FREE

ZENITH BANK PLC (ZENITHBANK) FY'20: Non-Interest Income, lower taxes boost profits 10% y/y

ZENITHBANK released its audited FY’20 earnings, reporting a 5% y/y growth in Gross Earnings to ₦696 billion (Vetiva: ₦679 billion). This came as a result of a 12% y/y jump in Non-Interest Income to ₦275 billion, which itself was occasioned by a 276% y/y surge in FX valuation gains to ₦43 billion.

Meanwhile, Interest Income inched up 1% y/y to ₦421 billion while Interest Expense fell 18% y/y to ₦121 billion causing Net Interest Income to rise 12% y/y to ₦300 billion (Vetiva: ₦310 billion). Despite this, the bank’s Net Interest Margin deteriorated 4% y/y to 7.9%, as the bank’s total assets
increased by an impressive 34% y/y. Furthermore, loan loss provisions surged 65% y/y to ₦40 billion, while Opex growth was fair at 10% y/y, coming in at ₦280 billion (Vetiva: ₦284 billion). Overall, this led to a FY PBT of ₦256 billion (Vetiva: ₦251 billion), while a significantly lower tax bill - occasioned by various write-offs on some of the bank’s charitable actions during the year -- propelled the bank’s PAT 10% higher y/y to ₦230 billion. This yielded an EPS of ₦7.34; thus, management proposed a Final dividend payment of ₦2.70, bringing the bank’s total dividend payout for the year to ₦3.00 (Vetiva: ₦3.01).

Yield rebound to propel profits further in FY’21
Despite the various challenges of the Covid-19 pandemic, ZENITHBANK was able to achieve impressive growth across key balance sheet items. The bank grew Loans and Advances by 21% y/y to ₦2.8 trillion, while customer deposits grew 25% to ₦5.3 trillion. Furthermore, the bank was able to maintain NPLs at 2019 levels (4.3%, regulatory benchmark: 5%), mainly due to the restructuring of a large part of its loan book at the onset of the pandemic. However, the fact that the bank managed to maintain NIMs and low cost of risk (1.5%) indicates that, should the Nigerian economy rebound as expected in 2021, the bank would be able to achieve further gains in profitability. Furthermore, as the CBN continues to raise rates in the Fixed Income market, we expect this to reflect in further gains in both Interest and Non-Interest Income.