ZENITH BANK PLC FY'21 Earnings Release - FY'22 profit forecast upgraded after 2021 outperformance

FY’22 profit forecast upgraded after 2021 outperformance                                             

In its audited FY’21 earnings, ZENITHBANK reported a 10% y/y growth in Gross Earnings to ₦766 billion (Vetiva: ₦698 billion). This growth came on the back of a 23% y/y jump in Non-Interest Revenue (NIR) to ₦309 billion, which was mainly a result of a 38% y/y surge in trading gains to ₦167 billion. Meanwhile, Interest Income grew modestly by 2% y/y to ₦428 billion as the bank’s income from interbank placements fell 74% y/y, outweighing the 17% y/y growth in income from loans and advances. However, the bank reported a 7% growth in Net Interest Income, as Interest Expense fell 12% y/y to ₦107 billion with the bank paying 26% less interest on customer deposits, which grew 21% y/y, mainly thanks to a 43% y/y growth in domiciliary deposits to ₦1.3 trillion.                                                  

Q4 surge drives strong year-end performance

ZENITHBANK’s Q4 performance was significantly stronger than the previous periods, as the bank’s Gross Earnings grew 43% y/y to ₦247 billion, the highest earnings growth seen in the final quarter since 2017 (+42%). This was mainly driven by a 145% q/q jump in trading income to ₦77 billion, specifically from net gains on derivative instruments. This drove NIR 76% higher q/q to ₦116 billion. Historically, Q4 has been the bank’s strongest quarter. This was seen once again in the bank’s 13% growth in Interest Income, as the bank’s Net loans grew 11% q/q, the strongest quarterly growth in loans since Q1’20 (12%). Concurrently, the bank reported a 246% jump in impairments during the quarter to ₦31 billion. Overall, this contributed to a 60% q/q growth in PBT to ₦101 billion, while PAT came in 54% higher at ₦84 billion, a 54% q/q improvement."                                                          

Asset growth, quality to remain stable in 2022

The bank reported an 11% y/y growth in Total Assets to ₦9.4 trillion, mainly driven by the 21% growth in total loans. Despite this, the bank reported an NPL ratio of 4.19% down from 4.5% in the previous year. This remarkable improvement was attributed to stringent risk-management practices, highlighted by the fact that despite the significant jump in loans (+21% y/y), the bank’s NPLs grew nominally by only 17% y/y to ₦147 billion. In 2022, we expect loans to grow 14% to ₦3.8 trillion, while NPLs are expected to match this growth to ₦168 billion, an NPL ratio of 4.17%.