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Zenith Bank Results Hailed By Analysts As Encouraging

Zenith Bank Plc on Monday  announced its results for the nine months ended September 30, 2016, showing improvement in performance indicators.
The bank ended the period with profit before tax of N121.2 billion, showing an increase of 16.6 per cent above the N104 billion posted in the corresponding period of 2015.
Profit after tax (PAT) rose 20.4 per cent to N100 billion, up from N83 billion as Gross earnings increased by 12.9 per cent from N337.9 billion to N380.4 billion, while net interest income grew by 17.6 per cent from N161.4 billion to N189.8 billion. Similarly, the bank’s impairment charges rose by 124.8 per cent to N9.7 billion to N21.9 billion, while other income soared from N9.7 billion in 2015 to N32 billion in 2016.
Despite the macroeconomic headwinds during the period under review, Zenith Bank attracted more deposits and also gave out more loans and advances.Deposits rose from N2.557 trillion to N2.692 trillion, while loans and advances grew from N1.841 trillion to N2.425 trillion. In all, the bank’s total assets hit N4.654 trillion, up by 16.2 per cent from N4.00 trillion in 2015.
Market operators described the performance as very encouraging, stressing it was an indication that shareholders of Zenith Bank could enjoy a robust harvest at the end of year. Recall that Zenith Bank has paid an interim dividend of 25 kobo to the shareholders for the half year ended June 30, 2016.
Reacting to the results, analysts at FBN Quest, said  given the nine month profit before tax of N121 billion, the N123 billion earmarked by the management for the full year would be surpassed.
The analysts said: On the back of these results, we would expect consensus PBT for 2016 to move up strongly, from N123bn currently, given that the nine months  result is N121 billion. The operating expenses and interest expense figures are disappointing and would draw some scrutiny from the market.
However, we expect the foreign exchange-related gains to more than compensate for these, given their magnitude and the fact that it was the absence of such gains in second quarter (Q2) (especially on the non-interest income line) that led to a muted to negative reaction by the market.”
Assessing the third quarter performance, FBN Quest said  PBT of N58 billion  grew 82 per cent while PAT grew much faster, by 151 per cent  to N83 billion,  thanks to a significant result on the other comprehensive income (OCI) line (boosted by fx translation gains).
“The main driver behind the strong growth in PBT was non-interest income of N61 billion which increased by 125 per cent. This performance compares with a 29 per cent  growth in net interest income. As a result, although both loan loss provisions and opex saw marked increases of 202 per cent  and 40 per cent  respectively, the strong revenue growth more than offset these trends, leading to the 82 per cent PBT growth. Sequentially, the non-interest income line stood out again, with a 239 per cent q/q increase. Unlike Q2 when non-interest income disappointed because fx revaluation gains were largely absent, in Q3 the gains were very visible at N28 billion, slightly over 45 per cent  of the total other-income result,” they said.

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