In its Q1’21 earnings report, ZENITHBANK posted a 6% y/y dip in Gross Earnings to ₦157.3 billion. The decline was the result of a 12% y/y decline in Interest Income to ₦101.2 billion, which was caused by declines in income from T-Bills and interbank placements. However, Non-Interest Revenue (NIR) climbed 7% higher y/y, thanks to a 71% jump in fees and commissions to ₦36.4 billion, which offset declines in trading income and FX revaluation gains of 36% and 52% y/y respectively.
Meanwhile, the bank actually reported a 2% y/y improvement in Net Interest Income (NII), due to a 45% drop in Interest Expenses to ₦18.0 billion. This improved the bank’s Net Interest Margin to 6.3% (FY’20: 5.2%). Furthermore, the bank recorded a 2% y/y decline in impairment charges, despite loan loss provisions remaining flat y/y at ₦3.5 billion. On the other hand, Opex grew 4% y/y to ₦74.4 billion; as with other banks in our coverage, this was driven by an increase in AMCON charges, which increased by ₦3.5 billion to ₦18.9 billion.  Ultimately, this led the bank to report a  PBT figure of ₦61.0 billion and bottom line of ₦53.1 billion, a 5% y/y improvement.

Solid NIMs driven by improved CASA mix
ZENITHBANK’s impressive 2% growth in Net Interest Income came about due to a 45% decline in interest expense, which was driven by a 66% decline in interest paid on time deposits, as well as a 23% decline in Interest paid on borrowed funds. This came about due to a shift in the bank’s CASA mix, as Demand on Current account deposits increased by 65% y/y, Savings by 58%, whilst time deposits fell 30% y/y. Looking forward, we expect the bank to continue attracting lower costing funds, maintaining its positive net interest growth despite weaker interest income. Thus, we lower our Interest Income projection to ₦400.5 billion (Previous: ₦460.9 billion) and our Interest Expense forecast to ₦94.7 billion (Previous: ₦127.3 billion), giving us a FY’21 Net Interest Income line of ₦305.7 billion (Previous: ₦332.9 billion).