Business
Zenith Bank: Increase in non-interest income drive profits
By Kayode Tokede
Zenith Bank plc released its audited result and accounts for full year ended December 31, 2020 with significant increase in non-interest Income (NII) that drive growth in profits and dividend payout to shareholders.
The bank thus struggled to grow its interest and similar income following a low-yield business environment during the period.
The lender’s growth in profits was achieved through optimization of its net income on fees and commission, trading gains and other operating income that drive NII by 8 per cent.
Zenith bank in the period under review reported 12 per cent increase in net interest income that also contributed to profit in the year under review.
With 10 per cent increase in profit after tax, the group Earnings Per Share gained 10 per cent to N7.34 in 2020 as against N6.65 in 2019.
Nigerian NewsDirect gathered that the lender in 2020 financial year proposed a final dividend of N2.70 per share which in additiuon to the N0.30 per share as interim dividned amounts to N3.00 per share (2019: interim dividend of N0.30 per share and a final dividend of N2.50 per share).
The group in 2018 had proposed of N0.30 and a final dividend of N2.50 per share (December 31, 2017: interim; N0.25, final; N2.45) from the retained earnings account as at December 31, 2018.
The Group’s audited results for the period under review shows a stable performance in balance sheets position as customer deposits and gross loans advance by 25 per cent and 19 per cent to drive total assets by 34 per cent as at December 31, 2020.
The solid financial performance for the period affirms Zenith’s Bank industry leadership position in profits, resilience and consistency in achieving its strategic objectives despite the challenging business environment.
Zenith Bank offers its clients a wide range of corporate, investment, business and personal banking products and solutions. It is one of the biggest and most profitable banks in Nigeria.
Increase in NII boost profits
Zenith Bank’s for the period under review reported gross earnings gained five per cent to N696.45billion in 2020 as against N662.25billion reported in 2019.
The financial institution reported Interest and similar income of N420.8billion, one per cent increase from N415.56billion reported in 2019, while Interest and similar expense dropped by 18 per cent to N121.13billion in 2020 from N148.53billion reported in 2019.
This, translates into net interest income that gained 12 per cent to N299.68billion in 2020 as against N267.03billion in 2019.
Continuing the trend during the year, Non-Interest Income (NII) gained 8 per cent to N251.75billion in 2020 compared to N231.83billion in 2019.
Also, while fees and commission income tumbled to N79.3billion in 2020 from N100.1billion in 2019, as non-interest income growth was supported by a surge in trading income (mainly on T-bills) to N121.8billion (from N117.8billion).
Notably, electronic banking fees tumbled from N42.5billion to N27.1billion amid regulatory changes and a reduction in transaction volumes due to the lockdown.
However, this was offset by a surge in foreign currency gains and trading income, which surged to N50.7billion from N14.2billion in 2019.
Expectedly, impairment charges printed a 64.5per cent increase to N39.5billion, driving Cost of Risk (COR) from 1.1 per cent in 2019 to 1.5 per cent.
Total operating expenses (OPEX) gained 10 per cent to N256.03billion in 2020 from N231.83billion reported in 2019 , as the bank continued to focus on cost management in the face of weak income growth.
OPEX was driven mainly by ICT charges (N20.4billion vs N9.8billion), AMCON, NDIC (due to deposit expansion), fuel & maintenance, license, registration, and subscription-related expenses.
Consequent on the Opex growth relative to operating income growth, cost-to-income ratio settled lower at 50 per cent in the year under review relative to 48.8per cent in the prior year.
For the period year ended December 31, 2020, the Zenith Bank Group’s profit before tax gained five per cent to N255.86billion in 2020 as against N243.29 billion reported in 2019 while profit after tax rose by 10 per cent from N208.84billion in 2020 compared to N230.57 billion reported in 2020.
With growth in profits, Zenith Bank’s Return on average equity (ROAE) closed 2020 at 22.4 per cent as against 23.8per cent reported in 2019 while Return on average assets (ROAA) dropped to 31.per cent from 3.40per cent in 2019.
