Zenith Bank Shrugs Off Recession, Increases Net Profit 112.35%

Zenith Bank Plc overwhelmed the storm occasioned by the nagging recession to hike its net profit 112.35 per cent in its half year financial result recently announced by the Nigerian Stock Exchange (NSE).
It went further to put smile on the faces of its shareholders by giving them a ‘half-time’ dividend payment, brightening their gloomy faces occasioned by the recession.
Analysts say, the Zenith Bank stock is one investors should watch out for. For them, if the bank, in an era where the Federal Government is taking banks to court (although the case has been withdrawn) and recession has limited saving power and consumers appetite, then there is more to benefit from the bank in booming days to come.
Zenith Bank declared a Profit After Tax (PAT) of N75 billion, with the directors announcing the payment of an interim dividend of 25 kobo to its shareholders.
The result saw the PAT which grew by 112 per cent, when compared to 2016 half year figures, also record a 77 per cent growth in revenue from N214 billion in 2016 to N380 billion.
The Earnings Per Share (EPS) translates to a dividend yield of 1.0 per cent and a payout ratio of 11.2 per cent.
The financial result presented to the Nigerian Stock Exchange (NSE), gross earnings jumped by N165.628 billion or 77.1 per cent from N214.812 billion in the first half of 2016 to N380.44 billion, with interest and similar income of N262.257 billion, up by N80.849 billion or 44.56 per cent from N181.408 billion. Interest and similar expense however rose to N123.295 billion or N68.91bn or 126.7 per cent, following which net interest income could only rise by N11.939 billion or 9.39 per cent from N127.023 billion to N138.962 billion.
Details of the income its profile of the bank for the period showed that N348.13bn or 91.5 per cent of the revenue was derived from Nigeria corporate, retail and pension custodian services business; while N24.72 billion or 6.49 per cent came from the bank’s African subsidiaries and the remaining N7.59 billion from Europe. In the same way, interest expense of N115.698 billion (92.69 per cent) was derived from Nigeria.
Added to this was an impairment loss on financial assets of N42.398 billion, up from N13.232 billion, representing an increase of N28.166 billion or 197.9 per cent, as net interest income after impairment loss on financial assets dropped from N112.791 billion to N96.564 billion.
Also, N37.249 billion or 87.85 per cent of impairment loss was booked in Nigeria; just like the N112.93bn, representing 93.29 per cent of the admin and operating expenses for the period under review
Fee and commission income improved to N37.753 billion from N30.701 billion, once more driven by account maintenance fee, which stood at N8.325 billion from N8.922 billion; fees on electronic products, rose from N2.008bn in the 2016 half year to N5.38 billion. Asset based management fees stood at N3.764bn from N2.89bn; while commissions on agency and collection services jumped to N3.86bn from N1.62bn. Trading income for the period climbed to N65.318 billion from a loss of N864m in the corresponding period of 2016, mitigating the effect of the impairment loss and operating expenses. Other operating income soared to N15.112bn from just N3.567 billion, lifted by the N8.404 billion “provision no longer required;” followed by N5.562 billion foreign currency revaluation gain, which rose from N2.84 billion. Depreciation of property and equipment rose to N5.53 billion from N4.524 billion.
Personnel expenses increased to N36.21 billion from N34.593 billion; while operating expenses soared to N80.068 billion from N52.477 billion, driven by the rise in AMCON (Asset Management Corporation of Nigeria) levy which rose from N18.752 billion to N21.419 billion; while deposit insurance premium to the Nigeria Deposit Insurance Corporation (NDIC) stood at N5.5 billion, from N5.196bn. Fuel and maintenance cost increased to N9.919bn from N6.362 billion; information technology gulped N6.281bn, from N3.178bn; security and cash handling cost rose to N3.664 billion from N1.474 billion; while advertisement cost increased to N5.871bn, up from N3.161 billion. These left profit before tax at N92.183 billion, as against the N53.905 billion reported in the prior half-year.
There was a drop in income tax expense from N18.438 billion to N16.866 billion; while profit attributable to shareholders for the period jumped from N35.467 billion to N75.317 billion, out of which N69.286 billion or 91.99 per cent was derived within Nigeria.
Zenith Bank’s balance sheet grew to N4.927 trillion, up by N187.542 billion or 3.95 per cent from N4.739 trillion. The bank’s loan and advances book dropped to N2.187 trillion from N2.289 trillion; even as customer deposits dropped slightly to N2.974 trillion, compared to N2.983tr in prior half year. Shareholders’ fund for the period rose from N704.485 billion to N719.333 billion.
A breakdown of the total loans showed that the bulk went to players in the oil and gas sector- N686.209 billion, out of which N11.067 billion is not performing; manufacturing, N523.686 billion, with N6.289 billion toxic; and government, N335.857 billion and N359 million impaired. These were followed by N281.204 billion loan to the general commerce sector, which had N27.146 billion as non-performing; as well as N112.87 billion and N2.86 billion non-performing; among others.

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