Economy
Zenith Bank Plc: Earnings Beat as Forex Income Spike Dwarfs Huge Provision
By Vetiva Research
- High interest rate environment lifts top line despite flat loan growth
- Elevated OPEX and Interest cost persist
- Provision in Power and Telecom assets pressure asset quality
Marked deviations from estimates as earnings beat
Zenith Bank released its audited H1’17 result posting marked deviations from our expectations across most line items. Notably, following a 58% q/q rise in Gross Earnings in Q2’17 standalone, the top line rose 77% y/y to ₦380 billion for the H1’17 period – beating our ₦282 billion estimate.
Particularly, despite a 3% decline in loans and advances, Interest Income rose 45% y/y to ₦262 billion (Vetiva: ₦226 billion) – supported by a strong interest rate environment. In the same vein, Interest Expense spiked 127% y/y to ₦123 billion following a significant uptick in cost of funds (H1’17: 6.4% vs. H1’16: 3.2%) – coming in higher than our ₦89 billion estimate.
Consequently, Net Interest Margin moderated 40bps y/y to 7.7% (Q1’17: 8.7%). More conspicuously, Non-Interest Income rose to ₦118 billion (H1’16: ₦34 billion) – dwarfing our ₦55 billion estimate.
Particularly, the bank recorded an FX trading income of ₦46 billion – largely driven by income from forward contracts within the period. Also, T-bills trading income rose significantly to ₦18.8 billion from ₦2.2 billion in the prior year.
Fee and commission income growth however came in more modest, up to ₦38 billion from the ₦31 billion recorded in H1’16.
Amidst rising NPL ratio (H1’17: 4.3% vs. Q1’17: 3.2%), ZENITHBANK reported a significant rise in loan loss provision, up 198% y/y to ₦42 billion vs. our ₦16 billion estimate. According to management, the increase in impairment charge was largely driven by higher provisioning across the Power and Telecoms sectors.
We recall that ZENITHBANK had the highest exposure to Etisalat and believe the bank must have taken a conservative approach to make provision for a portion of their exposure to the telecoms company.
Despite this, Operating Income rose 47% y/y to ₦215 billion–22% ahead of our ₦176 billion estimate.
Surprisingly however, Operating Expense rose substantially in Q2’17, up 54% q/q – a trend management attributed to inflation and currency pressure despite a relatively more stable FX environment and a sticky downward inflationary trend within the period.
Notwithstanding, PAT rose to ₦75 billion – beating our ₦65 billion estimate.
We highlight that ZENITHBANK restated its prior year’s profit, expensing an AMCON levy of ₦9.4 billion which had previously been capitalized.
Hence H1’16 PAT was restated to ₦35.5 billion (Previous: ₦44.8 billion).
Overall, the Board declared an interim dividend of ₦0.25 per share – same as prior year and in line with our estimate.
Earnings revised higher on higher interest rates
We have updated our model to reflect the marked deviations across most line items. Whilst we cut our loan growth forecast for FY’17 to a mild 2% (Previous: 8%), we raise our Interest Income estimate to ₦535 billion (Previous: ₦452 billion) – supported by the strong interest rate environment.
Similarly, we raise our Interest Expense forecast for FY’17 to ₦245 billion (Previous: ₦178 billion), pressured by the elevated funding cost.
Also, following the outperformance in H1’17, we revise our Non-Interest Income higher to reflect the spike in FX income from forwards and futures transaction recorded in Q2’17. Despite the raise, we remain conservative about the persistence of this income line in the coming quarters and taper down the run rate for the year.
Driven by the impairment in asset quality observed over the second quarter, we double our loan loss provision expectation for FY’17 to ₦66 billion (H1’17: ₦42 billion) – translating to a cost of risk of 2.9%. Furthermore, in line with the trend observed in Q2’17, we raise our Operating Expense estimate to ₦254 billion (Previous: ₦191 billion). Overall, our PAT forecast is raised to ₦143 billion (Previous: ₦131 billion).
We revise our target price to ₦30.73 (Previous: ₦28.00)
Whilst we see the recent uptick in NPL ratio (H1’17: 4.3% vs. Q1’16: 3.2%) as a pressure point for earnings in the coming quarters following the restructuring of Etisalat’s loan exposure and the subsequent takeover, we highlight ZENITHBANK’s impressive liquidity and capital ratios.
With capital adequacy and liquidity ratios of 21% and 61% (regulatory benchmark of 15% and 30%) respectively, we believe the bank is well positioned to take advantage of the market opportunities.
Given the earnings outperformance, we revise our target price to ₦30.73 (Previous: ₦28.00). Although we have seen a strong rally in the stock in recent time (ytd return: 63%), we believe the bank remains largely undervalued. ZENITHBANK trades at FY’17 P/B: 1.0x and P/E: 5.8x vs. Tier I banks’ average P/B: 1.1x and P/E: 5.8x respectively.
