it's not about the profit
  • 00:27:21
    after tax profit before tax or whatever
  • 00:27:23
    no it is actually by looking at the cost
  • 00:27:26
    of fund of that bank and net interest
  • 00:27:29
    margin this is the number you would not
  • 00:27:31
    see in a company's or in A bank's
  • 00:27:33
    financial statement expressly you have
  • 00:27:35
    to do the calculation yourself because
  • 00:27:37
    most times people pay attention to the
  • 00:27:39
    gross margin oh increase from this to
  • 00:27:41
    this um profit before tax oh 200 billion
  • 00:27:44
    gains and then oh the bank is profitable
  • 00:27:47
    no to know whether a bank is really
  • 00:27:49
    profitable look at the cost of fund of
  • 00:27:52
    that bank and net interest margin of
  • 00:27:54
    that bank so asset bank is really
  • 00:27:56
    profitable because cost of fund is 4.65
  • 00:27:59
    the net interest margin is 4.87 now
  • 00:28:02
    here's my point the higher the spread
  • 00:28:05
    the difference between net interest
  • 00:28:07
    margin and cost of fund how the more
  • 00:28:11
    profitable the bank is so if I'm going
  • 00:28:13
    to compare Banks right now I look at
  • 00:28:15
    banks that they spread banks that their
  • 00:28:18
    net interest margin difference with the
  • 00:28:20
    cost of fund is wider than other Banks
  • 00:28:23
    that's the bank that is most profitable
  • 00:28:26
    so don't look at how profitable a bank
  • 00:28:28
    is just based on return on Equity dig
  • 00:28:30
    deep look at the key numbers the key
  • 00:28:33
    numbers here is the cost of fund and net
  • 00:28:36
    interest margin so asset bank is
  • 00:28:38
    profitable now the difference is around
  • 00:28:40
    um two
  • 00:28:43
    0.22 yes so the spread so we say the
  • 00:28:46
    spread is
  • 00:28:48
    0.22 the spread is
  • 00:28:53
    0.22% now you might look at 0.22 and say
  • 00:28:56
    oh this 0.22 is small no
  • 00:28:58
    but then multiply 0.22 times this
  • 00:29:00
    trillion you will know what the bank is
  • 00:29:02
    generating as profit sure when you look
  • 00:29:04
    at the profit you will know that then
  • 00:29:07
    efficiency ratio how efficient this is
  • 00:29:10
    is this bank now efficiency ratio helps
  • 00:29:12
    you check how the bank is able to manage
  • 00:29:15
    its operating costs against the gross
  • 00:29:18
    income you know as a bank you incure
  • 00:29:20
    cost you pay salaries you pay for
  • 00:29:22
    maintenance you account for
  • 00:29:25
    depreciations and all that so you also
  • 00:29:27
    need to factor this cost with what the
  • 00:29:31
    bank is generating as total income or
  • 00:29:34
    gross earning so for assets
  • 00:29:36
    Bank the efficiency ratio is sitting at
  • 00:29:40
    77% now this is how I calculate
  • 00:29:43
    efficiency ratio of a bank now I go back
  • 00:29:45
    to the income statement right here so
  • 00:29:49
    first thing you want to do is to
  • 00:29:51
    calculate the gross earning of that bank
  • 00:29:53
    the gross earning of that bank is the
  • 00:29:55
    total income so that would be the next
  • 00:29:58
    interest income plus the fees and
  • 00:30:00
    commission now these fees and
  • 00:30:02
    commissions are what the bank earn from
  • 00:30:04
    your what the charges mobile
  • 00:30:06
    transactions all those extra charges you
  • 00:30:08
    pay the bank maintenance allots blah
  • 00:30:11
    blah blah whatever charges they call it
  • 00:30:13
    that's fees and commission so when you
  • 00:30:14
    add the two together to this um interest
  • 00:30:18
    income that will give you the gross
  • 00:30:19
    earning of that bank now what I do is to
