ZENITH BANK PLC Q1'22 Earnings Release - Interest Income supports Q1 earnings

Interest Income supports Q1 earnings                                                      

In its Q1’22 financial statements, ZENITHBANK reported a 22% y/y rise in Gross Earnings to ₦191.5 billion (Vetiva: ₦201.1 billion), after Interest Income grew 25% y/y to ₦126 billion (Vetiva: ₦111.6 billion), while Non-Interest Revenue (NIR) grew 12% y/y to ₦57 billion (Vetiva: ₦81.5 billion).  The impressive Interest Income growth was driven by a 36% rise in income from loans to customers, as the bank’s loan book grew 25% y/y. Meanwhile, NIR growth came after T-Bills trading income more than doubled y/y to ₦33 billion, helping to offset the ₦10 billion in FX revaluation losses recorded during the period.

On the other hand, the bank’s Interest Expense went up 44% y/y to ₦25.8 billion, a consequence of the 28% y/y rise in deposits which saw interest paid on deposits rise across all account types, although we do note that this figure was 10% below our Q1 expectation of ₦28.7 billion. Margin-wise, we estimate that Cost of Funds (CoF) rose 20bps y/y to 1.5%, while Net Interest Margin fell 10bps to 5.6%. Impairment charges rose 75% y/y to ₦6.7 billion, while Opex grew 19% y/y to ₦83 billion; this was driven by a 13% increase in AMCON charges. Overall, the bank posted an 11% increase in PBT to ₦67.9 billion, while bottom line grew 10% y/y to ₦53.1 billion.                                                

Stronger Interest Income growth expected in FY’22

ZENITHBANK’s impressive 21% growth in Net Interest Income supported gross earnings growth, making up for the slower than expected rise in NIR. Given the solid balance sheet growth witnessed in Q1, we have adjusted our FY’22 expectation to 18% y/y growth (Previous: 13%) and forecast a FY balance sheet figure of ₦11.2 trillion. Furthermore, we expect deposits to grow to ₦7.9 trillion, up from our previous estimate of ₦7.4 trillion and a 22% y/y increase overall. That said, we project an Interest Income of ₦505 billion for the full year (Previous: ₦446 billion), while Interest Expense is expected to reach ₦109 billion (Previous: ₦115 billion), giving us a Net Interest Income forecast of ₦396 billion (Previous: ₦332 billion).