Following a release of the 2018 audited financial statements of Nigeria’s biggest lender by assets, Zenith Bank, which saw profit rising by 11.30 percent, shares of the tier-one bank jumped, Tuesday, to their highest level in more than seven months.
The stock gained 5.63 percent to N25.35 after the close of trading on the floor of the Nigerian Stock Exchange (NSE), pushing the year-to-date return of the financial institution to 9.98 percent outperforming the NSE Banking Index as well as the All Share Index.
The surge was “on the back of the results released by the bank,” said Fola Abimbola, an equity research analyst at Lagos-based FBN Quest. “There is more buying interest on the stock.”
From the retained earnings account as at December 31, 2018, the board of directors of Zenith Bank Plc recommended a final dividend of N2.50kobo for every 50kobo share, in addition to the 30kobo per share paid as interim dividend, bringing the total dividend for the financial year to N2.80kobo.
This represents 3.70percent increase as against N2.70kobo total dividend paid in 2017.
This dividend proposal will be presented for ratification by the shareholders at the bank’s next Annual General Meeting. Dividend Yield was 11 percent at the close of trading.
Zenith Bank had shed 3.03 percent to N24 in the previous trading session amid sell-offs witnessed by most stocks that traded at the Lagos bourse in reaction to last weekend’s election postponement by the Independent National Electoral Commission.
According to Abimbola, the stock would likely continue to rally in the coming days as “there is nothing negative on the stock in particular.”
Zenith reported profit before tax (PBT) of N231.68billion as against N199.319 billion in 2017 representing a 16.2 percent increase. The bank’s after tax profit increased by 11.30 percent to N193.424billion in the 2018 financial year, from N173.791 billion in 2017.
“We have a Buy rating on Zenith Bank with a target price of N33.41 per share. Current price is N24 per share,” said CSL Research in its February 19 note following the bank’s release of its audited full year 2018 results.
“Zenith Bank’s FY 2018 Pre-tax profit was up 16 percent year-on-year (y/y) and 8 percent above our estimate mainly on the back of lower Interest Expense and a significant reduction in Impairment Charge. The bank also put a rein on expenses as operating expense (opex) remained flat y/y. On the flip side, Interest Income remains pressured while the bank reported a loss on derivatives,” CSL Research noted.
Basic and diluted earnings per share stood at N 6.15 in the review financial year as against N5.53 in 2017. The bank’s non-performing loan ratio increased to 4.98percent from 4.70percent in 2017. Interest and similar Income stood at N440.052billion in 2018 against N474.628billion in 2017 representing a 7.28percent decline.
Net interest Income (NII) was N295.594billion in 2018 as against N257.991billion in 2017, representing an increase of 14.58percent. The bank’s Impairment Charge for Credit Losses decreased by 81.30percent to N18.372billion against N98.227billion in 2017.
Loans and Advances declined to N2.497trillion from N2.596trillion in 2017, down by 3.8percent. Zenith Bank Plc grew deposits by 7.3percent to N3.690trillion in 2018 against N3.437trillion in 2017. Cost to Income Ratio (CIR) increased slightly by 4.5percent to 47.4percent from 42.9percent in 2017. Loan to Deposits ratio stood at 67.7percent in 2018 against 75.5percent in 2017.
Return on Assets (ROA) increased to 3.25percent from 3.11percent; while Return on Equity (ROE) rose to 23.71percent from 21.40percent in 2017.
At the sound of closing gong on Tuesday at Customs Street, Zenith Bank was the second-most traded stock by volume as over 37 million units of shares valued at N925.54 million were traded in 691 deals.
Iheanyi Nwachukwu & OLUWASEGUN OLAKOYENIKAN
