Zenith Bank’s strong profit position validates risk strategy

A strong profit position amid an environment characterized by lower oil price and a weak currency makes Zenith Bank Plc a super impressive lender as it continues to develop a solid risk management strategy.

The stock market reacted to the bank’s positive earnings as stock price was up (+2.43 percent) to N11.80 2:30 pm, on the floor of the bourse a day after the results release.

For the first three months through March 2016, Zenith Bank’s operating income increased by 23.37 percent to N71.24 billion as against N57.76 billion as at March 2015.

The lender’ top lines got a boost as interest income was up by 3.37 percent to N84.17 billion in the period under review, thanks to the contributions from interest income on loans and advances and appropriate pricing of assets.

Net interest income increased by 36.40 percent to N58.15 billion as at March 2016; Driven by a 32.92 percent drop in interest expense amid a high interest rate environment.

Lender’s in Africa’s largest are grappling with a slow growing economy caused by a significant drop in the price of oil that forced the Central Bank to devalue the naira twice and impose capital controls.

The economic sluggishness has impacted negatively on bank’s asset quality as collateralize assets have lost value on the back of sudden drop in oil prices.

Growth in Nigeria slowed to 2.8 percent last year, the weakest level since 1999 and down from 6.2 percent recorded in 2014.

Inflation rate increased to 12.80 percent in March from 12.80 percent in March.

Despite the sector’s high exposure to the oil and gas, Zenith Bank’s Non Performing Loans (NPLs) of 2.20 percent as at December 2015, is one of the lowest in the industry.

Zenith Bank’s reported a slight fall in net income of 4.01 percent to N26.57 billion.

Also, loans and advances to customers increased by 1.05 percent to N1.92 trillion in March 2016 compared with N1.90 trillion as at March 2015. Deposits from customers were down by 4.47 percent to N2.56 trillion in the period under review as against N2.68 trillion in March 2015; analysts attribute to the slow growth in deposit base to the introduction of the TSA.

The U.S. Agency for International Development (USAID) and other parties signed an agreement with Zenith Bank to make available $ 90 million in new private sector financing for the Power Africa Fund.

This is first of its kind in Nigeria.

BALA AUGIE