Zenith Bank’s gross earnings increased by +114 percent to N1,329.08 billion in nine months 2023 from N620.57 billion in 9M 2022.

The group’s Profit before tax also soared by +149percent to N505.04billion in 9M 2023 from N202.55 billion in 9M 2022.

The group’s customer deposit base rose by +66.42 percent to N13.38 trrillion, supporting a +48.99 percent loan growth to N5.78 trillion in 9M 2023.

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Additionally, the bank’s investment securities grew by +22.57 percent to N2.29 trillion, driving the growth in non-interest income in 9M 2023.

According to the lender’s results, it’s digital arm generated N33.55 billion, a decline from N36.07 billion in 9M 2022. The decline was understandable as the lender’s mobile app and internet banking had challenges in Q1 2023.

Further analysis of the lender’s nine months financial performance show that as Zenith Bank sorts out its future structure, it saw gross earnings improvement mainly from interest and non-interest income at 52 percent and 48 percent contribution, reflecting a better income structure than the previous distribution dominated by interest income.

The N607.16 billion non-interest income came predominately from revaluation gains and trading income at a contribution of 66 percent and 21 percent, respectively, which have raised the question of sustenance, considering both factors are due to favourable conditions that might not be repeated in subsequent quarters.

The deposit money bank’s (DMB’s) cost-to-income ratio (CIR) fell to 37.80 percent from 55.80 percent in 9M 2022, while its non-performing loan ratio (NPLR) dropped to 3.80 percent despite a higher cost of risk of 5.5 percent (1.3 percent in 9M 2022), Zenith’s return on equity (ROE) rose to 35.10 percent from 18 percent in 9M 2022 and its return on assets (ROA) floated to 3.8 percent (2.2 percent in 9M 2022).

The group’s price-to-earnings (P/E) ratio rose to 2.28x from 0.25x in the contemporary period of 2022, indicating that investors have higher expectations of the lender’s future earnings growth.

According to analysts from Proshare, Zenith’s financial position improved in 9M 2023 despite the riskier environment and a difficult first quarter (Q1) 2023.

The group retained a third of gross earnings as profit in 9M 2023, while it’s profit before tax grew by +149 percent to N505.04 billion and N434.17 billion in 9M 2023 from N202.55 billion and N174.33billion in 9M 2022 respectively.

In the past five years, the group’s profit had grown by an average of five percent, suggesting the absence of large revaluation gains that fatten income. However, the Asset Management Company of Nigeria’s (AMCON’s) levy remained the highest cost item for the group at N57.38 billion.

The group’s income tax expense rose by +151 percent to N70.86 billion in 9M 2023 from N28.22 billion in 9M 2022

Provisions for doubtful loans spiked in 9M 2023 as harsh economic conditions threatened loan quality and asset value.

The impairment charge rose by +466 percent to N210.00 billion in 9M 2023 from N37.10 billion in 9M 2022, driven by loans and advances, investment securities, and treasury bill provisions, which grew by +446 percent, +179 percent, and +4919 percent, respectively.

However, the group’s non-performing loan ratio improved to 3.80 percent in 9M 2023, the lowest in five years.

According to analysts,while the low NPL suggests improved loan quality, the fragile macroeconomic environment will continue to threaten asset quality; hence, impairment charges may continue to rise.

The bank’s total assets grew to N18.16 trillion from N11.34 trillion in 9M 2022, driven by +46 percent growth in treasury bills, +49 percent growth in loan & advances, +42 percent rise in investment securities and +68 percent rise in Cash and bank balances with CBN.

The total assets distribution slightly changed, with loans & advances at 32 percent, investment securities at 13 percent, cash & balances with CBN at 17 percent and treasury bills at 16 percent compared to the distribution of loans & advances at 34 percent, investment securities at 17 percent, cash balances with CBN 14 percent and 17 percent respectively in 9M 2022.

“The loans & advances and investment securities dominating the group’s assets will positively ensure interest income inflow, while the upward rise in Cash and bank balances with CBN will reduce funds available for lending.

“The growth in loans and advances came from term loans and overdrafts, which increased by +64 percent and +62 percent, respectively, as on-lending facilities declined by -9 percent during the period.

“The deposits portfolio was driven by demand and savings deposits valued at N7.00 trn and N4.62 trillion, respectively, while term deposits remain behind at N1.76 trillion, “the Proshare analysts stated in a note to clients.

Rising earnings improved the group’s financial efficiency in 9M 2023, with its cost-to-income ratio (CIR) sliding to 37.80 percent from 55.80 percent in 9M 2022. Most banks have struggled with a high inflationary environment, just as Zenith Bank has seen its CIR hover above 50 percent over the last five years.

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