Nigerian banks have been operating in a scorching environment as they are reeling from a slew of stringent regulations by the Central Bank of Nigeria (CBN) and the economic fallout from the spread of the coronavirus.
Zenith Bank Plc will fare better than peer rivals because of its scale, adequate capitalization, and liquidity position, according to MoneyCentral analysis.
Analysts and investors have come to a prevalent realization that lenders will not be making money like they used to a few years ago when high yield environment and foreign exchange devaluation added impetus to earnings.
First the central bank banned corporates and individuals from its Open Market Operations (OMO) just months after it had hiked the minimum levels of Loans to Deposit (LDR) as it seeks to spur lending to the real sector of the economy, leading to a crash in yields.
Recently, the regulator debited banks with N216 billion for breaching Cash Reserve Ratio (CRR) requirement. The latest round of debits is the third in recent times – the most recent being N459.7bn three weeks ago, and prior to that N1.4trn in April.
The implication of the recent penalty is that it will lead to downward pressure on banks liquidity ratio, with attendant uptick in funding cost of smaller tier 2 banks.
Zenith Bank has posted net income of N50.26 billion as at March 2020, overtaking GTBank to become the most profitable lender in Nigeria. It has an excellent risk management strategy with Non-Performing Loans (NPLs) of 4.60 percent as at March 2020, which is lower than the 5 percent regulatory threshold.
Capital and liquidity ratios for the Bank are well above regulatory requirements of 30 percent for Liquidity and 15 percent for Capital Adequacy Ratio.
Investors and shareholders will get a high return in form of dividend for investing in Zenith Bank’s stock as the lender’s dividend yield of 18.92 percent is the highest among Nigerian companies.
The bank is now the most profitable listed company in Nigeria.
Little wonder the lender emerged as the number one Bank in Nigeria by Tier-1 Capital in the 2020 Top 1,000 World Banks Ranking published by The Banker Magazine.
Climbing a whopping 29 spots from 415 in 2019 to 386 in the 2020 global ranking of banks, Zenith Bank retained its position as the number one Tier-1 bank in Nigeria with Tier-1 Capital of $2.79 billion, an increase of 16.1 percent on the $2.40 billion recorded in the 2019 rankings.