Zenith Bank sustains growth trajectory with double-digit growth in gross earnings

By Philemon Adedeji

Zenith Bank plc, a leading multinational service provider based in Nigeria, and listed on the Nigerian Exchange Limited (NGX), in its audited financial results ended December 31st, 2022 delivered an impressive performance which resulted double-digit growth in gross earnings, to keep maintaining its position as one of the leading Tier-1 banks in the country

In the audited financial result the group gross earnings grew in double-digit by 24 per cent to N945.5 billion in Full Year (FY) 2022 from N765.6 billion in prior financial year 2021.

The growth in gross earnings was driven by significant improvement in Interest Income and Non-interest Income (NII) contributing  26.3 per cent and 23.3 per cent growth respectively.

The result showed that the group’s Interest Income rose significantly by 26.3 per cent y/y to N540.17 billion, caused by the expansion in risk assets which rose by 19.6 per cent YTD to N4.23 trillion and an effective reprising of its interest-earning assets during the period.

Non-interest income (NII) grew marginally by 23.3 per cent y/y to N380.97 billion in the period. The growth recorded was supported by expansions in net fees & commissions income (+27.7 per cent y/y to N132.80 billion) and gains on investment securities (+27.0 per cent y/y to N212.68 billion).

Likewise, Interest expense increased stronger by 62.5 per cent y/y to N173.54 billion, reflecting higher costs on deposits from customers which expanded by 103.4 per cent y/y to N122.71 billion, and borrowings which rose by 13.2 per cent y/y to N48.75 billion.

The group audited result showed profit before tax (PBT) of N280.4 billion recorded in prior financial year to N284.7 billion recorded in the comparable period of 2022, Zenith Bank Plc has recorded nearly a 2.0 per cent growth in Profit Before Tax  during the full year ended December 31st, 2022. The increase in profit before tax was due to the significant growth in all the income lines.

Zenith Bank Profit After Tax stood at N223.9 billion during the end of 2022 in contrast with N244.6 billion recorded during the preceding period of 2021, reflecting a marginal loss of 8.4 per cent.

Impairments grew by 107 per cent from N59.9 billion to N124.2 billion, while interest expense grew 63 per cent YoY from N106.8 billion to N173.5 billion, respectively.

The impairment growth, which also resulted in an increase in the cost of risk (from 1.9 per cent in 2021 to 3.3 per cent in the current year), was due to the impact of Ghana’s sovereign debt restructuring programme.

The growth in interest expense increased the cost of funds from 1.5 per cent in 2021 to 1.9 per cent in 2022 due to hikes in interest rates globally.

Customer deposits increased by 39 per cent, growing from N6.47 trillion in the previous year to N8.98 trillion in the current year.

The growth in customer deposits came from all products and deposit segments (corporate and retail), thus consolidating the bank’s market leadership and indicating customers’ trust.

The continued elevated yield environment positively impacted the bank’s Net-Interest-Margin (NIM), which grew from 6.7 per cent to 7.2 per cent due to an effective repricing of interest-bearing assets.

The Group prudently grew its gross loans by 20 per cent, from N3.5 trillion in 2021 to N4.1 trillion in 2022, which increased the Non-Performing Loan (NPL) ratio modestly from 4.2 per cent to 4.3 per cent YoY.

The capital adequacy ratio decreased from 21 per cent to 19 per cent, while the liquidity ratio improved from 71.2 per cent to 75 per cent. Both prudential ratios are well above regulatory thresholds.

In 2023, the Group intends to expand its frontiers as it also reorganises into a holding company structure, adding new verticals to its businesses and growing in all its chosen markets, both locally and internationally.

The group closed 2022 financial year with 7.00 Kobo Earnings Per Share (EPS) as against 8.00 Kobo in prior financial year.

Due to the impressive performance delivered during FY 2022, the group has announced a proposed final dividend payout of N2.90 per share, bringing the total dividend to N3.20 per share.