  • 00:30:22
    look at the operating earning the
  • 00:30:24
    operating expenses of that bank not
  • 00:30:25
    operating earning operating expenses the
  • 00:30:28
    personal expenses depreciation
  • 00:30:29
    amortization and other operating
  • 00:30:32
    expenses this is key this is key because
  • 00:30:34
    by looking at this you can also tell
  • 00:30:36
    whether the bank is able to manage cost
  • 00:30:38
    you can also tell whether inflation is
  • 00:30:41
    actually hitting the bank because when
  • 00:30:43
    inflation is high the bank is going to
  • 00:30:44
    incure more
  • 00:30:46
    cost workers are going to be claming for
  • 00:30:49
    increase in salary so that also needs to
  • 00:30:52
    be looked into now it's not bad if a
  • 00:30:54
    bank is increasing personal expenses
  • 00:30:56
    salaries and but then you also need to
  • 00:30:57
    look at it as regards the threshold and
  • 00:31:01
    know whether the bank is overpaying or
  • 00:31:03
    whether the bank is actually extending
  • 00:31:05
    Beyond boundaries so here these are the
  • 00:31:07
    makeup of the operating expenses of that
  • 00:31:10
    bank so operating expenses divided by
  • 00:31:12
    the gross income that will give you the
  • 00:31:14
    efficiency ratio now look at the
  • 00:31:16
    efficieny ratio of assets bank at 2022
  • 00:31:20
    efficiency ratio is sitting at 163% this
  • 00:31:23
    is
  • 00:31:24
    bad this is extremely bad that's I have
  • 00:31:27
    to paint it red and let me show you why
  • 00:31:29
    I said it's not good at all in 2022 now
  • 00:31:32
    look at the personal expenses de and
  • 00:31:35
    amortization uh plus operating expens of
  • 00:31:38
    assets Bank in 2022 you see here 116 so
  • 00:31:41
    let's even add it together
  • 00:31:45
    116+ 116
  • 00:31:48
    621 plus you have your depreciation of
  • 00:31:52
    30
  • 00:31:54
    584
  • 00:31:56
    plus um amation of 13839
  • 00:32:01
    13839 plus the other operating expenses
  • 00:32:06
    of 341 315 341 315 that will give us
  • 00:32:12
    look at it here 502 539 so this like 52
  • 00:32:16
    billion naira 52 billion that's the
  • 00:32:19
    total operating expenses 52 billion NRA
  • 00:32:23
    now look at the gross income of assets
  • 00:32:25
    Bank in 2022 now when you add the look
  • 00:32:29
    at it here net interest income 161 plus
  • 00:32:35
    145
  • 00:32:38
    161
  • 00:32:40
    842 +
  • 00:32:43
    145 735 that will give you 307 can you
  • 00:32:47
    see can you see right here operating
  • 00:32:50
    expenses is 52 billion but gross earning
  • 00:32:53
    is 307 billion now yes assets B might
  • 00:32:57
    have cleared profit in
  • 00:33:00
    2022 which is what a profit of 152
  • 00:33:03
    billion you can see profit for the year
  • 00:33:05
    now if you are not careful you would
  • 00:33:07
    just take this number and say oh the
  • 00:33:10
    bank was profitable but no the bank was
  • 00:33:12
    not profitable in 2022 what actually
  • 00:33:16
    helped this number was the gains fair
  • 00:33:19
    value gain of 4 exchange gain which was
  • 00:33:22
    about 335 if you take out this number
  • 00:33:26
    this would have been netive this have
  • 00:33:28
    been a loss so s bank would have
  • 00:33:31
    declared loss in 2022 if not for FS gain
  • 00:33:35
    that's why for me I just think I hope
  • 00:33:37
    CBM will be able to find a lasting
  • 00:33:40
    solution to FS gain let's know the
  • 00:33:43
    companies that are really profitable the
  • 00:33:46
    market or not this is very important
  • 00:33:48
    this is very important so if you had if
  • 00:33:49
    if exch had been stable in 2022 asset