The group net Interest Margin (NIM) dropped to 8.2 per cent in 2020 as against 7.90 per cent in 2019, as cost of funds dropped from three per cent in 2019 to 2.1 per cent in 2020.
Policy drives gross loan &advances to customers
The Group closed the period with double-dight increase in total assets amid growth in gross loans and advances to customers and customers deposits.
The total assets of Zenith bank grew by 34 per cent to N8.48trillion in 2020 from N6.35trillion reported in full year ended December 31, 2019.
The Central Bank of Nigeria (CBN) had mandated commercial banks to lend 65 per cent of the deposit to support real sectors of the economy and Zenith bank in 12 months grew gross loans by 15 per cent to N2.92 trillion over N2.46trillion reported in 2019.
The group’s customers’ deposits grew by 25 per cent to N5.34 trillion from N4.26 trillion recorded in 2019, a reflection of increasing share of the industry’s deposits and customers’ confidence in the Zenith brand.
Zenith bank’s cash and balances with the CBN jumped 70per cent to N1.6trillion, of which over N1.3trillioon or 83.6per cent represents mandatory and special reserve deposits with the CBN.
This is unsurprising considering a move by the CBN to begin to issue special bills to banks in Q4-2020 as a strategy to manage liquidity as well the apex banks liabilities to deposit money banks going forward.
Furthermore, Zenith Bank’s total equity rose by 19 per cent to N1.12reillion as at December 2020 from N941.9 billion reported in 2019.
The financial institution continued to maintain a disciplined and prudent approach to loan growth in line with its risk management framework.
The Group Non-Performing Loans (NPL) ratio remained low at 4.29 per cent in 2020 from 4.30 per cent in 2019, below five per cent threshold required by CBN.
Zenith Bank’s Capital Adequacy Ratio (CAR) closed 2020 at 23per cent from 22 per cent in 2019, above 16 per cent required by regulatory body being of the Symmetrically Important Banks (SIBs).
However, Loan-to-Deposit (LDR) and liquidity ratio of 54.7per cent and 66.2per cent reflects a cautious approach to risk-asset creation in view of the fragility of the macroeconomic environment.
This gives headroom for providing support to businesses while creating risk assets opportunities in line with our credit risk management framework.
Points to consider
Nigerian NewsDirect ,however, retain a BUY rating on Zenith bank at the current price of N26.3/share, buoyed by operational efficiency which was reflected in the reduction in cost of funds, massive cheap deposits, and resilient interest income numbers.
In 2021, interest income from the huge deposits with the CBN should support earnings considering the special bills offering from the CBN which was executed at 0.5per cent.
For context, we expect PAT to remain stable and well above N200billion in 2021, consolidating its industry position as the most profitable bank.
Again, Zenith bank’s earnings stability continued to more than offset pressure on CAR, as observed in the 2020 numbers.
Accordingly, our valuation assumptions feed on the lender’s robust balance sheet position, earnings stability, resilient margins, and dividend consistency.
Adjusting our valuation assumption for higher country risk premium as well as risk-free rate, we revised our TP to N30.4/share with a 15per cent upside potential compared to current price.
By Matthew Denis
The Securities and Exchange Commission (“the Commission”) has launched the revamped e-Dividend Mandate Management System (e-DMMS) Portal!
Investors whose shareholding accounts appear on the list of non-mandated accounts hosted on the Commission’s website (www.sec.gov.ng/non-mandated) are advised to use the new self-service portal by clicking on “NIBSS Self Service” link on the page and follow the prompts
Alternatively, investors may use the link, https://docuhub3.nibss-plc.com.ng/edmms/self-service, or approach their respective registrars or banks to register for collection of their unclaimed dividends and the receipt of subsequent dividends electronically.
Mr Olubukola Akinwumi, a Deputy Director at the Central Bank of Nigeria (CBN), on Friday explained how Nigerians trading on Binance Holdings Limited’s platform use false names in the transactions.
