Zenith Bank Retains Profit Leadership Amidst High Interest Rate,Credit Risk Environment
Zenith B a n k , in the first nine months of 2024 financial year delivers exponential Profit and retains its leadership amidst interest and inflation rate -induced cost environment.
The inclement nature of the operating environment of the banking industry in which the players do their businesses has continued to give them a sleepless night in the last few years; more importantly ,the competitive space has been paved with critical but hostile and hard policies, setting up the industry for failure; and Zenith B a n k is not immune from this too .
While the Central Bank of Nigeria, CBN, is trying to keep the policy rate higher to bring down the inflation rate , the exercise has continued to stretch the capacity of borrowers to repay debt .Even the excessive inflation rate led to an overheated economy with weak purchasing power and weak saving capability of the entire populace .
But Zenith B a n k has proved itself capable of navigating in a rough weather . It has mastered the rope; it frustrated the above potential spoilers , exploited the available opportunities with dexterity and neutralized some threats to emerge the most valuable and profitable Tier 1 bank in the financial industry . With the release of the third quarter result for 2024 and all its performance metrics practically looking up . Zenith Bank has demonstrated by its nine months performance that its 2024 financial year will once again be a harbinger of a juicier outing.
Gross Earnings
Zenith Bank, Nigeria’s biggest bank by profitability , had gross earnings growing in the third quarter of 2024 and wrenched up bottom line with a deft application of management’s experience beginning from leveraging net interest income.
Zenith Bank Plc posted remarkable growth in gross earnings for Q3 2024, increasing by 118% year-on-year to NGN2.9 trillion, driven by the expansion of both interest income and non interest income. Interest income saw a notable 190% rise to NGN1.95 trillion, attributed to the high-yield environment. Non-interest income rose by 41% to NGN856 billion, bolstered by substantial growth in fees and commissions, which highlights the strength of Zenith Bank’s retail growth and the robust performance of its digital channels during the reporting period
To achieve the big buck ,the bank had to ensure the yield on its earning asset moved at a greater paces than its cost of fund just as it deployed bigger volume of earning asset to generate bigger revenue . Consequently ,while its Interest and similar expense grew at a slower pace at 161% to hit N666.44b from N255.70b, its Interest and similar income grew faster at 190% to N1.95trn in 2024 from N670.93b
Consequently, its Net interest income accelerated by 208% to N1.28trn from N415,23b. This feat could be linked to the Zenith Bank’s capability to manage the risk of mismatches between assets and liabilities and between borrowing and lending rates ; its fund transfer pricing. a method used by bankers to evaluate the profitability of deposits and loans, is also demonstrated to be superb . .This is confirmed by its Net interest margin (NIM),a guide to how well a bank manages the interest rates it pays for borrowing and lending, which increased to 10.0% from 5.6%
Strong Profitability
In the period under review , Zenith Bank’s profitability was also strong, with profit before tax increasing by 99% to NGN1.0 trillion and profit after tax growing by 91% to NGN827 billion. This profitability increase reflects the Bank’s focus on operational efficiency and strong risk management practices.This strength of profitability is also confirmed by Earnings per share (EPS) which nearly doubled, rising to NGN26.34 from NGN13.82 in Q3 2023, underscoring Zenith Bank’s
strong value creation for shareholders.
With that rise in pre-tax profit, the bank’s net profit flew 91% percent to N 827.28billion from N 434.17 billion in the period, leading to a rise in Earnings per share (NGN) N26.34 from N13.82k ,an increase of to 9131.7 percent.The third quarter result is another attempt to wring good profit as was done in the last financial year, in its attempt to reaffirm leadership of the sector.
To cement its place as the most profitable bank, return on equity (ROAE), and return on assets (ROAA), improved to 37.8%per cent and 4.3% per cent in 2024 from 35.1% per cent and 3.8% per cent respectively in 2023
The Bank’s balance sheet grew significantly, with total assets growing by 49% to NGN30.4 trillion, largely supported by customer deposits, which rose by 42% to NGN21.6 trillion. This growth in deposits was broad-based across corporate and retail segments, highlighting the Bank’s deepening reach and customer loyalty. Gross loans increased by 46% to NGN10.3 trillion, underscoring our commitment to supporting strategic sectors in the economy.
Similarly, the bank’s shareholders’ fund grew heavily by 51%per cent, from N 2.32trn in 2023 to N3.51trn in 2024. For such weighty shareholders’ fund, it is natural to pull in heft deposits as Customer deposits grew 42% percent to N21.57trillion from N15.17trillion.
Its Cost of funds increased to 4.3%, reflecting the broader market trend of rising interest rates, while the cost of risk was maintained at 7.3%, underscoring the Bank’s proactive approach in provisioning for credit risk.
The Bank’s cost-to-income ratio rose to 39.5%, reflecting the impact of strategic investments in technology and capacity building aimed at supporting long-term growth, even as it continues to strive for greater operational efficiency.