  • 00:33:53
    bank would have recorded a
  • 00:33:55
    loss it would have recorded a loss and
  • 00:33:58
    that would have been a good thing for
  • 00:34:00
    the bank why because the bank's
  • 00:34:03
    efficiency ratio was 163% that means the
  • 00:34:07
    total operating expenses were more than
  • 00:34:10
    the gross income in 2022 now let's now
  • 00:34:13
    look at the numbers in 2023 to now say
  • 00:34:16
    look to now finally certain the position
  • 00:34:20
    of the bank so let's do our look at
  • 00:34:23
    efficiency in 2023 again now personal
  • 00:34:26
    expenses I one 167 + 45 + 18 +
  • 00:34:32
    465 right here that will give us 697
  • 00:34:36
    billion and then if you now add the
  • 00:34:39
    bank's gross income in
  • 00:34:42
    2023 so that is what 555 + 207 that will
  • 00:34:47
    give us um an average of 93 so let's
  • 00:34:52
    look at the numers again 555 832 + 2 oh
  • 00:34:58
    sorry not
  • 00:34:59
    207 yes let me
  • 00:35:02
    check
  • 00:35:03
    555
  • 00:35:05
    832 +
  • 00:35:08
    207
  • 00:35:10
    781 that will give us
  • 00:35:14
    763
  • 00:35:17
    763 um soorry let me look at how I
  • 00:35:20
    arrived at
  • 00:35:22
    93. 41
  • 00:35:27
    okay so I've looked at the figure again
  • 00:35:30
    now the total operating expenses of this
  • 00:35:33
    bank is 6975 31 and then gross income
  • 00:35:38
    763 613 look at the numbers here so the
  • 00:35:42
    gross income is net interest income
  • 00:35:44
    right here
  • 00:35:48
    555 here 555
  • 00:35:51
    832 so 555
  • 00:35:55
    832 + 2 07 781 that give you 763 613
  • 00:36:02
    which is 763 61 that's the gross
  • 00:36:05
    earnings of that bank this is it here
  • 00:36:07
    and then the operating expenses of the
  • 00:36:10
    bank is um 167 4518 465 so that gives us
  • 00:36:17
    697 so you see here that the efficiency
  • 00:36:20
    ratio of assets bank is 91 although we
  • 00:36:23
    saw a m a significant improvement from
  • 00:36:27
    163 to
  • 00:36:28
    91% but then it is far higher than my
  • 00:36:34
    average threshold of
  • 00:36:36
    40% so if you go by this you will see
  • 00:36:40
    that um and then look at return on
  • 00:36:42
    Equity of assets Bank 28% quite okay
  • 00:36:45
    profit for the year 2019 and then total
  • 00:36:48
    Equity 2.1 trillion so 28% but here's my
  • 00:36:52
    comment why assets Bank did improve on
  • 00:36:54
    its efficiency ratio and missed Rising
  • 00:36:57
    inflation so we can explain this m
  • 00:37:00
    massive increase look at the Personnel
  • 00:37:02
    expenses of assets Bank we had 116 to
  • 00:37:06
    167 now look at the operating other
  • 00:37:10
    operating expenses we saw a jump from
  • 00:37:13
    341 to
  • 00:37:15
    465 341 to
  • 00:37:18
    465 and then that's um actually
  • 00:37:21
    accounted for that job so why assets
  • 00:37:24
    Bank um efficiency ratio already did
  • 00:37:27
    improve on efficiency ratio I miss
  • 00:37:29
    Rising inflation that's that Improvement
  • 00:37:31
    I am talking about is this particular
  • 00:37:34
    improvement from 163% in 2022 to 91 so
  • 00:37:38
    that means the bank is looking to cut
  • 00:37:40
    cost and that is reflecting in its 2023
  • 00:37:43
    financial statement but then um I think
  • 00:37:46
    the bank need to achieve the below 40%
  • 00:37:50
    targets from
  • 00:37:54
    91% which is still considered high so
  • 00:37:58
    efficiency ratio around 91% is
  • 00:38:01
    considered high and that bank need to
  • 00:38:04
    work on its
  • 00:38:05
    expenses we need to work on its expenses
  • 00:38:07
    because I like efficiency ratio below 40