Source: Vetiva Research
By Aduragbemi Omiyale
Shares of First Holdco Plc worth N45.0 billion issued through a private placement have been listed on the Nigerian Exchange (NGX) Limited.
A circular issued by the Head of Issuer Regulation Department of the NGX Regulation Limited, Mr Godstime Iwenekhai, disclosed that the equities were admitted for trading at the stock market on Monday.
According to the notice, the additional shares brought for listing to rank pari passu with existing shares of the organisation were 1,021,334,544 units.
These stocks were sold to one of the company’s major shareholders at a unit price of N44.06, amounting to N45.0 billion.
The total issued and fully paid-up shares of First Holdco, as a result of this listing, are now 45,475,027,677 ordinary shares of 50 Kobo each.
“Trading licence holders are hereby notified that an additional 1,021,334,544 ordinary shares of 50 Kobo each of First Holdco Plc were on Monday, June 22, 2026, listed on the daily official list of Nigerian Exchange Limited.
“The additional shares listed on NGX arose from the company’s private placement of 1,021,334,544 ordinary shares of 50 Kobo each at N44.06 per share.
“With the listing of the additional shares, the total issued and fully paid-up shares of First Holdco Plc have now increased to 45,475,027,677 ordinary shares of 50 Kobo each from 44,453,693,133 ordinary shares of 50 Kobo each,” the disclosure stated.
By Adedapo Adesanya
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has approved fresh import licences for petrol and diesel for the third quarter of 2026 (July – September) to prevent potential supply shortages in the domestic market.
According to a report by global energy intelligence firm, Argus Media, the latest approvals were issued to major downstream operators amid declining fuel stock levels and concerns over reduced petrol production at the 700,000 barrels per day Dangote Petroleum Refinery in Lagos.
The move comes as Nigeria continues to balance increasing local refining capacity with the need to guarantee adequate supplies of petroleum products across the country.
According to the Argus report, domestic firms, including AA Rano, AYM Shafa, Bono Energy, Nipco, Matrix Energy and Pinnacle Oil, received permits to import Premium Motor Spirit, popularly known as petrol, during the July-September period.
The publication further reported that the same companies, with the exception of Nipco, were granted approvals to import Automotive Gas Oil, commonly known as diesel. The fresh approvals follow an earlier batch of petrol import permits issued by the regulator in May, covering about 720,000 metric tonnes.
Quoting a regulatory source, Argus noted that many of the companies granted the latest approvals were among those that had received permits in previous rounds. “These are some of the same ones that previously received the PMS permits,” the source was quoted as saying.
It was also claimed that AA Rano and Matrix Energy each received approvals to import 180,000 metric tonnes of petrol. AYM Shafa received approval for 120,000 metric tonnes, while Pinnacle Oil received a permit covering 150,000 metric tonnes.
For diesel imports, Argus reported that AYM Shafa obtained a permit for 60,000 metric tonnes, while Pinnacle secured approval for 45,000 metric tonnes. The report stated that the import approvals were issued only recently, after being delayed from an initial target date of June 15.
By Adedapo Adesanya
Three securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.01 per cent on Tuesday, June 23, dragging the market capitalisation down by N25.91 billion to N2.544 trillion from Monday’s N2.570 trillion. Also, the NASD Security Index (NSI) decreased by 43.17 points to 4,239.34 points from 4,282.51 points.
The triplet price losers were Central Securities Clearing System (CSCS) Plc, which gave up N4.82 to trade at N75.00 per unit versus Monday’s closing price of N79.82 per unit. NASD Plc depreciated by N3.70 to close at N33.30 per share compared with the preceding day’s N37.00 per share, and Nitrox Industrial Gases Plc marginally lost 1 Kobo to sell at N21.41 per unit, in contrast to the previous session’s N21.42 per unit.
Tuesday’s trading data showed that the volume of securities traded by investors retreated by 35.9 per cent to 211,671 units from 330,034 units, and the value of securities fell by 82.9 per cent to N5.6 million from N32.7 million, while the number of deals doubled to 38 deals from 19 deals.
At the close of trades, Great Nigeria Insurance (GNI) Plc was the most traded stock by value on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units valued at N6.5 billion, and CSCS Plc with 68.1 million units transacted for N4.7 billion.
GNI Plc also closed the trading day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, trailed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units sold for N415.7 million.
-
Feature/OPED6 years agoDavos was Different this year
-
Travel/Tourism10 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz3 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking8 years agoSort Codes of GTBank Branches in Nigeria
-
Economy3 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking3 years agoSort Codes of UBA Branches in Nigeria
-
Banking3 years agoFirst Bank Announces Planned Downtime
-
Sports3 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn