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Recently released first quarter results of Zenith Bank plc have indicated strong improvement and strategic performance across key line items.

Whereas gross earnings was higher by 14.52% y/y (-20.91% q/q) at NGN169.19 billion, PAT and PBT also grew by 22.17% y/y (+6.07% q/q) and 25.55% y/y (-3.32% q/q) to NGN54.0 billion and NGN47.08 billion respectively.

Industry analysts say the observed increase in Gross earnings was largely supported by strong upticks in interest income (+20.77% y/y, +26.39% q/q) and other income (+177.20% y/y, -30.57% q/q), which muted the declines in fee and commission income (-1.38% y/y, +8.97% q/q), and trading income (-75.76% y/y, -97.75% q/q).

Besides, the positive growth (contrary to GTB’s performance) in interest income was driven by increased earnings in treasury bills trading (+88.86% y/y, +100.15% q/q), which outweighed the drop in interests earned on customers’ loans and advances (-2.19% y/y, +4.58% q/q).

On the other hand, the significant decline in interest paid on borrowed funds (-19.02% y/y, -43.98% q/q) – which constitutes 56.93% of total interest expense paid – drove the 1.62% y/y (-17.07% q/q) dip in interest expenses for the quarter.

Accordingly, net interest income grew by 35.83% y/y and 69.73% q/q. In the same vein, the annualized net interest margin improved by 160 bps y/y to 9.30% (slightly below GTB’s 9.52%), following improvements in asset margin (+62 bps y/y to 7.92%) and cost of funds (-90 bps y/y to 4.10%).

The 1.38% y/y (+8.97% q/q) downtick in fee and commission income (which constitutes 78.41% of total NIR) to NGN20.84 billion, and the 75.76% y/y decline in trading income (-97.75% q/q to NGN1.71 billion), offset the growth in other income (+177.20% y/y and -30.57% q/q to NGN4.03 billion), causing a contraction in NIR (-10.36% y/y and -73.71% y/y) to NGN26.57 billion.

Also, the sharp declines in current account fees (-48.16%) and forex trading income (-85.55% y/y) were the major drivers of the downturn in fees and commission and trading income respectively.

Just as provision for loan impairment was 42.01% y/y (-91.06% q/q) lower at NGN4.57 billion during the quarter the result doused expectation, considering the implementation of IFRS 9. The decline in impairment charge, as well as the significant drop in gross loan and advances by 9.5%, drove improvement in cost of risk by 40 bps y/y to 0.90%. The ratio of non-performing loans to total loan book increased to 4.30% from 3.2% in the previous year.

The loan-to-deposit ratio dropped 178 bps to 50.7%, as the decrease in loan and advances matched a slower reduction in customer deposits (-1.2% to NGN3.40 billion).

The result revealed that total operating expenses increased by 32.67% y/y (+15.13% q/q) to NGN63.90 billion, largely driven by a surge in AMCON fees to NGN12.08 billion, from NGN5.36 billion in the previous year. Cost-to-income ratio increased to 54.20%, from 52.10% in the previous year.

IFRS 9 adjustments weighed on the bank’s CAR, which dropped 210 bps, following transfer of NGN138.13 billion from retained earnings to loan reserve ratio.

The result was impressive, analysts as Codros Capital say.