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Zenith Bank: Long awaited H1 results show more positives

Zenith-Bank

Zenith Bank plc recently released its long awaited first-half (H1) 2015 results, posting double digit growth in top and bottom lines.

At the Nigerian Stock Exchange (NSE), Zenith Bank plc submitted its audited consolidated and separate interim financial statements for the period ended June 30, 2015 together with directors and auditor’s report.

The results

Gross earnings of the Group increased by 24.2% and profit before tax (PBT) increased by 24.8%. The group’s half year (H1) 2015 gross earnings rose to N229.08billion from N184.43billion. PTB rose to N72.20billion from N57.85billion in the corresponding H1’2014.

The group’s basis and diluted earnings per share rose to 169kobo from 151kobo in H1’14.Non-perfroming loan ratio declined to 1.44% from 2.80% in H1’14.

Zenith Bank plc has proposed interim dividend of 25kobo which will be paid on August 28, 2015. The qualifying date for payment of this interim dividend is August 21, 2015. The company will close its register of qualified members on August 24, 2015.

The group/ corporate governance report

Zenith Bank plc has five subsidiary companies namely, Zenith Bank (Ghana) Limited, Zenith Pension Custodian Limited, Zenith Bank (UK) Limited, Zenith Bank (Sierra Leone) Limited, and Zenith Bank (Gambia) Limited.

In line with regulatory directives on the scope of banking operations in Nigeria, the Bank has concluded the divestment from its non-core banking operations (excluding Zenith Pension Custodian Limited).

During the H1’15 period, the Group opened ten new branches. No branch was closed during period, according to the directors’ report for the period ended June 30, 2015.

Zenith Bank as a foremost financial institution in Nigeria and the West Africa sub-region conducts its business in line with global best practices, according to Corporate Governance Report for the period ended June 30, 2015.

The Bank has been generally adjudged as a Corporate Governance compliant bank by the Nigerian Stock Exchange (NSE) and recently won “the Best Corporate Governance Bank in Nigeria 2015” award at the Global Banking and Financial Review Awards 2015.

“This is being sustained through a constant reappraisal of our processes to ensure that our business conform to the highest global standards at all times,” the bank stated in the report at the NSE.

Analysts view

“The strong income that Zenith reported proved significant, offsetting the increase in provisions and outpaced a 25% year-on-year (y/y) growth in opex. After a stellar Q1 in which non-interest income was boosted by FX trading, we expected a q/q decline, but not to the extent that Zenith reported. It appears that yield expansion played a greater role in boosting funding income than volumes (net loans were up only modestly q/q)”, according to research analysts at FBN Capital Limited.

The analysts added: “We expect the market to shift its focus to the strong underlying result”.

Also, research analysts at Lagos-based United Capital plc said, “While Zenith Bank plc PBT came in 6.6% ahead of our expectation largely due to lower funding cost and Opex, a higher effective tax rate compared to our estimates means PAT berthed 7.6% below our forecast.”

According to the United Capital analysts, “We note that a y/y comparison of these numbers has limited reliability at this point, given that the benchmark H1-14 results, as filed by the bank, are unaudited. That said, relative to FY-14 audited numbers, the bank showed what we could describe as resilient growth in balance sheet.”

“Loan book expanded by 7.6% in H1-15, on track to meet management guidance of 15% for FY-15, even as deposits grew modestly by 2.7%. Market reaction to the results is likely to be positive in the short term, driven in part by the corporate action of 25kobo dividend (the first in the history of the bank), as well as compelling valuation on account of the recent sell-offs in the broader market.”

Share performance

The share price of Zenith Bank plc rose slightly by N0.37 or 2.3% Tuesday to N16.45. Zenith Bank market capitalisation is in excess of N516.472billion and its shares outstanding are 31,396,493,786 units.

Iheanyi Nwachukwu