Zenith Bank Shows Strenght At The Top In Third Quarter Results

By Emmanuel Aziken, Editor

Uneasy lies the head that wears the crown it is said, but for Zenith Bank the crown seemed to fit when it announced its nine months results for the year on Thursday.

It is the first quarter result announced since the emergence of the new Managing Director of the bank, Ebenezer Onyeagwu which showed the bank’s robust fundamentals as underpinned by capital adequacy of  23% . Though CAR slipped marginally from 25% in the corresponding period in 2018, it is, however, well above the 16% stipulated by the Central Bank.

The bank’s sound asset quality is underpinned by the sustenance of Non-Performing Loan which slightly improved from 4.98% in 2018 to 4.95% in the reporting period,

However, pressure from the regulatory authorities as underpinned by the new 65% LDR is one challenge to the bank’s relatively sound asset quality.

In the fourth quarter the bank must raise its LDR from 55.8% to meet the regulator’s new threshold by December, 2019. It is a stiff challenge that could otherwise open the bank to risks from delinquents if not properly managed. This is because the bank has to increase its loan portfolio by N197.6 billion in the period before the end of the year in order to meet the 65% new LDR as stipulated by the regulators.

However, the bottom line for the majority of shareholders will be the earnings which climbed 5% from N4.58 to N4.80 per share positioning shareholders to again reap a high dividend pay out at the end of the year.

Remarkably, the result seemed to show Zenith Bank shifting focus from making revenue from interest income to reaping income from fees and commissions a fact that is spreading across the industry. Interest income indeed dived 6% from N228 billion to N214 billion, but that decrease was more than compensated in the 22% rise in non-interest income which moved from N128 billion in 2018 to N156 billion in 2019.

A statement from the bank unveiling its dominance and leadership of the financial markets showed that gross earnings increased by 4% percent from N474,607 billion recorded in Q3 2018 to N491,268 billion in Q3 2019. Profit Before Tax (PBT) grew by 5% from N167,307 billion in Q3 2018 to a record N176,183 billion in Q3 2019. Also, profit after tax rose by 5% from N144,179 billion in Q3 2018 to N150,723 billion in Q3 2019.

Despite a challenging macro-economic backdrop, the Group recorded a significant growth in Non-Interest Income, expanding by 22% from N128.7 billion in Q3 2018 to N156.8 billion for the current period. Our platforms and channels have been the enablers of this growth, with fees from electronic products doubling to N35.3 billion from N17.6 billion in Q3 2018. 

The bank in the statement accompanying the results said:

“Our cost optimization strategies and aggressive retail banking drive are yielding the desired effects as cost-to-income ratio declined from 51.2% in Q3 2018 to 50.1% in Q3 2019 with Earnings Per Share (EPS) growing by 5% from N4.58 in Q3 2018 to N4.80 in Q3 2019. 

“Our retail and corporate banking franchises continued its momentum with customers’ deposits growing by 7% to N3.95 trillion from N3.69 trillion recorded as at December 2018, a reflection of increasing share of the industry’s deposits and customers’ confidence in the Zenith brand. These deposit acquisitions have directly contributed to our cost of funds improving from 3.3% in Q3 2018 to 2.95% as at Q3 2019. 

“We have continued to deploy capital to creating viable risk assets with gross loans and advances growing by 9% from N2.02 trillion as at December 2018 to N2.2 trillion as at Q3 2019 across both the retail and corporate segments. Our focus remains the search for bankable lending opportunities to ensure the attainment of the minimum regulatory loan-to-deposit ratio (LDR) of 65% by December 31, 2019 without compromising our prudence.

“Our robust risk management framework has ensured that non-performing loans (NPL) ratio declined from 4.98% in December 2018 to 4.95% in the current period. Our commitment to maintaining a shock-proof balance sheet remains with liquidity and capital adequacy ratios at 63.8% and 23.8% respectively, both above regulatory thresholds. 

“In this final quarter of the year, we will sustain our competitiveness and share of market in the corporate segment and build upon our digital foundations to reinforce our retail banking initiatives.

“As a testament to this superlative performance and in recognition of its track record of excellent performance, the bank was recently named as the Bank of the Year and the Best Bank in Retail Banking at the 2019 BusinessDay Banks’ and Other Financial Institutions Awards (BAFI Awards).”

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