• Thursday, March 28, 2024
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BusinessDay

Zenith Bank’s non-interest income surges 24% in H1 on deepened retail banking

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Zenith Bank Plc, Nigeria’s second-biggest bank by market value, was off to a good start in a drive to leverage the retail segment for improved profitability, as half-year 2019 growth in non-interest income was strongly supported by electronic services in a show of progress in its retail banking initiatives.

Although net interest income fell some 7 percent in the first half of this year to N142.5 billion, the tier-one lender had a lot to cheer about as non-interest spiked 24 percent to N109.73 billion on the back of a 170 percent growth to N27 billion in fees from electronic products. This contributed 43 percent to fee and commission income as against 22 percent share it recorded in half-year 2018.

The significant boost in non-interest income largely translated to N331.6 billion gross earnings recorded by the bank, which represents a 3 percent increase from N322.2 billion garnered in the corresponding period of 2018. “This continues to reflect increased traction on transaction volumes via the bank’s electronic banking channels,” Aderonke Akinsola, a banking analyst at Chapel Hill Denham, said.

Besides the stellar performance in the electronic services, the lender recorded a 25.6 percent decline in derivative losses to N13.83 billion in the first half of 2019 compared with the same period last year, an achievement which supported the 22.5 percent growth achieved in trading gains even as trading income on treasury bills showed significant improvement.

While the gross earnings befitted immensely from these advances, they were not limited to the top line as pre-tax profit witnessed a 4 percent growth to N111.7 billion from N107.4 billion, while earnings per share (EPS) jumped 9 percent to N2.83 from N2.60.

As a result, the Board of Directors of the bank announced payment of an interim dividend of 30 kobo per share, payable on September 2 to shareholders whose names appear in the register of members as at the close of business on August 29.

Furthermore, the Group’s customer deposits rose 3.2 percent since the start of the year to N3.81 trillion with retail deposits increasing from N861 billion to N1.1 trillion.

“Despite the growth in our deposit base, we optimized interest expense leading to a 4 percent reduction from N74.7 billion to N72.1 billion due to the Group’s improved funding mix and our profound treasury management skills,” the company said in a statement sent to BusinessDay.

Net Interest Margins (NIMs) witnessed a compression from 10 percent in the same period last year to 8.6 percent as a result of the declining yield environment but the cost of funds improved from 3.4 percent to 3.0 percent.

Non-performing Loan ratio increased marginally 5.3% in the review period from 5 percent corresponding period of 2018 owing to a 3 percent reduction in its loan book from N2.02 trillion as at December 2018 to N1.95 trillion at the end of the period.

The tier-one lender assured it is creatively deploying new retail loan products to ensure it captures a reasonable share of the retail loan market.

The bank said it would consolidate on its leadership in the corporate space for the remaining six months of the year. “Our retail banking drive will continue unabated,” Zenith Bank stated. “We expect to see an improvement in economic activities even as we maintain our promise of delivering a unique service experience to our customers.”

Zenith Bank’s shares gained 2.41 percent on the Nigerian Stock Exchange Monday to close at N17, thereby reducing its loss since the beginning of the year to 26.25 percent.

 

OLUWASEGUN OLAKOYENIKAN