ZENITHBANK PLC 2022FY Earnings Result- Impairment Charges Incurred on Ghana Debt Securities Slowed Profitability
Zenith Bank released the audited Full-year results for 2022, revealing a strong topline performance. Gross Earnings, which exceeded our 2022FY estimates, grew by 23.51% YoY to NGN945.55bn on the wheels of increased interest and non-interest income. For context, Interest Income climbed 26.33% YoY to NGN540.17bn while Non-Interest Income grew by a notable 19.95% YoY to NGN405.39bn. On the flip side, Operating Expenses surged 17.32% YoY to NGN339.69bn owing to rising energy costs and regulatory costs. Profit Before Tax (PBT) at NGN284.65bn fell shy of our estimates by 8.79% due to the rise in loan loss provisions (impacted by impairment on Ghana securities) and OPEX both of which exceeded our projection. As a result, Net Profit Margin slipped by 8.26% to 23.68% in the period.
Overall, we adjust our target price for Zenith Bank to NGN29.26 on the wheels of anticipated higher loan growth, rise in both interest and non-interest income that would translate to profits. At its current price of NGN25.80 as of 3rd April 2023, this translates to an upside prospect of 13%. Thus, we put an OVERWEIGHT rating on the stock.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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