Olubukola, who is the Economic and Financial Crimes Commission (EFCC)’s 2nd prosecution witness (PW-2) in the ongoing trial of Binance and its executive, Tigran Gambaryan, told Justice Emeka Nwite of a Federal High Court, Abuja, while giving his testimony.
The News Agency of Nigeria (NAN) reports that the EFCC had filed a five-count charge against Binance and Gambaryan (1st and 2nd defendants) bordering on money laundering offences.
The anti-graft agency had accused Binance and Gambaryan of money laundering involving $35.4 million.
Besides, the company was under suspicion of alleged terrorism financing.
Led in evidence by EFCC’s lawyer, Ekele Iheanacho, on Friday, Akinwumi, who heads the Payment Policy and Regulation Division in the Payments System Management Department of CBN, said the apex bank did not issue any licence to the cryptocurrency firm to operate in Nigeria.
“In the course of carrying out our operations, we normally monitor development within the SEC (Securities and Exchange Commission); monitoring the activities of payment service providers and the usage of the payment system.
“We observed in doing that that Binance provides a trading platform where users trade virtual assets.
“And to consummate their transactions for the purpose of settlement of payments, the users make use of the payment system for the purpose of transfering or making payment to one another.
“These traders normally trade in pseudo names (pseudonyms) that hide their identities and they are not authorised by the CBN,” he said.
The PW-2 described virtual assets as “digital representation of values created by computer system which can be digitally traded, transferred or use in payments.”
He said they discovered that users of the platform received and made payments or transferred payments to one another using the payment system to consummate transactions on Binance Peer to Peer (P2P) platform.
“Binance Platform provides a trading place or market place for traders and users of virtual assets, otherwise known as cryptocurrency.
“The platform also provides other services like electronic wallet, fiat wallet, publishing of exchange rate, etc,” he told the court.
Asked where the activities of Binance are carried out, Akinwumi said its “activities are conducted on its website; binance.com and through its mobile apps (applications).
“They have two variations of Binance Apps; Binance Pro or Binnace Lite.”
Asked what P2P means, the witness said: “P2P means Peer to Peer, and for basic translation, it can also mean person to person.
“What that means is that if a particular user does not want to trade with the platform but rather will like to trade with another user, P2P is a service that brings such two users as described to engage each other in transacting for the purpose of buying or selling virtual asset, cryptocurrency and fiat directly between the two users.
“This is done by quoting rates with offers to sell or buy at the quoted rate.
“The P2P Platform of Binance provides such service to such two users to come to an agreement on such trade.
“Once such understanding for the trade is reached by the two users on Binance platform, the selling party will provide a bank account to which the buying party can send the naira amount or transfer into the account provided by the selling party.
“Once the buying party transferred the amount agreed, he clicks on a particular icon on Binance platform to communicate the fiat that he has transferred the amount to the selling party.
“The Binance platform will, on the side of the selling party, awaits confirmation based on which it will release the cryptocurrency or fiat currency traded on the platform.
“So the Binance platform facilitates all the processes or P2P transaction as I have just enumerated, either using Nigerian bank account already stored by users on Binance platform and or the naira wallet account , provided by Binance platform.”
Submission of certified true copies of documents made available to SEC by Binance which was equally made available to the investigating team at the office of the National Security Adviser, and pages generated on the firm’s website were tendered in evidence and marked as Exhibits 8 and 9 by the judge.
Taking the witness through Exhibit 8 and 9, Iheanacho asked him to tell the court more about the nature of the transactions.
Akinwumi said Page 2 of Exhibit 8 introduced Binance as the world’s leading crypto exchange with users from over 190 countries.
“They have on the page, the address of the website in full which is Https://www.binance.com.
“Binance has what is called Binance Academy. That is on page 16 of Exhibit 8.
“Some of the videos will be on their YouTube platform which they use in educating those who are interested in the services that they provide,” he said.
The PW-2 said the firm equally has Binance coins and that on its website, it gives the description of the coin as “NGN” (Naira).
“On page 21 of Exhibit 8, it listed the ways to use Binance coin,” he added.
Akinwumi said on Page 9 of Exhibit 9, there is an information which reads: “Depositing and withdrawing NGN (Naira) on Binance via cash link; it is swift and simple.”
