Zenith Bank’s performance driven by a combination of core and non-core income- Analysts

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Management of the Zenith Bank in its report of six months’ interim financial released this afternoon on August 23, 2022 through the trading floor of The Nigerian Exchange (The NGX) to the investing community, showing the bank recorded strong earnings growth during the period under review. According to the report, this performance was driven by a combination of core and non-core income growth as the bank benefited from the improved interest rate environment.


Consequently, the report further stated that the bank recorded an EPS growth of 5.0% to NGN3.55 compared with NGN3.38 in the period 2021, while an interim dividend of NGN0.30 per share steady to the corresponding period last year was proposed, which represents a dividend yield of 1.4% based on the last closing price of NGN22.00 on August23, 2022.

Analysts at Cordros Research revealed that the bank recorded an 18.5% year on year growth in interest income, which settled at NGN241.73 billion. This strong growth was supported by an expansion in income from loans and advances to customers grow by 20.7% year on year to NGN163.41 billion, reflective of the bank’s increased risk appetite  an increase of 4.3% to NGN3.50 trillion in six months of 2022, while strong income from investment securities  upstick by 18.5% year on year to NGN74.45 billion, driven by the higher yields on investment securities, was also supportive.


“Similarly, interest expense grew by 29.5% year on year to NGN56.98 billion, driven by increased expense on deposits from customers grew by 36.8% year on year to NGN35.79 billion, which was reflected in the deterioration of the bank’s CASA, which settled at 90.6% contrast to 93.0% in 2021Full Year.


Also, the bank recorded an increase in the cost of borrowing by18.8% year on year to NGN21.19 billion despite the decline in interest-bearing borrowings by 3.0% Year To Date to NGN1.09 trillion. Following the growth in interest income which outstripped the increase in interest expenses, net interest income expanded by 15.5% year on year to NGN184.74 billion. After accounting for credit impairment charges up by 26.9% year on year to NGN25.12 billion, net interest income (ex-LLE) settled 13.9% higher year-on-year, it added.


“Growth in non-interest income (NII) was strong during the period, as it expanded by 17.5% year on year to NGN148.98 billion. This is attributed to the gains in investment securities by 43.7% year on year to NGN85.19 billion and expansion in fees and commissions income up by 35.2% year on year to NGN64.45 billion.


In addition, the report noted that the aforementioned offset the loss in net foreign exchange revaluation of NGN6.25 billion while added that the impressive NII expansion, alongside the growth in net interest income, led to a 15.6% year on year increase in operating income to NGN308.61 billion.

Advertisement The report contained that operating expenses expanded by 19.2% year on year to NGN178.60 billion, with the most pressures exerted by regulatory charges – NDIC insurance premium grew by 21.2% year on year to NGN9.78 billion, while AMCON levy up by 16.1% year on year to NGN44.01 billion and personnel expenses upstick by 5.7% year on year to NGN39.74 billion.


“Consequent to the OPEX growth relative to operating income, the cost-to-income ratio (ex-LLE) settled higher at 57.9% relative) to 56.1% in half 2021.


Notwithstanding, the report affirmed that profitability was stronger, with profit-before-tax settling 11.1% higher year-on-year, while profit-after-tax increased moderately by 5.0% year on year to NGN111.41 billion, given the higher income tax expense by 69.9% year on year to NGN18.59 billion.


Comment on the results: The analysts at Cordros Research are of the opinion that the bank’s performance was impressive during the period and aligned with our expectations. The strong growth in core and non-core income is very positive and should allow operating income growth to trail expense growth, which is expected to remain under pressure due to spiralling costs. Overall, this should allow the bank recorded stronger profitability year-on-year

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