Tier 1 financial powerhouse, Zenith Bank Plc (ZENITHBANK) published its H1-23 interim financial results this morning (Sept.11, 2023), recording a 161.7% y/y expansion in EPS to NGN9.29 (H1-22: NGN3.55). The significant growth in the bank’s earnings was supported by the broad-based expansion across its funded (+71.9% y/y) and non-funded (+246.1% y/y) income lines. Management proposed an interim dividend of NGN0.50/share (H1-22; NGN0.30/share), translating to a dividend yield of 1.4% based on the last closing price of NGN36.95/share (11 September).
Cordros Research reports that the bank recorded a 71.9% y/y growth in funded income to NGN415.43 billion, driven by (1) higher yields in the fixed income market and (2) growth in its earning assets (+22.5% YTD to NGN12.25 trillion). Across the contributory lines, the bank generated higher income from loans and advances to banks (+457.8% y/y to NGN21.54 billion), loans and advances to customers (+55.4% y/y to NGN253.95 billion), and investment securities (+88.0% y/y to NGN139.94 billion) in the review period.
Interest expense advanced by 169.5% y/y to NGN153.56 billion, as the elevated interest rate pushed the bank’s funding costs higher. For clarity, the bank incurred higher costs on its customers’ deposits (+236.1% y/y to NGN120.29 billion) as its CASA mix deteriorated to 82.4% (2023FY: 84.6%). In the same vein, the bank’s cost of borrowing increased by 69.4% to NGN32.70 billion following the increase in interest-bearing borrowings (+28.3% YTD to NGN1.63 trillion). After accounting for credit impairment charges (+727.7% y/y to NGN207.93 billion), net interest income (ex-LLE) settled lower by 66.2% y/y to NGN53.94 billion.
Expectedly, non-interest income (NII) surged by 246.1% y/y to NGN515.69 billion, as the naira devaluation drove the significant gains generated from foreign exchange revaluation of NGN355.59 billion (vs. the NGN6.25 billion loss recorded in H1-22). In addition, the FX revaluation gains and income from trading investment securities were sufficient to offset the lower income from net fees and commission (-31.8% y/y to NGN43.92 billion) in H1-23. Consequently, the impressive NII expansion, alongside the growth in net interest income (+41.7% y/y), led to an 84.6% y/y increase in operating income to NGN568.63 billion.
However, within the period under review, operating expenses expanded by 22.8% y/y to NGN219.27 billion, triggered by the increased costs incurred on personnel expenses (+41.6% y/y to NGN56.25 billion) and NDIC insurance premium (+38.8% y/y to NGN13.58 billion) in the review period. Consequent to the faster growth in operating income relative to OPEX, the cost-to-income ratio (ex-LLE) improved, settling at 38.5% (relative to 57.9% in HY-22).
Overall, profitability came in significantly higher, as the profit-before-tax grew by 169.5% y/y to NGN350.36 billion. Likewise, PAT grew by 161.8% y/y to NGN291.73 billion despite the higher income tax expense (+215.3% y/y to NGN58.63 billion).