——-As Share Price Hits Roof Top
Zenith Bank’s stock’s current megahit has thrown the market into frenzy . Elated by the development, both the bank and investors are overehelmed as the stock continues to deliver mouthwatering returns. For the bank ,it is a signal of confidence in its potentials ;for the investors, they have made a wise investment decision. For both , it has been a celebration galore .
On Thursday 12th November ,2020 , Zenith Bank’s share price skyrocketed again to hit N28.15 ,a 163 percent capital gains from its N10.70 level in March 23 ,2020 . Its daily return also delivered 9.96 per cent increase . Its 7 days return stands at 21.7 per cent while its total yearly return is 72 percent Asides the investors, the bank too ,is savoring the success . The bank gained N54.93 b between this period . This is the difference between its market capitalization in March which stood at N33.98 b and the November at N883 .91 b . Zenith Bank”s outstanfing shares of 31.40b
. By the above value delivery , the bank outperformed the market both on daily and yearly basis . Equities market closed November 12,2020 ,on a positive note, as NSEASI appreciated by +6.23% to close at 35,342.46 basis points as against +1.90% appreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at +31.67%.
The market turnover closed on positive note as volume moved up by +39.00% as against +48.27% uptick recorded in the previous session. Zenith Bank, FBNH and Access were the most active to boost market turnover. Both Zenith Bank and MTNNN topped market value list. MRS leads the list of active stocks that recorded impressive volume spike at the end of today’s session.
The Nigerian Stock Exchange had to trigger a market-wide circuit breaker at 12:55p.m, when the NSE All-Share Index (NSE ASI) rose beyond the set threshold of 5%, triggering a 30-minute trading halt of all stocks. This was the first time that the circuit breaker had kicked in since its introduction in 2016. As stated by the NSE, the Circuit Breaker protocol which was triggered by the increase of the NSEASI from 33,268.36 to 34,959.39 was aimed at preventing the market from volatile trading activities. The market reopened at exactly 1:25pm with a 10-minute intraday auction session, before resuming continuous trading till the close of the day at 2:30pm .The NSEASI eventually closed trading with a record growth of +6.23%.
Zenith Bank has continued to sustain the confidence of its stakeholders in spite of the fact that the environment is fraught with plenty of uncertainties and hick-ups ,deleterious social and political environment and highly competitive The question remains , what drove Zenith Bank Plc ‘s digit whooping returns to its investors ? This question continues to reverberate among many industry players, analysts and observers. Zenith Bank’s impressive returns reaffirms the bank’s time-honored stature as a leader, innovator and a financial institution of choice Truly, the answer to this question is not far to seek. Like the saying: “a good product sells itself”, Fidelity Bank continues to re-invent itself with unmatched creativity, uncommon innovation and exceptional team work that bring out the best in its management and members of staff.
The above developments underscore investors and analysts’ belief in the growth potential of Zenith Bank . Moreover, it also signals positive expectations that the bank’s third quarter results for 2020 will be impressive and the optimism that the bank may soon declare dividend
Despite the above, according to the stock analysts ,Zenith Bank is not significantly more volatile than the rest of the Nigerian stocks in the past three months while its volatility on weekly basis has been stable over the past year.
Moreover . its impressive earnings power and valuations have continued to drive the stock over time .With its Earnings Per Share, EPS, of N5.96k as its earnings power; Price Earnings ,PE, ratio of 3.87x and dividend of N2.80k and a yield of 11.43 percent ,Zenith Bank is pregnant with necessary potentials that draw investors and dispose them positively to its stock A PE of 3.87 times multiple indicate that the investors are willing to part with more to own the bank’s stocks .
It is difficult not to do so since the bank delivered higher returns on equity and asset .The bank’s ROE at 22.6 percent and ROA of 2.9 percent considered to be very high by analysts. Also , the bank’s current profit margins at 46 percent are higher than the last year at 43.3 percent.In the last five years, it has outperformed both the industry and the market with earnings growth of 16.4 percent against 14 and 10 percent for the industry and the market respectively within the same period. Zenith Bank’s dividend yield at 10.96% is higher than the bottom and top 25 percent of dividend payers in the market which are 3.95% and 9.86 % respectively.
.It outperforms both the industry and the market with its 16.9 percent seven days shareholders return and 43.5 percent one year’s return respectively. In contrast to the above , both the industry and market’s 15 and 8.7 percent 7 days performance and their one year’s 21.9 and 25 percent returns respectively are below Zenith Bank’s returns .The bank’s 5 year return at 54.9 percent equally stays above the industry 38 percent and the market 46 percent negative returns
Leaning against coronavirus-induced headwinds in H1 2020, Zenith Bank recorded a solid performance, maintaining status as the most profitable bank in Nigeria listed on the Nigerian Stock Exchange (NSE). It posted modest growth in PBT of +2.2%, gross earnings of +4.38%, but saw a leap in shareholder’s funds of +20.68%.
Despite the above challenges some banks still sprung surprises developing an iron teeth to break a metaphorical hard nut . One these banks is Zenith Bank Plc ,a traditional industry profit leader. At the end of the first half of the year it topped the table as the most profitable bank with N103.8 billions profit after tax ,an increase of 16.8 percent over the corresponding period of June 2019 .
To achieve the above feat in a deleterious environment was not that easy .Under the stifling environment Zenith Bank could only grow its gross earnings by 4.4 percent from N331,586 billion in the first half of the year 2019 to N346,088 billion in the first half of the ongoing financial year. A detailed of the bank’s book revealed that out of the gross earnings for the period of N346.088bn, N296.983bn or 85.81% was derived from its Nigeria corporate retail and pension custodian services business; followed by the N41.328bn from outside Nigeria (Africa); and N12.283bn from Europe.
Zenith Bank recorded +2.19% Y-o-Y growth in profit before tax, from N111.7bn recorded in H1 2019 to N114.1bn recorded in H1 2020. This was achieved despite the significant increase recorded in operating expenses, operating expenses grew by +113.64% Y-o-Y, however, other operating income increased by +174.01% Y-o-Y. A major driver of the growth in other operating income was foreign exchange revaluation gain which increased significantly by +239.62%, the Group also recorded recoveries of N1bn and gains on disposal of investment of N891m in H1 2020. Profit before tax declined by -5.87% Q-o-Q from N58.79bn recorded in Q1 2020 to N55.34bn recorded in Q2 2020. This was as a result of a -46.49% decline recorded in other operating income and a +5.87% increase in operating expense. The highest percentage increase in profit before tax of +45.67% was recorded in H1 2017 while the highest percentage decline in PBT of -12.35% was recorded in H1 2016.
Total assets of Zenith Bank have an upward trend, total assets grew by +28.51% Y-o-Y, from N5.89trn recorded in H1 2019 to N7.58trn recorded in H1 2020. Major drivers of the growth in total assets were cash and balances with central banks and loans and advances, they both recorded significant growth of +121.77% and +45.65% respectively. The highest percentage increase in total assets was recorded in H1 2020 while the lowest percentage increase in growth of total assets of +6.68% was recorded in H1 2018.
. Loans and advances of the Group also recorded increased by +45.65% Y-o-Y from N1.8trn recorded in H1 2019 to N2.6trn recorded in H1 2020 Zenith bank’s non-performing loans declined to 4.7% in H1 2020 from 5.3% recorded in H1 2019, this shows an improvement in the asset quality of the Group