Zenith Bank is Nigeria’s largest lender by total asset as valuations remain attractive

Zenith Bank Plc is Nigeria’s largest lender by total assets as valuations remain attractive even amid a punitive regulatory environment and deteriorating economy.

Its total asset stood at N7.93 trillion as at September 2020, which compares to Access Bank, (N7.92 trillion); Firstbank Holdings, (N7.24 trillion); United Bank for Africa, (N7.05 trillion0), and Guaranty Trust Bank, (N4.57 trillion).

Notably, Zenith Bank’s total asset spiked by 33.50 percent, thanks to 32.84 percent uptick in loans and advances to customers and a 22.95 percent increase in treasury bills to N1.05 trillion in the period under review.

The acceleration in loan means the lender has been extending credit to the real sector of the economy, in line with the central bank’s policy framework.

The Apex bank had hiked the minimum loans to deposit ratio to 65 percent as it urged operators in the industry to maintain strong risk management practices regarding their lending operations.

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Interestingly, Zenith Bank is the country’s largest lender by profit, despite a low yield environment that has continued to pressure revenue of operators in the industry.

For example, its net income stood at N159.31 billion as at September 2020, which compares with Gtbank, (N142.30 billion); Access Bank, (N102.30 billion); United Bank for Africa, (N77.13 billion), and Firstbank Holdings, (N54.35 billion).

An Investor that owns a unit of shares in Zenith will be rewarded generously from distributed profit as the lender has a dividend yield of 10.94 percent.

This means that a shareholder gets N109,400 in dividend income for every one millions of shares invested in the stocks.

The dividend yield–displayed as a percentage–is the amount of money a company pays shareholders for owning a share of its stock divided by its current stock price.

Zenith Bank is trading at 3.70 times earnings, which means it is the right time for investors to buy into the stocks because they are attractively cheap.

The lender also benefited from a stock rally as its shares have gained 40.10 percent since the start of the year.

There has been rotation from bonds into equity that has never been witnessed since 2019 as a cut in interest rate by the central bank sent treasury bills tumbling.

The Nigerian Stock Exchange (NSE) circuit breaker has been triggered amid a market wide rally, but the rally isn’t driven by improvement in the macroeconomic fundamentals or improved corporate earnings given rising inflation rate.

The NSE ASI has a year to date of 27.18 percent, according to data gathered from the Bloomberg Terminal.

There are concerns about tepid economic growth and a volatile currency market, and the border closure is responsible for soaring food prices.

Nigeria’s economy has been hobbled as the coronavirus pandemic has triggered a crash in the price of oil, its main export, and an exodus of foreign investors.

Nigeria is likely to enter recession in the third quarter after its economy contracted 6.1% in the second quarter. The government expects the economy to shrink as much as 8.9% this year.

Despite concerns around the macro-economic outcome in Nigeria, analysts at United Capital estimate that robust system liquidity will most probably sustain demand for stocks for the rest of the year amid near zero yields on T-bills.

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