The witness, however, explained that depositing and withdrawing Naira which “NGN” stands for, is a regulated activity carried out by banks and other financial institutions duly registered by CBN.
He said another information on Exhibit 9 reads: “To help Binance users in Nigeria understand this Fiat Gateway, Binance has been holding various events such as the Binance Cash Link, Live Master Class to educate users on cash link and why it is an excellent method of deposit and withdrawal on the Binance platform.”
“Generally, Exhibit 9 explains to Nigerians on how to deposit Naira on the Nigerians wallet on the Binance platform.”
He said there is a statement on a page which says though “Binance does not charge deposit fees,” he said next to the statement, there is another message which says: “for each withdrawal, a flat fee is paid by users to cover the transaction cost of moving the cryptocurrency out of their Binance account.
“So as I explained earlier, Binance maintains accounts and it needs revenue for its services
“On Page 2 of Exhibit 9, under the Fiat Section, it shows the rates that are applied for regular users.”
After concluding given his evidence, Justice Nwite adjourned the matter until July 16 for cross-examination of PW-2.
In demonstration of its leadership in the Sustainability space, leading financial institution – Fidelity Bank Plc – has emerged the first bank to publish its 2023 ISSB-Compliant Sustainability and Climate Report in the Nigerian banking industry.
Hosted on the bank’s website on 30 June 2024, the report provides insights into the Bank’s Governance, Strategy, Risk Management, Metrics and Targets around Sustainability and Climate-related risks and opportunities, Human Capital, Community Efforts, amongst others in the 2023 financial year.
“2023 marked a pivotal point in our sustainability journey. We became a signatory of the UN Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Banking (PRB) and the UN Women’s Empowerment Principles (WEP). These associations go beyond mere statements of membership – they actively integrate sustainability and climate-related goals into our core business strategy and daily operations.”
“We believe innovation and transparency are essential for building trust in our strategies and achievements. As we progress towards sustainability, we remain committed to our diverse stakeholders including our dedicated workforce, esteemed shareholders, and valued customers”, remarked Mr. Mustapha Chike-Obi, Chairman, Board of Directors, Fidelity Bank Plc in the report.
The document, which was prepared in accordance with the requirements of IFRS S1 and S2, highlights the bank’s achievements and aspirations as pacesetters within the financial services sector.
Speaking on the bank’s strategy on Sustainability and Climate change, Mr. Kevin Ugwuoke, Executive Director/Chief Risk Officer, Fidelity Bank Plc, stated, “Our 2023 Sustainability and Climate Report details our commitment to continually situate ESG and Climate-related risks & opportunities considerations at the core of our business operations and activities as we constantly explore means of meeting our corporate objectives in a manner that significantly reduces the negative environmental and social effects. We are glad to be the first bank to publish its report as this emphasizes our market leadership in the Sustainability space and we commit to do more to increase our positive impacts in all aspects of sustainability.”
It would be recalled that Fidelity Bank was recently listed amongst the top Nigerian banks in ESG performance according to a survey commissioned by the Independent Project Monitoring Company (IPMC) Limited.
To access the Fidelity Bank 2023 Sustainability and Climate Report, please visit https://www.fidelitybank.ng/documents/Fidelity_Bank_Sustainability_Climate_Report_2023.pdf
Ranked as one of the best banks in Nigeria, Fidelity Bank is a full-fledged commercial bank with over 8.3 million customers serviced across its 251 business offices in Nigeria and the United Kingdom as well as on digital banking channels.
The bank has won multiple local and international awards including the Export Finance Bank of the Year at the 2023 BusinessDay Banks and Other Financial Institutions (BAFI) Awards, the Best Payment Solution Provider Nigeria 2023 and Best SME Bank Nigeria 2022 by the Global Banking and Finance Awards; Best Bank for SMEs in Nigeria by the Euromoney Awards for Excellence 2023; and Best Domestic Private Bank in Nigeria by the Euromoney Global Private Banking Awards 2023.
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