  • 00:38:11
    but then anything below 50 is still okay
  • 00:38:14
    fair but it shouldn't exceed 50 to reach
  • 00:38:18
    91% so that means assets bank is
  • 00:38:20
    actually battling with increasing cost
  • 00:38:23
    of operation and that needs to be worked
  • 00:38:25
    on because if you take out the fair
  • 00:38:28
    value gain here of
  • 00:38:32
    628 and take out the fair value gain of
  • 00:38:34
    335 on asset Bank record this would most
  • 00:38:38
    likely not be good so what has been
  • 00:38:40
    actually helping this profit before
  • 00:38:42
    profit for the year that you're seeing
  • 00:38:44
    right here is exchange rates if you take
  • 00:38:46
    out 621 from this 619 is already a loss
  • 00:38:50
    if you take out 6 335 from 152 is
  • 00:38:53
    already a
  • 00:38:55
    loss so it means that as bank is being
  • 00:38:58
    supported by FS game but then is that
  • 00:39:02
    bad no it's not bad because that's the
  • 00:39:05
    essence of diversification I think
  • 00:39:08
    bank's strength is actually in
  • 00:39:10
    diversification the bank is able to
  • 00:39:12
    diversify across different across region
  • 00:39:16
    different continent and that is actually
  • 00:39:18
    helping it to generate this FS gain or
  • 00:39:21
    loss because if the bank had been
  • 00:39:23
    concentrated assuming assets bank is in
  • 00:39:25
    Nigeria alone I think assets B would
  • 00:39:27
    have recorded a loss so the management
  • 00:39:30
    might have seen this that's why they
  • 00:39:32
    keep expanding that's why they keep
  • 00:39:34
    investing in foreign
  • 00:39:37
    acquisition acquisition of foreign
  • 00:39:38
    subsidiary so you will see why T Bank is
  • 00:39:41
    always acquiring banks in different
  • 00:39:44
    continents or banks in different
  • 00:39:46
    countries why because the bank strength
  • 00:39:49
    is in its acquisition because that
  • 00:39:51
    acquisition is helping to generate FS
  • 00:39:53
    gain because if you look at it over time
  • 00:39:55
    n has been depreciating against major
  • 00:39:57
    currencies so asset bank is leveraging
  • 00:40:00
    that long-term Trend to grow its Revenue
  • 00:40:04
    so if you look at it you might probably
  • 00:40:06
    assume oh it's actually not a good thing
  • 00:40:09
    but the bank is actually turning this
  • 00:40:12
    problem into opportunity and how is turn
  • 00:40:15
    into opportunity is that is investing in
  • 00:40:17
    foreign subsidiaries so when you hear
  • 00:40:19
    assets Bank acquire assets Bank acquire
  • 00:40:21
    ass acquire note that this bank is using
  • 00:40:24
    that to drive this particular line I
  • 00:40:27
    because this L item is very key for the
  • 00:40:30
    bank to sustain its profit until the
  • 00:40:33
    bank is able to cut down its efficiency
  • 00:40:35
    ratio below 40 it has to continually
  • 00:40:38
    leverage on foreign subsidiaries to be
  • 00:40:41
    able to grow their bottom line so that's
  • 00:40:43
    my key observation on assets bank so
  • 00:40:46
    that is not bad because foreign
  • 00:40:48
    subsidiaries foreign Acquisitions and
  • 00:40:50
    foreign associate for me is good that's
  • 00:40:53
    how a smart manager thinks that's how
  • 00:40:56
    they think of that classification uba is
  • 00:40:58
    also doing that too so don't see it as a
  • 00:41:01
    bad thing but then I think the bank just
  • 00:41:02
    need to work on
  • 00:41:04
    it efficiency the management need to
  • 00:41:06
    look at how it is spending to ensure
  • 00:41:09
    that it's able to drop efficiency ratio
  • 00:41:11
    below 40% but then you shouldn't do that
  • 00:41:14
