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How Zenith Bank Remained @ Zenith Even In Recession


The recent release of Zenith Bank’s 2016 half-year result has continued to elicit commendations as analysts are upbeat that the bank has surpassed predictions and the serial meltdown currently challenging every sector. NIGERIA BUSINESS HiLIGHTS looks at the implications of the bank’s financial result and its consolidating position in the industry.


In practical terms, when one is driven by a culture of excellence and strict adherence to global best practices, the result is always stability on the top. Zenith Bank Nigeria Plc, has combined vision, skillful banking expertise, and cutting-edge technology to create products and services that anticipate and meet customers’ expectations; enable businesses to thrive and grow wealth for customers.

Within twenty-two years, Zenith bank has demonstrated rare resilience and has witnessed exponential growth in virtually all areas. Today, Zenith is undoubtedly one of Nigeria’s strongest financial services institutions and one of the country’s largest banks by market capitalization, shareholders fund and profitability.

The bank’s growth momentum has increased over time and impacted positively on its standing as a market leader. In essence, Zenith Bank continues to make remarkable success on the sustainability agenda which is at the heart of its strategic and business models. As a result, Zenith bank is better positioned to continue on its growth trajectory and our desire to be a vital part of people’s lives and businesses.

Excellent service delivery and development of superior asset quality, strong capital base, professionalism and corporate governance have provided the grounds for consistent high returns to stakeholders. The bank maintains sound risk management and corporate governance culture in line with global best practices.

No doubt, experts believe that since 2004, when the Central Bank of Nigeria (CBN) directed Nigerian banks to put in place a management succession plan, many banks did not take it seriously.

But Zenith Bank in its usual proactive approach to banking puts in place a team of high caliber managers as part of efforts to fortify succession architecture. That design today, produced Mr. Peter Amangbo as the Group managing Director who took over from Godwin Emefiele now CBN Governor.

Amangbo’s leadership intelligence drove Zenith Bank to its current higher levels in both strength and financial services delivery.

Latest in the line of success records is the Zenith Bank’s half year 2016 results which were published recently.

The report clearly attests to the fact that investors who put their money in the bank are in safe hands. Shareholders in the bank will be getting a 25 kobo per share as interim dividend at a time when most companies listed on the Nigerian Stock Exchange are posting losses. The bank however, is not insulated from the crash of crude oil prices which has almost brought the Nigerian economy to its heels.

However, the current economic recession resulting from the crash has had a solitary effects on the operation of Nigerian banks as Zenith bank result showed a slight decline in the bank’s gross earnings of N192 billion as against the N213.5 billion it earned in the second first half of last year.

But in their usual financial intelligence super structure, Zenith bank’s management has made spirited effort to maneuver the affairs of the bank through a tough and turning financial environment.

Income from interest charged on loans and advances improved marginally from N160 billion in June 2015 to N165.6 billion in June 2016 which is to be expected in a period of economic recession. Interest and similar expenses stood at N49.6 billion as at June 2016 a decline from the N59.2 billion expenses incurred on interest as at June 2015.

As a result, Net Interest Income has a positive result of N116 billion over and above the N100.8 billion the bank earned in June 2015. This however, declined to N104 billion after provisions were made for impairment losses on financial assets.

Profit Before tax stood at N56 billion lower than the N67.7 billion achieved in June 2015. Zenith Bank’s Profit After Tax thus stood at N40billion while other comprehensive income from the group stood at N44.1 billion. It thus made a profit before making provision for non performing loans, depreciations and others of N56.964billion during the operating period.

The bank also made Provisions of N11.655billion against nonperforming loans and the sum of N38.89billion was the total cost of running the bank during the period, while personnel cost amounted to N31.745 billion. On removing the provisions made and the cost of running the day to day affairs of the bank including staff salaries and allowances, the bank made a profit before tax during the period of N56.016 billion.

Daily Champion findings showed that the marginal growth in loans and advances and the decline in non-interest income may have been fueled by the decline in the profit before provisions.

Besides, the decline in non-interest income stood out more as the magnitude of the declines show, due to low trading income, and to a lesser extent, fees and commission.

It is on record that Zenith Bank paid the sum of N15.98billion as taxes to government at the corporate tax rate of 41.4 per cent. It however made some gains of N30.2billion from other comprehensive income net of tax which swelled its profit after tax. The bank non performing credit in the second half of 2016 stood at N35.4billion and its ratio of nonperforming loans to total loan portfolio is just 1.64 per cent making it one of the best in the industry.

