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Zenith Bank records strong performance, extending supper finish in 2021FY

ZENITHBANK released Q1-22 numbers after the close of trading on 27th of Apri, which showed that the bank recorded a strong performance, extending the strong finish in 2021FY. The bank recorded a significant growth in gross earnings (+21.7% y/y to NGN191.52 billion), supported by growth in both funded and non-funded income. However, a substantial growth in expenses decimated the trickle-down to the bottom-line, although the bank was still able to record a strong growth in after-tax earnings.
Interest income grew by 24.9% y/y to NGN126.38 billion, supported by all contributory lines – loans and advances to customers (+35.7% y/y), Investment securities (+16.5% y/y). Interest expense also rose significantly, increasing by 43.5% y/y to settle at NGN25.85 billion. Given the recent results by other players, it seems there have been increased funding cost pressures across the industry. However, the nominal increase in income was enough to lead to a growth in net interest income. After accounting for a substantial 75.3% y/y increase in credit impairment charges, net interest income (ex-LLE) settled 20.9% higher year-on-year.
The bank recorded an 11.8% y/y growth in non-interest income, which was supported by robust growth in net fees and commissions income (+16.7% y/y) and trading income from investment securities (+159.2% y/y), even as a substantial FX revaluation loss of NGN10.48 billion (vs gain of NGN6.90 billion in Q1-21) pressured other operating income. Given the growth from funded and non-funded income, operating income settled 15.7% higher year-on-year.
Operating expenses expanded significantly during the period, and pressured the trickle-down impact of the operating income growth to the bottom-line significantly. All contributory lines impacted, however, the impact of regulatory charges – AMCON levy (+12.8% y/y to NGN21.40 billion), personnel expenses (+16.1% y/y to NGN21.54 billion) and the inflationary environment – fuel and maintenance (+329.1% y/y to NGN3.42 billion) were more pronounced on the bank’s earnings. Following the OPEX growth relative to operating income growth, the bank’s cost-to-income ratio (ex-LLE) settled marginally higher at 55.0% (Q1-21: 53.2%).
Notwithstanding, the profitability was stronger, with profit-before-tax settling 11.4% higher year-on-year.
Analysts say they like that Zenith Bank maintained the earnings growth momentum belying the tough operating environment. The bank has continued to grow both its core and non-core banking businesses well, and seems in line to record a good 2022FY.