    at the detriment of his staff because at
  • 00:41:17
    the end of the day if you certify your
  • 00:41:18
    staff and they're not able to get paid
  • 00:41:21
    morale will go down that would also be a
  • 00:41:23
    problem so I think man need to work on
  • 00:41:25
    this part that's one area I think manag
  • 00:41:27
    need to work on but everything that is
  • 00:41:29
    perfect everything is okay but like I
  • 00:41:32
    said before is not a major problem
  • 00:41:34
    because as long as the bank is
  • 00:41:35
    diversifying that means interest um
  • 00:41:38
    foreign exchange gate will continue to
  • 00:41:40
    drive Banks earning in the future which
  • 00:41:42
    is not a bad thing because n to Dollar
  • 00:41:45
    has been bad like the the trend has not
  • 00:41:48
    been encouraging so any smart business
  • 00:41:50
    will look to end in foreign currency to
  • 00:41:53
    help to cushion the effect of that
  • 00:41:55
    devaluation so that's what I think ass
  • 00:41:57
    bank is doing you can see how the
  • 00:41:59
    numbers are revealing certain things
  • 00:42:01
    about a bank you really don't have to be
  • 00:42:02
    an Insider you don't have to know the MD
  • 00:42:04
    you don't have to know the CFO or the H
  • 00:42:06
    manager or whoever is in charge of
  • 00:42:08
    assets Bank to probably get an idea of
  • 00:42:11
    what the bank is doing and where the
  • 00:42:14
    bank position is Right Now by looking at
  • 00:42:16
    the numbers and going deeper like this
  • 00:42:18
    you'll be able to tell whether this is a
  • 00:42:19
    bank you want to vote in or not but then
  • 00:42:22
    I think this is okay this is fine as
  • 00:42:24
    long as it's helping to keep the bank a
  • 00:42:25
    float then that's that's for me it's
  • 00:42:27
    okay because if you look at longterm
  • 00:42:29
    trend of Nar to dollar is still most
  • 00:42:31
    likely going to go higher so that's also
  • 00:42:33
    going to be positive for assets Bank in
  • 00:42:36
    the long run then is customer confidence
  • 00:42:39
    improving on assets Bank like we shared
  • 00:42:41
    earlier total deposit on assets bank is
  • 00:42:43
    around 19.7 trillion naira so average
  • 00:42:47
    growth in customer deposit in the last 5
  • 00:42:49
    years is around 72% and then projected
  • 00:42:52
    deposit by the end of 2024 is 34
  • 00:42:54
    trillion so I am projecting 34 trilon
  • 00:42:57
    for assets Bank by the end of 2024 so
  • 00:43:00
    look at assets
  • 00:43:01
    Bank um historical record on Capital
  • 00:43:06
    Cube people have been asking me where do
  • 00:43:08
    you get your historical records from I
  • 00:43:10
    get my historical record from Capital
  • 00:43:11
    Cube so here is the total deposit on
  • 00:43:14
    asset Bank you can see deposit from 2019
  • 00:43:17
    into traing 12 month right here 5.4 6.5
  • 00:43:22
    8.3 11.3 19.9 and 25 so the bank is also
  • 00:43:27
    doing a good job by hitting new high on
  • 00:43:30
    its deposit year on year so just like
  • 00:43:33
    Fidelity Bank has been growing its
  • 00:43:34
    customer deposit asset bank has been
  • 00:43:36
    doing the same thing as a loan driven
  • 00:43:38
    business and then if a bank is able to
  • 00:43:40
    grow a deposit as a loan driven business
  • 00:43:43
    then it means that the bank is
  • 00:43:44
    generating cheap funds and that's good
  • 00:43:47
    that's positive for the bank in the long
  • 00:43:48
    run because look at the cost of fund on
  • 00:43:50
    depbt instrument that's 5.1 cost of fund
  • 00:43:53
    on customer deposit is 4. 5.2 sorry
  • 00:43:56
    customer deposit is 4.1 so which means
