Banking
Stock Analysis: Zenith Bank Sets for Impressive FY-2017 Performance Amid Credit Loss Pressure
Zenith Bank recorded a 44.57 percent growth in interest income in H1-17. On our 12.98 percent estimated assets yield, we believe the run rate will be sustained for the rest of the year, equating to 36.38 percent y/y growth in interest income to N524.46 billion.
The bank’s portfolio of investment securities, treasury bills, and quality loan books will be catalysts of the growth in assets yield. We also forecast NIR to surge by 51.16 percent to N186.60 billion, buoyed by strong trading income, revaluation gains, and marginal write-back of previous provisions.
Overall, we forecast a 39.97 percent growth in gross earnings to N711.06 billion in 2017F.
That said, PBT and PAT growth will be muted, owing to the impact of the elevated cost of refinancing maturing FCY obligations, higher impairment provisioning on transportation (specifically the aviation sector), communication and general commerce exposure, and a surge in total operating expenses (opex).
In a bid to meet maturing FCY obligations during the year, Zenith Bank issued the second tranche of its $1 billion Global Medium-Term Note Programme established in 2014. The programme was completed in May and the bank successfully raised $500 million (at a coupon rate of 7.375 percent, a 113bps premium over the first tranche).
The bank’s balance sheet as at H1-17 ending reveals that FCY borrowings worth $593.80 million (KEXIM $16.44 million, ABSA Bank $151 million, JP Morgan $75.05 million, Standard Bank $273.83 million, First Rand Bank $6.52 million, Citi Global Markets $51.96 million, and BACA $18 million) are due for maturity between May and October 2017.
We believe both the Eurobond and the newly secured borrowings during the year (SMBCE $49.75 million and AFC $181.9 million) came at higher cost relative to the maturing loans (mostly concessional borrowings) having estimated weighted average rate of 5.15 percent.
Accordingly, and given the continued tight domestic interest rate environment, we expect cost of funds to expand 125 bps y/y to 5.40 percent in 2017F – translating to interest expense of N235.88 billion.
However, we expect the stronger expansion in asset yields will offset the growth in funding cost, thus, we forecast an uptick in net-interest margin by 25 bps to 7.65 percent.
In H1-17, Zenith Bank made a 30 percent provision on its exposure to 9 Mobile (formerly Etisalat Nigeria) which resulted in a surge in credit loss provision (COR rose to 3.6 percent, from 1.3 percent in Q1-17 and H1-16) to N42.40 billion. Though we acknowledge the fact that a haircut is eminent on the syndicated exposure to 9Mobile, it is our understanding that most of the provisions booked in H1-17 by Zenith Bank was on its bilateral loan to the telco and not entirely on its share as a part of the syndicate.
Despite the bank restructuring 11.8 percent of its gross loan in H1-17(with oil & gas exposure representing 10.1 percent of the restructured exposure) as well as declassified some power exposure (down to 1.0 percent from 43.0 percent in FY-16), NPL still rose to 4.3 percent (N99.19 billion) from 3.0 percent (N71.37 billion) in FY-16, as the bank classified 37.6 percent (vs. 1.5 percent in FY-16) and 27.4 percent (vs. 18.5 percent in FY-16) of its transportation and general commerce exposure as NPL.
Overall, for 2017F, we estimate Zenith Bank’s NPL to increase to 4.50 percent, from 3.00 percent in FY-16 and 4.30 percent in H1-17, and cost of risks to rise to 2.68 percent, translating to a credit loss provision of N77.13 billion in 2017F.
We estimate opex to rise 29.63 percent y/y to N226.24 billion in 2017F (driven largely by higher regulatory levies on operating expenses) – translating to a 415 bps y/y expansion in CIR to 56.84 percent and growth in operational leverage to 4.5x (from 4.0x in FY-16).
Accordingly, we expect the impact of the increase in opex to limit the trickling down effect of the rise in gross earnings – we estimate PBT and PAT to rise 9.61 percent and 8.28 percent to N171.81 billion and N140.38 billion, respectively.
While acknowledging the impressive performance across income lines in H1-17, which resulted in an upward revision in earnings for the year, we believe the revaluation-bloated growth in NIR will taper in 2018, and factoring in the impact of the adoption of IFRS 9 from 2018 (with management guiding to a 20 percent impact on credit loss provision and 1 percent drop in CAR), we now expect PAT to grow lower than previously estimated over 2018F-2019F.
Hence, we revise our target price on the stock downward to N27.18 (Previous: N30.63), translating to 13.26 percent upside from current price of 24.00 (as at 21/08/2017).