Coming slightly above the 8 per cent industry average and regulatory requirement of  ratio of 5 per cent, the bank’s total loans and Advances as at June 2016 had a record of N2.114 trillion as against the N1.849 trillion on its books as at end of December 2015. Zenith total Assets grew from N3.75trillion in December 2015 to N3.952 trillion in June 2016. Its shareholders fund recorded a figure of N542 billion as against the figure of N546 billion in June 2017.

Interestingly, the development again puts the bank on a comfortable footing as its capital adequacy ratio is above the regulatory requirement. Going by these financial indices the bank’s earnings per share stood at 126 kobo while it proposed an interim dividend of 25 kobo per share. This will gladden the hearts of shareholders at a time when most companies are returning negative results.

Another strategic revelation from the 2016 half year report is that whereas most of its peers are declaring less than average results the bank performance indicators showed it operated profitably though the year on year difference in its Profit Before Tax was 20 per cent lower when compared to its previous year’s record due to the prevailing economic difficulty the country in passing through.

Records further show that Zenith Bank within the period under review had prudently invested in its off shore subsidiaries is now benefiting from the investment as the boost to the PAT is observed to have came from foreign exchange-related gains in the light of the recent introduction of the flexible exchange rate that resulted in the devaluation of the naira.

The feat according to analysts as contained in a note to investors after the result was released, FBN Capital said “As with several of the banks which have reported second quarter results, the impact of the naira devaluation has proved significant, distorting the bottom line. Further devaluation since end-June implies that more gain is likely for Zenith when it reports third quarter results.

The run-rate of the PBT implies that the bank is running in line with management’s full year PBT guidance of N126billion. The only other point that will give the market some concern is the loan loss provisions line. Although we do not believe the quarter to quarter increase in provisions (relative to revenue delivered) justifies the concern, we understand why it will draw some scrutiny.

“The loan loss provision figure of N11.7 billion was significantly higher than our N4.4billion estimate. Having said that, profit before provisions beat our forecast by 16 per cent, and in naira terms by more than the difference we see between the reported N11.7billion and our N4.4billion estimate.

It added also that “Zenith is proposing an interim dividend of 25kobo as we expected. On the back of these results, we would expect consensus full year PBT to remain broadly unchanged. Year to date, Zenith shares are up 11 per cent as against All Shares Index ASI’s -4.7 per cent. We rate Zenith shares Outperform”.

Daily Champion recalls that Zenith Bank Plc was established in May 1990, and commenced operations in July of the same year as a commercial bank. The Bank became a public limited company on June 17, 2004 and was listed on the Nigerian Stock Exchange (NSE) on October 21, 2004 following a highly successful Initial Public Offering (IPO). Zenith Bank Plc currently has a shareholder base of about one million and is Nigeria’s biggest bank by tier-1 capital. In 2013, the Bank listed $850 million worth of its shares at $6.80 each on the London Stock Exchange (LSE).

Headquartered in Lagos, Nigeria, Zenith Bank Plc has over 500 branches and business offices in prime commercial centres in all states of the federation and the Federal Capital Territory (FCT). In March 2007, Zenith Bank was licensed by the Financial Services Authority (FSA) of the United Kingdom to establish Zenith Bank (UK) Limited as the United Kingdom subsidiary of Zenith Bank Plc. Zenith Bank also has subsidiaries in: Ghana, Zenith Bank (Ghana) Limited; Sierra Leone, Zenith Bank (Sierra Leone) Limited; Gambia, Zenith Bank (Gambia) Limited. The bank also has representative offices in South Africa and The People’s Republic of China. The Bank plans to take the Zenith brand to other African countries as well as the European and Asian markets.

Zenith Bank Plc blazed the trail in digital banking in Nigeria; scoring several firsts in the deployment of Information and Communication Technology (ICT) infrastructure to create innovative products that meet the needs of its teeming customers. The bank is verifiably a leader in the deployment of various channels of banking technology, and the Zenith brand has become synonymous with the deployment of state-of-the-art technologies in banking.

In a statement personally issued by the GMD of Zenith Bank and posted on the bank’s website, Peter Amangbo said “Going forward, our challenges will include, though not limited to, further elevating our standing as a reputable financial institution by establishing a corporate structure that can stay imperturbable. However, I am glad that we are well positioned and adequately equipped to remain at the forefront of Nigeria’s financial services sector”.