For investors looking for value stocks in the banking sector with upside potential, Zenith Bank plc is one of them. Zenith Bank recently demonstrated its resilience as evidenced in its recently announced audited results for the half-year (H1) ended June 30, 2021.
The bank recorded positive growth across key financial metrics despite a challenging macroeconomic environment exacerbated by the COVID-19 pandemic.
Following the H1’21 scorecards, Lagos-based Coronation Research analysts rate the stock a “Buy,” saying their Target Price (TP) is N30.86kobo as against N24.25kobo it closed on Monday, August 30. This target price represents upside potential in excess of 27 percent.
“We maintain our Buy recommendation on the stock,” Coronation Research analysts says in their August 30 note to investors.
Also, Meristem Research analysts in their stock recommendation set a target price of N29.57kobo for Zenith Bank , thereby supporting their ‘Buy’ rating for the bank’s stock. Meristem analysts’ ‘Buy’ rating is given to Zenith Bank because the analysts believe that the stock’s TP is above the current market price by at least 10 percent.
Also, GTI Research analysts say Zenith Bank stock is a good “Buy,” considering their TP of N29.40kobo for the stock, representing an upside potential of 20.49 percent when compared with N24.40kobo it closed last Friday.
Zenith Bank’s audited half-year financial results presented to the Nigerian Exchange (NGX) show the Group recorded a growth in profit before tax of 3 percent from N114 billion reported in H1’ 2020 to N117 billion in H1’ 2021.
The Group also recorded a 9 percent growth in non-interest income from N116 billion in June 2020 to N127 billion in June 2021. Overall, the significant reduction in interest expense by 26 percent and growth in non-interest income by 9 percent culminated in improved profitability.
The Group’s retail journey continues to deliver positive results as retail deposits grew by N38.2 billion from N1.72 trillion to N1.76 trillion year-to-date (YtD). Savings balances grew marginally by 2 percent YTD to close at N1.18 trillion from N1.16 trillion as of December 2020.
The Board of Directors of Zenith Bank proposed an interim dividend of 30kobo per share (same as in H1’2020) from the retained earnings account as of June 30, 2021. The qualification date for the dividend is September 10, 2021. Zenith Bank has 31,396,493,786 in shares outstanding, which means that it will pay interim dividend worth N9.42 billion, subject to withholding tax (WHT).
Zenith Bank’s drive for increased retail deposits and a low-interest yield environment helped reduce the cost of funding from 2.2 percent to 1.3 percent in the current period. Operating expenses grew by 10 percent YoY, but growth remains below the inflation rate, while the Group improved its Earnings per Share (EPS) which grew 2percent from N3.30 to N3.38 for the half-year ended June 2021.
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The Group also increased total customer deposits by 8percent to close the period at N5.77 trillion, demonstrating growth in the market share.
Total assets grew marginally to N8.52 trillion as of June 30, 2021 from N8.48 trillion recorded as of December 31, 2020. Despite the COVID-19 pandemic induced challenges and the challenging operating environment, the Group grew its risk assets as gross loans were up by 3percent YTD, from N2.92 trillion to N2.99 trillion.
This was conservatively achieved at a low Non-Performance Loans (NPL) ratio of 4.51percent (FYE 2020: 4.29percent) and a reduced cost of risk of 1.3percent (June 2020: 1.8percent). Prudential ratios such as liquidity and capital adequacy also remained above regulatory thresholds at 69.9 percent and 22percent, respectively.
Despite the continued prevalence of the COVID-19 pandemic, there is cautious optimism that the global economy will continue to recover as vaccination programmes are intensified. On the domestic economy, Nigeria’s Gross Domestic Product (GDP) grew by 5.01percent in the second quarter of 2021, and the inflation rate, which peaked in March 2021 at 18.17percent, is gradually trending down (currently at 17.38percent as at July 2021). The Group is well-positioned to maximise the opportunities that these recovering fundamentals present while leveraging technology to expand its retail footprints to deliver improved returns to all its stakeholders.
In recognition of its track record of excellent performance, Zenith Bank was voted as Best Commercial Bank in Nigeria in the World Finance Banking Awards 2021, Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards 2020, Best Bank in Nigeria in the Global Finance World’s Best Banks Awards 2020 and 2021, and Best in Corporate Governance ‘Financial Services’ Africa 2020 and 2021 by the Ethical Boardroom. Also, the bank emerged as the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands 2020 and 2021, and Number One Bank in Nigeria by Tier-1 Capital in the “2021 Top 1000 World Banks” Ranking by The Banker Magazine.
The bank was also recognised as Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Retail Bank of the year at the 2020 BusinessDay Banks and Other Financial Institutions (BOFI) Awards, and Best Company in Promotion of Good Health and Well-Being as well as Best Company in Promotion of Gender Equality and Women Empowerment at the Sustainability, Enterprise and Responsibility (SERAS) Awards 2020.
Zenith Bank has grown enormously in 30 years to become Nigeria’s largest and one of Africa’s largest financial institutions by tier-1 capital, with shareholders’ funds of N1.1 trillion ($2.64bn) as of December 31, 2020.
The Bank continues to distinguish itself in the Nigerian financial services industry through superior service offerings, unique customer experience and sound financial indices. Zenith Bank is the clear leader in the digital space with several firsts in the deployment of innovative products, solutions and an assortment of alternative channels that ensure convenience, speed and safety of transactions.
