Zenith kicks-off banks earnings season with impressive results

…Earns N507.997billion, N156.8bn PBT

…Proposes final dividend of N1.77kobo

Zenith Bank Plc on Monday kicked off the full year earnings season of banks with an impressive result for the period ended December 31, 2016.

The results at the Nigerian Stock Exchange (NSE) show Zenith Bank Plc gross earnings of N508 billion against N433 billion in 2015, an increase of 17.45 percent.
Its reported profit before income tax (PBT) in 2016 was N157 billion against N126 billion in 2015. Profit After Tax (PAT) rose to N130 billion from N106 billion in 2015.
The Board of Directors of the bank proposed a final dividend of N1.77 kobo per share, which in addition to the N0.25kobo per share paid as interim dividend, amounts to N2.02 kobo per share from the retained earnings account as at 31 December 2016.

Basic and diluted earnings per share increased to 412kobo from 336kobo in 2015, an increase of 22.62percent. The bank’s proposed final dividend of N1.77 implies a yield of 12 percent using Friday’s closing price of N14.73kobo.

On the back of these results, analysts expect the dividend and strong PBT to provide support for Zenith Bank Plc shares. The share price rose to N14.81.

“Indeed it was an impressive performance for Zenith Bank Plc. Investors are better off with the result and dividend payout. Zenith has blazed the trail despite macroeconomic challenges that banks faced last year. The performance of Zenith Bank confirms our earlier view that tier-one lenders will always weather the storm,” Sewa Wusu, head research at SCM Capital Limited told BusinessDay.

Also, the Olubunmi Asaolu team of research analysts at FBNQuest, said the bank’s PBT was impressive, “beating our forecast”.

“We expect the dividend and the strong PBT result to provide support for the shares. Given the better-than-expected non-performing loan (NPL) ratio, the market’s expectations for 2017 earnings may improve, however. Our estimates are under review. We rate Zenith shares Outperform,” said FBNQuest analysts.

Interest and similar income also increased to N385 billion from N349 billion in 2015, an increase of 10.45 percent, driven largely by loans and advances to customers, Treasury bills and other government securities.

The bank’s fee and commission income increased to N68 billion in 2016 from N61 billion in 2015, an increase of about 12.38percent; while trading income increased to N29 billion in 2016, largely due to FX revaluation gains from N18 billion in 2015. The bank grew its total assets to N4.7 trillion from N4.0 trillion in 2015, up by 18.29percent.

The bank posted an increase in customer deposits of 16.64 percent to N2.98 trillion, an increase from N2.56 trillion in 2015.

Impairment on loans and other credit losses expanded by 106 percent to N32.35billion.

DLM Research analysts said interest income was the most significant driver of Zenith Bank earnings “despite rising at a much slower pace relative to revenue growth.”

The proposed dividend will be presented to the shareholders of the bank for approval at the next Annual General Meeting (AGM).
If the proposed dividend is approved by the shareholders, the Bank will be liable to pay additional corporate tax estimated at N12.52 billion representing the difference between the tax liability calculated at 30 percent of the dividend approved and the tax charge reported in the statement of profit or loss and other comprehensive income for the year ended 31 Dec 2016. Payment of dividends is subject to withholding tax at a rate of 10 percent in the hand of qualified recipients.

 

Iheanyi Nwachukwu