  • 00:43:58
    the bank would do anything possible to
  • 00:44:00
    be able to encourage people to deposit
  • 00:44:03
    with them so don't be surprised ass
  • 00:44:05
    might be investing in assets that would
  • 00:44:07
    or activities that would drive customer
  • 00:44:10
    Depot so I'm projecting 34 trillion for
  • 00:44:12
    2024 so that also means the bank would
  • 00:44:15
    definitely give out more loan which is
  • 00:44:17
    also positive for the bank's bottom line
  • 00:44:20
    so that's customer deposit for assets
  • 00:44:22
    bank and it's improving so what's my
  • 00:44:24
    fair value what's my average forecast on
  • 00:44:27
    assets bank so I'm using
  • 00:44:29
    the um p ratio to project this number
  • 00:44:33
    I'm using the p ratio to project this
  • 00:44:34
    number now the earnings per share
  • 00:44:36
    trading 12 mod of assets bank is
  • 00:44:38
    19.6 the p ratio trading 12 mod is uh
  • 00:44:42
    0.98 so what's the current market price
  • 00:44:44
    of asset Bank ass bank is 19.4 so if you
  • 00:44:47
    do
  • 00:44:49
    19.4 divided by
  • 00:44:52
    19.6 that gives me 0.98 so key ratio of
  • 00:44:56
    ass bank is 0.98 in sure this is the
  • 00:44:59
    lowest in the industry this is among the
  • 00:45:01
    lowest in the industry right now because
  • 00:45:04
    if you look at the ptio of the banking
  • 00:45:06
    sector in general you see that the p
  • 00:45:09
    ratio of assets bank is 0 point you can
  • 00:45:11
    see here why the industry itself is
  • 00:45:14
    3.5 so this means that asset bank is
  • 00:45:16
    relatively cheap compared to other Banks
  • 00:45:20
    asset bank is one of the lowest so
  • 00:45:22
    meaning that the people are here to
  • 00:45:25
    catch up Bank to catch up with it's real
  • 00:45:28
    value based on what we're see right here
  • 00:45:30
    so that is what that p ratio means it
  • 00:45:32
    means that investors are paying
  • 00:45:35
    0.96% so 0.96 times the earnings of that
  • 00:45:38
    band now my average EPS
  • 00:45:41
    forast the last 5 years has been 48% on
  • 00:45:45
    average if you look at the uh growth EPS
  • 00:45:48
    growth of assets Bank in the last five
  • 00:45:52
    years EPS growth of assets Bank in The
  • 00:45:54
    Last 5 Years you can see here 2.7 2.9
  • 00:45:58
    4.5 and the Deep to 4.3 massive increase
  • 00:46:01
    in 4.2 then trading 12 month of
  • 00:46:04
    19.6 so average growth is 48% now if I'm
  • 00:46:08
    going to project assets Bank year end
  • 00:46:10
    using the 48% then I'm expecting asses
  • 00:46:13
    Bank projected EPS for 2024 to print at
  • 00:46:16
    25 naira current one as our q1 is 19.6
  • 00:46:20
    so end of 2024 I'm projecting at least
  • 00:46:23
    225 for assets bank so if assets bank is
  • 00:46:26
    going to deliver 25 n EPS for 2024 then
  • 00:46:30
    by looking at this p ratio of 0.96
  • 00:46:33
    that's what investors are paying right
  • 00:46:34
    now for the company share then chess
  • 00:46:37
    Bank share price should most likely be
  • 00:46:39
    trading at
  • 00:46:40
    24.5 24.5 and
  • 00:46:43
    24.5 minus
  • 00:46:47
    19.4 will give me 5.1 so 5.1 divided by
  • 00:46:52
    19.4 market price so upside potential of
  • 00:46:55
    assets Bank minimum is 20
  • 00:46:57
    26% 26% that's the upside potential of
  • 00:47:02
    assets Bank 26% so if you're buying
  • 00:47:04
    assets bank right now you're looking at
  • 00:47:07
    a minimum of 26% return based on this
  • 00:47:10
    projection if assets Bank exceed 25 n in
  • 00:47:13
    2024 then the bank upside might be far
  • 00:47:15
    more than 26% so my upside potential on
  • 00:47:19
    assets bank is 26% using the PE Ratio
