LAGOS: Zenith Bank Plc, Nigerian multinational financial services provider, has announced a record breaking profit before tax of N203.46 billion for the 2017 financial year. It is the highest profit to declared by any Nigerian financial institution yet. Other banks are expected to release their full year results in the coming weeks but analysts doubt if any other bank will beat the performance.
Zenith Bank earnings announcement yesterday has kicked off earnings season for the industry, offering insight into the stellar numbers investors should expect when the big banks start releasing results.
The 2017 audited financial statement of the Zenith Bank shows profit after tax surged by 37.13 percent to N177.93 billion, the highest in five years, based on data gathered by BusinessDay. The bank has consequently recommended a cash dividend of N2.50 per share. This comes to an average dividend yield of 7.9 percent. Zenith Bank’s share price closed at N31 per share yesterday, up 0.32 percent. The stock has returned 20.9 percent in capital gains since the beginning of 2018.
The bank’s gross earnings rose a significant 46.77 percent to a new record high of N745.62 billion in 2017, which beats the N740.52 billion estimates of 11 analysts surveyed by BusinessDay.
The bank’s earnings were boosted by a spike in interest income which was up by 23.42 percent to N474.62 billion in December 2017 as against N384.55 billion in 2016.
BusinessDay analysis shows that interest income was supported by a 82.33 percent rise in income from treasury bills to N109.74 billion buoyed by the attractive rates on government securities in 2017.
“The bank’s result is very impressive” said Ayodeji Ebo, managing director and CEO of Afrivest Securities Limited.
“Loans and advances declined by three percent, which means they were careful in taking risk during the period of fragile economic recovery. With effective yields above 22 percent for one-year treasury bills most of last year, most banks slowed down on credit expansion to the real sector”
Analysts had said that Zenith Bank and other tier 1 lenders were better positioned to ride the economic recovery in 2017.
The tier 1 banks have better capital buffers, more reserves, robust earnings, better market share and an excellent risk management strategy, all of which will help them cushion the provisioning they are expected to take following the rising non-performing loans portfolio in the banking industry.
Despite a slow recovering economy, Zenith Bank was able to more than double its non-interest income within the period to N271 billion, an indication that the bank has a core base of income to tide it over a likely drop in yields on government securities this year. The bank also showed a solid liquidity position with its cash and cash equivalents rising a significant 43.1 percent to N957 billion. Zenith Bank closed 2017 with total deposits of N3.44 trillion, up 15.2 percent while its net asset position or capital position rose 16.6 percent to close at N822 billion.
The bank’s cost to income ratio dropped within the period to a new low of 42.9 percent in 2017, compared to 48 percent in 2016, an indication that the bank is keeping a tight lid on costs protect its income in an increasingly difficult operating environment.
(BUSINESSDAY)
