THE EXPLOITS OF A PROFIT AND INDUSTRY LEADER.
What drives Zenith Bank Plc ‘s profit and industry leadership over years? This question continues to reverberate among many industry players, analysts and observers. Truly, the answer to this question is not far to seek. Like the saying: “a good product sells itself”, Zenith 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. To deliver superior performance while building the capacity to do it again and again, is ,indeed, a big task for a great organization. However, that is exactly what Zenith Bank leaders’ have turned the bank to. Quite unsurprisingly, the bank has been able to expand growth levels year in, year out. And despite the limiting conditions of operations and other related challenges, Zenith Bank stands like the rock of Gibraltar, unshakeable and adaptable to new challenges. The current share price of Zenith Bank Plc is NGN 23.45. The ZENITHBANK stock closed its last trading day (Wednesday, December 9, 2020) at 23.45 NGN per share on the Nigerian Stock Exchange, recording a 0.21% gain over its previous closing price of 23.40 NGN. ZENITHBANK began the year with a share price of 18.60 NGN and has since gained 26.08% on that price valuation, ranking it 29th on the NSE in terms of year-to-date performance.
The bank has continued to distinguish itself in the Nigerian financial services industry through superior service offering, unique customer experience and sound financial indices. The bank has remained 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
Recently , the bank’s outstanding leadership has once again attracted another international recognition and laurel . It emerged the Bank of the Year in Nigeria in The Banker’s Bank of the Year Awards 2020. This is coming on the heels of the awards as the Most Valuable Banking Brand in Nigeria and the Number One Bank in Nigeria by Tier-1 Capital by The Banker won earlier in the year.
The award, which was announced today by The Banker Magazine, Financial Times Group, United Kingdom during the virtual awards ceremony, was based on individual banks’ ability to deliver returns, gain strategic advantage and serve their markets.
Regarded as the industry standard for banking excellence, The Banker’s Bank of the Year awards is contested by the world’s leading financial institutions, with winners chosen across Africa, Asia-Pacific, Central & Eastern Europe, Latin America, the Middle East, North America and Western Europe.
Commenting on the award, the Group Managing Director/CEO of Zenith Bank Plc., Mr. Ebenezer Onyeagwu said that: “it is a thing of joy for us in Zenith Bank to have been recognized by The Banker, Financial Times Group, as the Bank of the Year 2020 in Nigeria. I dedicate this award to our staff for their commitment, doggedness, creativity and very outstanding talents. It is in the talents of our staff that the Bank has continued to build dynamic competencies and capabilities that are driving our business for continued superior performance.” He also expressed his gratitude to the Group Chairman, Jim Ovia, for the pioneering and foundational role he played in building the structures and laying the foundation for an enduring and very successful institution, the Board for the deep insights and outstanding leadership they provide, as well as the Bank’s teeming customers for their support which has enabled the Bank to prove to the market what it can deliver. The above award ,one many of its kinds , was driven by its usual impressive fundamentals .
Zenith’s Impressive Market Fundamentals
Zenith Bank, Nigeria’s biggest bank by profitability, had gross earnings slowing in the 3rd quarter of 2020 but wrenched up bottom line with a deft application of management’s experience beginning from leveraging net interest income. Zenith Bank Plc ,a traditional industry profit leader, sustained its leadership again .
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. As a testament to its resilience and market leadership, Zenith Bank announced an impressive result for the year ended December 31, 2019, with profit after tax (PAT) of N208.8 billion, achieving the feat as the first Nigerian Bank to cross the N200 billion mark
This feat was repeated in the third quarter . Zenith Bank Plc has announced its unaudited results for the third quarter ended 30 September 2020 with gross earnings rising by 4% to N509 billion from N491 billion posted in the same period in the previous year. This performance demonstrates the Group’s resilience against the backdrop of a challenging macro-economic environment brought about by the Coronavirus (COVID-19) pandemic. . .
The result also demonstrates the Group’s ability to deliver optimal pricing for its interest-bearing assets and liabilities in a declining yield environment,
Despite the drop in total interest income from N322 billion to N319 billion the bank hauled up net interest income grew by 5% Year-on-Year (y-o-y) to N225 billion
. Interest expense and cost of funds were down 13% and 27% to close at N94 billion and 2.2% respectively, reflecting the Group’s robust treasury and liquidity management. Zenith Bank showed that it’s not what you get but what you make out of it that matters.
Revenue had had grown marginally by 3.6 percent from N491.268 billion to N508,975 billion, a potential spoiler. But after suppressing interest expenses while at the same time guiding the growth of interest income by 5 percent to net interest income, which is a guide to how well a bank manages the interest rates it pays for borrowing and lending, jumped many paces to give a positive outlook to pre-tax profit.
According to the unaudited account which was presented to the Nigerian Stock Exchange (NSE), this growth was driven by non-interest income which grew by 11% to N173 billion from N157 billion recorded at the end of Q3 2019, reflecting the Group’s increasingly diversified business model
Pre-tax profit of the leading bank, buoyed marginally to N177 billion at the end of Q3 2020, representing a 1% growth over the N176 billion posted in the corresponding period last year. However, its net profit rose better by 5.7 percent from N150 ,723b to N159,315 b .
The third quarter result is the beginning of another attempt to wring good profit as was done in the last financial year, in its attempt to reaffirm leadership of the sector. Its earning power as indicated earning per share jumped by 5.6 percent N4.80 TO N5.07
Total deposits closed at N5.2 trillion at the end of Q3 2020 up from N4.3 trillion in December 2019, dominated by low-cost deposits. Retail deposits grew impressively by 58% to N1.7 trillion at the end of Q3 2020 up from N1.1 trillion as at December 2019, underpinned by the continuous expansion and improvement of the Group’s digital platforms.
In terms of asset quality, the Group’s Non-Performing Loan (NPL) ratio improved to 4.80% (FYE 2019: 4.95%), despite growing loans and advances by 17 % from N2.5 trillion as at December 2019 to N2.9 trillion at the end of Q3 2020, affirming the Group’s prudent credit risk management. The liquidity and capital adequacy ratios (CAR), at 67.4% (Bank: 52.5%) and 21.5% respectively at the end of Q3 2020, remain above regulatory thresholds of 30.0% and 15.0%.
Zenith Bank Plc has continued to demonstrate resilience and industry leadership. In recognition of its track record of excellent performance, Zenith Bank was voted as the Best Commercial Bank in Nigeria 2019 by the World Finance and the Best Digital Bank in Nigeria 2019 by Agusto and Co. The Bank was also recognised as Bank of the Year and Best in Retail Banking at the 2019 BusinessDay Banks and Other Financial Institutions (BOFI) Awards. More recently, the Bank emerged as the Most Valuable Banking Brand in Nigeria, for the third consecutive year, in the Banker Magazine “Top 500 Banking Brands 2020”, Number One Bank in Nigeria by Tier-1 Capital in the “2020 Top 1000 World Banks” Ranking published by The Banker Magazine, Best Bank in Nigeria 2020 in the Global Finance World’s Best Banks Awards 2020, and Bank of the Decade (People’s Choice) at the ThisDay Awards 2020.
The above fundamentals are the major drivers of this bank outstanding stock values at the stock market . Most time it throws the market into frenzy . Elated by the development, both the bank and investors are usually l overwhelmed as the stock always deliver mouthwatering returns. For the bank ,it is a signal of confidence on its potentials ;for the investors, they have made a wise investment decision. For both , it has always 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 outstanding 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