Zenith Bank Plc in its recently released last quarter results for the year ended December 30th 2019 showed improvement in profit due to 22.36 percent increase in fees and commission income.
Despite the continuing tough operating environment, the lender has been able to curtail operating expenses as it became the first bank to cross the N200 billion profit marks.
It has an excellent risk management strategy and efficient allocations of loans to critical sectors of the economy as its Non-Performing Loans (NPLs) are below the regulatory threshold.
The Bank for the full year 2019 maintained its regular dividend payment, and it has paid investors a final dividend of N78.50 billion for 2019 financial year (on the basis of N2.50 per share) for every N0.50 share, and it had paid an interim dividend of N9.42 billion (N0.30 per share).
The lender’s investment in the latest technology with a view to magnifying earnings and spurring shareholders value has paid off as income from electronic product transaction surged by 108 percent.
A further breakdown electronic transaction showed income from Zenith Mobile surged by 106.38 percent to N8.46 billion in December 2019 from N4.07 billion as at December 2018.
Income from internet banking surged by spiked by 69.95 percent to N11.56 billion in the period under review from N6.82 billion as at December 2018.
Volume of electronic product transactions was up by 32.65 percent to 163.70 million in the period under review from 123.40 million as at December 2018.
Volume of transaction from USSD (Unstructured Supplementary Service Data) increased by 84.48 percent to 193.70 million in the period under review from 104.80 million the previous year.
The Bank offers its client a wide range of corporate, investment, business a wide of corporate, investment, business, and personal banking and solutions.
Zenith Bank was established in May 1990 and started operations in July same year a commercial bank. It became public limited company on June 17, 2004 and was listed on Nigerian Stock Exchange on October 21, 2004.
The Bank won the award for the best commercial Bank 2019 by The World Finance; Most Valuable Bank Brand by The Banker; Best Digital Bank by Augusto and co; Bank of the year by BusinessDay Media; Best Bank in Retail Banking by BusinessDay Media, and Most innovative Bank of the year (2019), by The Tribune Newspaper.
FESS AND COMMISSION INCOME ADD IMPETUS TO GROSS EARNINGS
Gross earnings for the year ended December 2019 increased by 5.06 percent to N662.25 billion from N630.34 billion corresponding period of 2018; largely driven by a 29.16 percent increase in noninterest revenue to N232.12 billion from N179.96 billion over the same period.
The increase in noninterest revenue was propelled by fees and commission income and trading gains that recorded an uptick of 22.15 percent and 46.87 percent, respectfully.
Interest expense grew by 2.82 percent to N148.52 billion in the period under review from N144.58 billion the corresponding period of 2018.
A breakdown of the components of interest expenses shows that the increase was triggered by an uptick of 16.15 percent in interest expense on savings accounts to N21.62 billion from N18.69 billion the corresponding period of last year.
EFFECTIVE MANAGEMENT OF EXPENSES RESULT IN INCREASED PROFIT
Zenith Bank’s pretax profit was up 5.07 percent to N243.29 billion in the period under review from N231.15 billion the corresponding period of last year.
The improvement in profits was largely supported by an upsurge in noninterest income and the ability of management to curtail costs even amid a tough and unpredictable macroeconomic environment.
The Bank’s drive towards cost optimization continues to yield positive results as total operating expense increased by only 3 percent (lower than 12.13 percent January inflation figure) to N231.82 billion in December 2019 from N225.50 billion the previous year.
Cost to income ratio improved to 48.80 percent in December 2019 from 49.30 percrnt as at December 2018. This means the lender has kept cost to the barest minimum while magnifying earnings.
Net income increased by 7.97 percent to N208.84 billion in December 2019 from N193.42 billion the previous year.
EXCELLENT RISK MANAGEMENT STRATEGY SENDS NPLS TO THREE YEAR LOW.
Zenith Bank’s risk management strategy through portfolio diversification across the sectors of the economy has yielded fruit as Non-Performing Loans (NPLs) fell to 4.30 percent in the period under review from 4.98 percent in 2018 and 4.70 percent in 2017.
The Bank adopts a complete and integrated approach to risk management that is driven from the Board level to the operational activities of the bank.
Risk management is practiced as a collective responsibility coordinated by the risk control units and is properly segregated from the market facing units to assure independence.
STRONG BALANCE SHEET VALIDATES AGGRESSIVE LENDING
For the year ended December 2019, Zenith Bank grew its total assets by 6.34 percent to N6.34 trillion from N5.95 trillion the corresponding period of last year.
The growth in total assets can be attributed to a 24.15 percent rise in property and equipment and deferred tax 24.93 percent.
Gross loans grew by 21.78 percent to N2.46 trillion in the priod under review from N2.02 trillion as at December 2018; propelled by both corporate lending activities and new retail loan products. The 16 percent year on year (YoY) growth in customers’ deposits is a reflection of the increasing confidence in the Zenith brand.
Total deposit from customers was up 15.44 percent to N4.26 trillion in the period under review from N3.69 trillion the previous year.
ATTRACTIVE VALUATION VALIDATES BUY RATINGS FROM INVESTMENT HOUSES
Despite the macro and regulatory risk brought on by Central Bank of Nigeria (CBN) new Loans to Deposit ratio (LDR) rules, reduction in charges, and removal of local and institutional investors from the Open Market Operation (OMO) market, Zenith Bank was able to exceed analysts’ expectations as earnings remained strong while valuations remained attractive.
Zenith Bank has a price to earnings ratio of 2.89 times, the lowest in the industry, which makes its share price an allure to investors.
Investors will receive much in dividend income from the Bank’s stocks then peer rivals.
Zenith Bank has a dividend yield of 14.74 percent, this compares with Guaranty Trust Bank (GTB)’s (9.82 percent); Access Bank, (5.26 percent); United Bank for Africa (UBA), 11.49 percent, and First Bank Holdings, (4.52 percent).