  • 00:47:22
    there are different ways to Value
  • 00:47:23
    Company stock I'm just trying to use
  • 00:47:25
    different model to Value Company's stock
  • 00:47:28
    so remember this is just based on my own
  • 00:47:31
    personal research please do your own
  • 00:47:33
    fair value calculation and do your own
  • 00:47:35
    due diligence so if bank Fair Value
  • 00:47:38
    upside potential is 26% now what is our
  • 00:47:40
    technical analysis saying remember that
  • 00:47:43
    I said something earlier on we're going
  • 00:47:44
    to look at detail fundamental analysis
  • 00:47:47
    and technical analysis so from our
  • 00:47:50
    fundamental and numbers s bank should be
  • 00:47:53
    fairly value at
  • 00:47:55
    24.5 if the bank delivers 25 naira by
  • 00:47:59
    the end of 2024 now what is the
  • 00:48:02
    technical analysis saying on assets bank
  • 00:48:04
    so let me quickly show you something on
  • 00:48:06
    asses bank now asses Bank stock closed
  • 00:48:08
    yesterday's section at 19.4 price has
  • 00:48:11
    been trading below the counter trend
  • 00:48:13
    line from a high of 13A think in January
  • 00:48:16
    2024 and also retest in um April 2024
  • 00:48:21
    that's at 25 I will show you that on
  • 00:48:23
    chart now with gradual with the bank
  • 00:48:26
    stock gradually
  • 00:48:29
    Rising with the bank
  • 00:48:31
    stock gradually Rising above the trend
  • 00:48:34
    line I want to see a comfortable close
  • 00:48:37
    above 20 na to confirm the entrance of
  • 00:48:40
    new buyers in the market that means if
  • 00:48:41
    asset bank is to Trend higher if asset
  • 00:48:44
    bank is to move into a trending stage
  • 00:48:47
    where we can say oh asset bank is
  • 00:48:48
    actually in a bullish St right now it
  • 00:48:50
    has to close above 20 n so here's asset
  • 00:48:53
    Bank on chart now before I mention or
  • 00:48:56
    talk about this counter train line let's
  • 00:48:58
    go back to similar play in the past
  • 00:49:00
    where asset Bank followed the same
  • 00:49:01
    counter train line broke out and
  • 00:49:03
    delivered massive return so that's
  • 00:49:05
    between July to November so you can see
  • 00:49:09
    how assets Bank hit a new high in July
  • 00:49:12
    of 19 naira pulled back touched another
  • 00:49:16
    high of 19.4 P but you can see how it
  • 00:49:19
    respected his counter trend line here
  • 00:49:21
    first touch second Touch third touch so
  • 00:49:25
    now a Breakout above was a massive
  • 00:49:28
    opportunity this was a huge opportunity
  • 00:49:30
    for anyone to jump into assets bank at
  • 00:49:34
    18.7 to 19 you can see how the bank
  • 00:49:37
    stock Rally from 19 sorry 17 to 18 to
  • 00:49:40
    reach a high of 30 so if I do 17.8 or
  • 00:49:45
    averagely 18 to 30 that would be 12 ID
  • 00:49:48
    by 18 that means the bank did an average
  • 00:49:51
    of 66% return between November 2023 and
  • 00:49:55
    January 4 now the same pattern is
  • 00:49:58
    playing out right here look at how the
  • 00:50:00
    bank is trading below the counter trend
  • 00:50:02
    line first touch here second touch here
  • 00:50:05
    and then you see how the bank is
  • 00:50:08
    gradually breaking out from that counter
  • 00:50:09
    trend line but then there is a minor
  • 00:50:12
    resistance here which have marked there
  • 00:50:14
    a minor resistance region here which
  • 00:50:16
    means I want to see the bank break out
  • 00:50:17
    of 19.4 to reach at least 20 naira so if
  • 00:50:22
    asset Bank enters 20 n region we could
  • 00:50:25
    see a retest of previous high now
  • 00:50:27
    remember our fair value calculation is
