• Monday, July 15, 2024
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BusinessDay

Why Zenith is Nigeria’s biggest bank by market cap

Fire at Zenith Bank’s data centre causes network downtime

Based on its recent positive performance, there are facts that prove why Zenith Bank Nigeria Plc is currently in the driver’s seat as Nigeria’s largest lender by market capitalization.

To achieve the new position, Zenith Bank overtook Guaranty Trust Holding Company (GTCO) on December 6, trading at N23.45 per share with total outstanding shares of 31.4 billion resulting in a market capitalization of N737.90 billion.

Also, GTCO occupies the second position by trading at N23.95 per share with total outstanding shares of 29.43 billion resulting in a market capitalization of N704.85 billion, according to Bloomberg.

According to Ayodeji Ebo, heads Retail Investment at Chapel Hill Denham, the major attraction by Investors to Zenith bank is the dividend yield and the profitability of the Bank.

“Zenith and GTCO pay almost the same dividend, so when you look at the return on investment, Zenith has always been leading in the past years and investors are skeptical if GTCO would be able to sustain a similar dividend payout as Zenith Bank”, he said.

In terms of profitability, Zenith bank also did better this year, he further stated.

BusinessDay analysis showed the strength in Zenith bank’s earnings story so far this year is the big cut in the cost of funds. The cost of funds, which measures the company’s expenses for keeping deposits from Banks and customers, dropped to N74.1 billion in the first nine months of 2021 compared to N93.6 billion in the same period of 2020.

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The bank’s pre-tax profit increased by 1.42percent to N179.81 billion in the first nine months to September 30, 2021, compared to N177.28 billion in the corresponding period last year.

While profit after-tax profit of N160.59 billion in the first nine months of 2021 represents an increase of 0.8 percent when compared to N159.32 billion in the same period under review of the last year.

The company’s basic earnings per share increased to N5.11 in the same period this year, from N5.07 in the corresponding period of 2020.

The profit for Zenith Bank in the first nine months of 2021, was driven by an increase in the net fee and commission income by 32.43 percent to N78.30 billion compared to N 59.12 billion in the period under review of 2020.

However, in the first nine months of 2021, their assets increased to N8,751.59 trillion from N7,973.27 trillion in the corresponding period of 2020.

As at December 6, the share of Zenith Bank was down 5.44 percent from the opening price of N24.80 at the beginning of the year. While that of GTB plunged 25.96 percent from the opening price of N32.35 at the beginning of the year.

For GTCO, after-tax profit of N129.4 billion declined by 9.96 percent compared to N142.28 billion in the first nine months of 2020. The company’s basic earnings per share decreased to N4.54 in the first nine months of 2021 from N5.02 in the comparable period of 2020.

The profit for GTCO in the 9’month 2021, was mostly driven by a 51.34 percent increase in Fee and commission income to N56.6 billion compared to N 37.4 billion in the same period of 2020.

Nevertheless, a decline in the profit of the first nine months of 2021 was mostly anchored on the reduction by 14 percent to N162.94 billion in the net interest income when compared to N189.73 billion in the same period of 2020.

However, their assets increased to N5.14 trillion in nine-month of 2021 from N4.94 trillion in the comparable period of 2020.

The cost of funds for the company dropped to N29.92 billion in the first nine months of 2021 compared to N33.93 billion in the same period of 2020.

Unless there is a “Santa rally” in favor of these stocks, both may underperform Meristem analysts’ “Buy” ratings.