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Friday, March 31, 2023

Zenith Bank Q3 Earnings up 4.1% on Lower Impairment Charges

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Zenith Bank reported a 5.7 percent year on year (YoY) growth in nine months (9M) 2020 earnings due to a lower effective tax rate (10.1% vs 14.5% in 9M’19). On a before tax basis, earnings came in relatively flat (+0.6% YoY) during the period.
Zenith Bank Q3 earnings grew 4.1 percent QoQ driven by lower impairment charges (-94.1% QoQ) and operating expenses (-14.2% QoQ), respectively.
Q3’20 Highlights:
  • Net interest income shrank 10.7 percent QoQ on the back of a surprise 27.6 percent QoQ jump in interest expenses.
  • Non-interest income weakened 18.4 percent QoQ, as lower net trading gains (-28.5% QoQ) and FX revaluation loss of N1.5 billion (vs gain of N7.3 billion in Q2’20) offset the impact of a 41.8% QoQ jump in net fee income.
  • Operating expenses eased 14.2 percent QoQ; albeit, cost to income ratio was flat (48.4%) vs Q2’20 due to weaker operating income (-14.4% QoQ).
  • Impairment charges crashed 94.1 percent QoQ to ease cost of risk pressure (1.3% vs 1.8% in H1’20).
  • Gross loans rose 3.1 percent funded by a 6.5 percent increase in customer deposits during the review quarter.
  • Annualised ROE and ROA were 21.5 percent (FY’19: 23.8%) and 3.0 percent (FY’19: 3.4%), respectively. Capital Adequacy Ratio remained robust at 21.5 percent, above the 15 percent regulatory limit.
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Zenith Bank shares have returned 65 percent in the past year and still sports a dividend yield of 10.7 percent, the highest among banking peers.

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