  • 00:50:30
    sitting around 20 let's look at the
  • 00:50:33
    slide again
  • 00:50:34
    24.5 so our fa value calculation on
  • 00:50:37
    assets bank is around
  • 00:50:39
    24.5 my 24.5 is around here around here
  • 00:50:45
    this
  • 00:50:46
    region 24.5 here around this region
  • 00:50:50
    right here which is the previous G here
  • 00:50:52
    which also correspond with one of the
  • 00:50:55
    major key level at the ma at the trend
  • 00:50:57
    line so if asset Bank breaks out of
  • 00:51:00
    20 20 Nara then we could see a retest of
  • 00:51:03
    its fair value of 24 and if it breaks
  • 00:51:06
    out of 24 we can see a retest of
  • 00:51:09
    previous high now this will most likely
  • 00:51:12
    happen if assets bank is able to beat
  • 00:51:15
    expectation if analyst project that
  • 00:51:18
    assets Bank might surpass this 24.5
  • 00:51:22
    naira 25 naira 2024 projection so if
  • 00:51:26
    asset bank is going to be 25 NRA then
  • 00:51:30
    ass Bank stock price might clear this
  • 00:51:32
    fair value right here which is based on
  • 00:51:34
    my projection and then rally to previous
  • 00:51:37
    high of 30 and if you R to previous high
  • 00:51:40
    of 30 from 20 that's 10 divid by 20
  • 00:51:43
    that's like almost 50% upside potential
  • 00:51:46
    so if assets Bank impress the market
  • 00:51:50
    beat expectation surpasses my
  • 00:51:52
    2024 projection then we could see a
  • 00:51:55
    rally to 30
  • 00:51:57
    n so this projection is just based on my
  • 00:51:59
    modest estimate I don't want to over
  • 00:52:01
    exaggerate right but if asset Bank
  • 00:52:04
    delivers EPS far far above 25 in 2024
  • 00:52:08
    then it's stopping the bank from
  • 00:52:10
    rallying back to
  • 00:52:12
    39 so that's my projection of asset bank
  • 00:52:16
    so if you're asking whether asset bank
  • 00:52:18
    is a buy right now I think this analysis
  • 00:52:20
    is something you need to watch again
  • 00:52:22
    take your buy or sell decision but then
  • 00:52:24
    there is actually huge upside potential
  • 00:52:26
    of assets bank if the conditions are
  • 00:52:28
    share right now eventually plays out
  • 00:52:30
    first one is a breakout above 20 which
  • 00:52:32
    should open the tab for 24 region fair
  • 00:52:35
    value calculation based on my
  • 00:52:37
    expectation of 2024 EPS but then if the
  • 00:52:40
    bank continues to impress the market
  • 00:52:42
    then we can see further rally to 13A
  • 00:52:45
    which is an average of almost 50% plus
  • 00:52:47
    from current market price so I hope you
  • 00:52:50
    got value from this section I hope this
  • 00:52:53
    video makes a lot of sense to you and
  • 00:52:55
    all that so this is the first time
  • 00:52:56
    watching like I said you can like this
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    button like this video uh subscribe and
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    important look at this kind of video
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    want to be among the first to get this
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  • 00:53:46
    and you like this video drop a comment I
  • 00:53:48
    want to read your comment I'm interested
  • 00:53:50
    in your comments yes I want to read your
  • 00:53:51
    comments I want to read your feedback
  • 00:53:53
    about assess bank and what you think
  • 00:53:55
    assess bank will be worth by by the end
  • 00:53:57
    of 2024
Tags
  • Access Bank
  • Investment
  • Banking Stocks
  • Financial Analysis
  • Market Valuation
  • Fair Value
  • Customer Confidence
  • Profitability
  • Risk Assessment
  • P/E Ratio