Zenith Bank’s asset quality remains a cornerstone of its strength, with a non-performing loan (NPL) ratio of 4.5%, within regulatory limits. A high coverage ratio of 198.4% underscores the Bank’s disciplined approach to risk management, positioning it for resilience in the face of market volatility while supporting stable loan growth.
The bank’s balance sheet was robust as Liquidity ratio – Bank 52.7% 45.0% ; Group 57.0% 71.0% ; Loan to deposit ratio – Group 47.9% 46.5% 3% ; Loan to deposit ratio – Bank 52.3% 52.8% ; Capital adequacy ratio (CAR) 21.9% 21.7% 1% all well above the regulatory threshold
The bank’s non-performing loans ratio, however, increased marginally to 4.5% per cent in 2024 from 4.4% per cent in 2023 . However, this is still within the regulatory threshold and far below industry peers. Coverage ratio 198.4% 191.1%
Also, the bank’s robust risk management framework ensured that the cost of risk grew significantly from 5.5 per cent in the prior year to 7.3 per cent in 2024 . This was due to the increase in impairment charges . In the same breadth, coverage ratio increased by 34.2 per cent from 191 per cent to 198.4 per cent over the same period, an indication of prudent disposition consistent with the bank’s known record of excellent credit risk management.
The bank’s customer deposits grew by 42 per cent led by an increase of N109 billion in savings and an increase of N122billion in current accounts, providing it with a platform to rebalance its deposits mix. In 2018, costly deposits were foregone in favour of cheaper and more stable deposits resulting in a reduction of expensive and shorter dated deposits by N110 billion. This culminated in the reduction of cost of funds which declined by 40 per cent from 5.2 per cent in 2017 to 3.1 per cent for the year.
The results were a testament of the bank’s efforts to deepen its roots in the retail segment. This has led, in the main, to a remarkable increase in the volume of transactions across various electronic platforms as well as significant customer acquisitions. This growth in transactions on the bank’s digital channels continues to support the bank’s retail push as fees with retail deposit balances also growing aggressively. The bank stated that it would continue its investment in the retail end of the market to consolidate its leadership in both the corporate and retail segments.
Zenith Bank remains steadfast in its commitment to sustainable growth and value creation. The Bank launched a capital raise program on August 1, 2024, consisting of a combined Rights Issue and Public Offer. This capital raise was driven by the Central Bank of Nigeria (CBN)’s recapitalization directive for commercial banks issued in March 2024. While the Bank awaits final capital verification approvals from authorities, the fundraising exercise was successful, reflecting strong confidence in Zenith Bank’s brand. The additional capital will enhance the Bank’s ability to expand its product offerings, deepen its penetration in strategic sectors, boost lending to the real sector and pursue its African and global expansion plan. In furtherance of this, the Bank in September 2024 received regulatory approval for the establishment of a Zenith Bank branch in Paris, France, which is fully operational and will enhance the Bank’s product offerings in international markets.
With a strengthened capital base, Zenith Bank will be well-positioned to navigate the evolving economic landscape, while putting best-practice sustainability standards at the heart of its business. Management will also continue to prioritize opportunities that enhance stakeholder value and a strong compliance and corporate governance culture, which will reinforce the
Bank’s leadership position within Nigeria’s financial sector and drive long-term growth
Speaking on the performance for that financial year, Chairman, Jim Ovia, assured shareholders of the bank’s commitment of continuing to deliver superior returns in the years ahead. Ovia said Zenith Bank remains a clear leader in the digital space, with several firsts in the deployment of innovative products, solutions and an assortment of alternative channels that ensure convenience, speed and safety of transactions. “To continue to cater to the varied appetites of our customers in a constantly changing world and stay ahead of the competition, therefore, we have invested massively in new technologies and innovative solutions in the last financial year. This is geared towards ensuring that we continue to provide best in class quality services that create value for all our stakeholders,” he said, noting that Zenith Bank made significant progress in the adoption and integration of sustainable banking principles into its business, especially in its credit administration process.
Consistent with this excellent performance and in recognition of its track record of stellar performance, the bank was recently ranked as the Most Valuable Banking Brand in Nigeria in 2018 by The Banker Magazine. Similarly, Zenith Bank was recognised as the Best Corporate Governance Bank in Nigeria by The World Finance for the sixth time just as Ethical Boardroom, a Europe based Boardroom watchdog reaffirmed this recognition by naming Zenith Bank as the Best Bank in Corporate Governance in 2018. Recognition has also come the way of the bank as it was recently named the Best Institution in Sustainability Reporting in Africa 2018 (SERAS Awards) and the Bank of the Year 2018 (BusinessDay). According to the bank, its outlook for 2024 is positive, supported by improving macroeconomic conditions, relative exchange rate stability, and expected stability in the oil market
