ZENITHBA | Cost containment
Zenith Bank's FY '18 results continued the trend of improved funding and operating costs and cost of risk. In line with our investment thesis, these improvements supported earnings growth (+11.2% yoy) and the Group's ROE (23.8% versus a three-year average of 22.5%). We were impressed with management's ability to control costs given the low growth operating environment. In our view, the counter offers a compelling opportunity to increase Nigerian banking exposure as the Group trades on a forward P/B multiple of 0.9x. We calculate a forward dividend yield of 12.2%. Based on our normalised ROE assumption of 20.0%, we believe the counter is undervalued.
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