The group balance sheet remain well structure increased by a remarkable 30 per cent, growing from N9.45 trillion in 2021 to N12.29 trillion, mainly driven by growth in customer deposits, with the steady and continued recovery in economic activities.

As a result, the group generated higher income from loans and advances to customers which rose by 26.8 per cent y/y, also loans and advances to banks increased by 81.3 per cent y/y, while investment securities also added by 22.4 per cent y/y in 2022FY.

Also, Intangible assets stood at N25.001 billion in FY 2021 to N25.251 billion in FY 2022, representing an increase of 9.9 per cent, while Property and equipments gained a 15.1 per cent to N230.8 billion in current year from N200 billion accounted in the preceding year.

However, the group total liabilities increased by a decent 33.5 per cent to N10.906 trillion in FY 2022 from N8.168 trillion achieved in the preceding year, while Total shareholders’ equity closed 2022 by N1.378 trillion, reflecting a marginal increase of 7.8 per cent from N1.279 trillion recorded in prior financial year.

Key Ratios

The group Return on Average Equity (ROAE) came in at 16.8 per cent in 2022 from 20.4 per cent in declared in 2021, as Return on Average Assets (ROAA) margin came in from 2.7 per cent in 2021 to 2.1 per cent reported in 2022 reflecting a decline of 22 per cent.

Other key ratios are Cost of Funds which stood at 1.9 per cent in 2022 from 1.5 per cent in 2021 representing a significant improvement of 27 per cent, as Cost of Risk gained 3.2 per cent in 2022 from 1.9 per cent in 2021, indicating an increase of 67 per cent, while Liquidity Ratio added 75.0 per cent in 2022 from 71.6 per cent in 2021, showing improvement of 5 per cent.

The Vice President of HighCap Securities Limited, David Andori commented on the result that “Excessive expenses and tax, robbed Zenith Bank of increased profit despite their huge growth in Gross Income. Payment of N3.20 dividend in spite of lower profit is commendable. The security has demonstrated good resilience as a reliable income stock.”

Analysts at Cordros Securities in a remark on Zenith Bank’s 2022 audited financial statement noted, “Zenith bank’s 2022 FY performance came in below our expectations as the group’s earnings were undermined by the impact of its Ghana subsidiary’s impairment charges on its bottom line.

“Notwithstanding, we acknowledge the group’s resilience in this challenging business environment. We remain positive regarding the long-term outlook for the bank and expect financial performances to remain strong, supported by strong underlying fundamentals and strong management. We are reviewing our estimates.”

Conclusion 

In recognition of its track record of excellent performances, Zenith Bank was recognised as the Number One Bank in Nigeria by Tier-1 Capital, for the 13th consecutive year, in the 2022 Top 1,000 World Banks Ranking published by The Banker Magazine; Bank of the Year (Nigeria) in Their Banker’s Bank of the Year Awards 2020 and 2022; Best Bank in Nigeria, for three consecutive years from 2020 to 2022, in the Global Finance World’s Best Banks Awards; Best Commercial Bank, Nigeria 2021 and 2022 in the World Finance Banking Awards; Best Corporate Governance Bank, Nigeria in the World Finance Corporate Governance Awards 2022; Best in Corporate Governance’ Financial Services’ Africa, for three consecutive years from 2020 to 2022, by the Ethical Boardroom; Best Commercial Bank, Nigeria and Best Innovation In Retail Banking, Nigeria in the International Banker 2022 Banking Awards.

Also, the bank emerged as the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands 2020 and 2021, and Retail Bank of the year, for three consecutive years from 2020 to 2022, at the BusinessDay Banks and Other Financial Institutions (BAFI) Awards.

Similarly, Zenith Bank was named as Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Most Innovative Bank of the Year 2019 by Tribune Newspaper, Bank of the Year 2020 by Independent Newspaper, Bank of the Year 2021 by Champion Newspaper, Bank of the Year 2022 by New Telegraph Newspaper, and Most Responsible Organisation in Africa 2021 by SERAS Awards.