Zenith Bank profit-after-tax expansion settled at 2.2% year-on-year growth

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The management of Zenith Bank has released the interim financial statement for six months on Friday August 27, 2021 which showed that the bank recorded earnings growth, albeit marginal.  In the report disclosed that this performance was primarily driven by the growth in non-interest income and supported by moderate improvement in funded income, reflecting the new post-pandemic realities.

According to the overall performance report, profitability was stronger, with profit-before-tax 2.6% higher year-on-year. However, profit-after-tax expansion settled at 2.2% year-on-year growth (NGN106.12 billion), on account of a 6.2% year-on-year increase in income tax expense.


The bank’s operating expenses, however, also grew at a faster pace (+10.3% to NGN149.85 billion), as all major contributory line items, save for personnel expenses (-3.3% year-on-year to NGN37.58 billion), recorded growth. Particularly the respective 22.5% and 16.8% year-on-year growth in AMCON levy and NDIC premium drove costs higher. Consequent to the higher opex growth relative to operating income, the bank’s cost-to-income ratio (ex-LLE) settled higher at 56.1% (Half Year 2020: 54.3%).


Also, the bank recorded a significant decline in interest expense which contributed to its overall profitability. Thus, EPS grew by +2.4% year-on-year to NGN3.38 (vs. NGN3.30 in Half Year 2020) while an interim dividend of NGN0.30/share (same as the corresponding period last year) was proposed for the period.


The Bank’s interest income declined by 6.0% year on year to NGN203.93 billion, following declines in income from investment securities (-12.6% year on year to NGN62.84 billion) and loans and advances to banks (-66.0% year on year to NGN5.66 billion). These declines were expected given the lower yields on investment securities and the tighter liquidity pressures causing banks to reduce loans being advanced to other banks. Both of these contributory lines masked the growth in income from loans and advances to customers (+5.5% year on year to NGN135.43 billion) as risk asset creation edged up by 2.1% to NGN2.84 trillion in Half 2021.

Likewise, interest expense declined significantly by 26.1% year on year to NGN43.99 billion, reflecting the lower cost on deposits from customers (-38.5% year on year to NGN26.16 billion) and despite the higher interest cost on borrowings (+4.9% year on year to NGN17.83 billion). Consequent to the larger decline in interest expense, net interest income settled marginally higher by 1.6% year on year at NGN159.94 billion. After accounting for credit impairment charges (-17.2% year on year to NGN19.80 billion), net interest income (ex-LLE) settled 5.0% higher year-on-year.


The Bank Maintaining the trend from last period, non-interest income (NII) settled 8.8% higher y/y at NGN126.77 billion. This was supported by the significant expansion in fees and commissions income (+42.3% year on year NGN47.66 billion) and gains from other operating income (+244.6% year on year to NGN7.34 billion). The impressive NII expansion, alongside the growth in net interest income, led to a 6.8% year on year increase in operating income to NGN266.91 billion.


According analysts at Cadros Research, the bank’s performance was in line with our expectations in the recovering   economic environment. Nonetheless, we expect the bank to record stronger income growth as the year progresses on the back of improved risk creation, higher yields obtainable to reinvest maturing assets and strong balance sheet management.

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