Zenith Bank is currently trading at 2017F P/BVPS of 1.0x (above peer average of 0.9x and below the 5-year average of 1.1x) and P/E of 5.6x (above peer average of 5.2x and below the 5-year average of 5.9x). HOLD.
By Modupe Gbadeyanka
About N2 billion is expected to be used to finance renewable energy products for customers by the end of 2026 in an effort to accelerate Nigeria’s clean energy transition.
To meet this goal, Sterling Bank is launching Sterling Solar Financing Hubs inside StarTimes retail outlets to embed on-the-spot solar financing at the point of purchase.
From the N2 billion earmarked for this initiative, N600 million has already been used up.
Under this programme, customers can now walk into participating outlets, select their preferred solar solution, receive financial guidance from dedicated Sterling Solar Financing Advisors, and begin the financing process immediately, subject to the bank’s credit assessment.
The first phase of the rollout commenced this July with five Solar Financing Hubs across Lagos, located in Lekki, Ikeja, Festac, Surulere, and Victoria Island.
The network will expand rapidly to 46 StarTimes outlets nationwide before the end of the third quarter of 2026, with a view to extending the model to more than 200 StarTimes locations nationwide.
Both parties have promised to continue working together to democratise access to clean energy financing, empowering more Nigerians to solarise their homes and businesses while contributing to a greener future.
“Sterling exists to enrich lives, and we believe that access to clean, reliable energy should be within everyone’s reach. Through this partnership with StarTimes, we are democratising access to solar by bringing financing directly to the point of need, enabling more families and businesses to transition to sustainable energy without the burden of prohibitive upfront costs. This is about unlocking opportunity, improving livelihoods, and powering Nigeria’s future,” the Divisional Head of Renewable Energy and Mobility at Sterling Bank, Mr Darlington Nwankwo, said.
Also commenting, the Vice President of StarTimes Nigeria, Mr Eric Xiao, said, “With the rollout of the Sterling Solar Financing Hubs, we are doing more than just selling solar products; we are building a sustainable energy ecosystem. By integrating StarTimes’ extensive service network with Sterling Bank’s professional financial services, we are significantly lowering the barrier for Nigerian households and small businesses to access clean energy.
“Moving forward, we will continue to deepen this partnership, ensuring that more Nigerians can enjoy reliable, affordable, and smart energy solutions, ultimately turning our vision of energy accessibility into a reality for all.”
By Modupe Gbadeyanka
The Nigeria Business Summit Regional Tour of Stanbic IBTC Bank made a detour to Jogor Centre, Ibadan, Oyo State, on Wednesday, July 15, 2026, to empower Micro, Small, and Medium Enterprises (MSMEs).
The event brought together business leaders, development partners and government representatives to discuss pathways for sustainable enterprise development across the South-West.
Participants engaged in practical masterclasses on export opportunities; access to finance and business growth strategies; gaining actionable insights into market expansion; trade documentation; credit readiness; financial record-keeping; and structured financing solutions designed to support long-term business success.
The Head of Enterprise Banking at Stanbic IBTC Bank, Ms Olajumoke Bello, informed participants that the programme is part of the lender’s commitments to supporting MSMEs through practical business education, strategic partnerships and improved access to growth opportunities.
The Executive Director of Business and Commercial Banking at Stanbic IBTC Bank, Mr Remy Osuagwu, on his part, said, “Our ambition is to be more than a financial institution to Nigerian businesses. We want to be a trusted growth partner, providing the financing, business insights and advisory support entrepreneurs need to build sustainable enterprises and unlock new opportunities.”
Similarly, the chief executive of Stanbic IBTC Bank, Mr Wole Adeniyi, who reinforced the company’s commitment to enterprise development, highlighted the importance of providing businesses with the right support structures to enable sustainable growth and long-term competitiveness.
“At Stanbic IBTC, we believe that sustainable economic growth depends on the success of small and growing businesses. That is why we are focused on providing access to finance, practical advisory support and the connections businesses need to move from ambition to scale,” he stated.
The Oyo State Commissioner for Investment, Trade, Cooperatives, and Industry, Professor Soliu Adelabu, said the initiative was designed to support businesses and strengthen the state’s entrepreneurship ecosystem, praising the bank for its support for traders, entrepreneurs, and artisans in the state.
The Permanent Secretary in the Oyo State Ministry of Women Affairs and Social Inclusion, Mrs O.M. Shotonwa-Roagess, highlighted the importance of strategic partnerships in expanding economic opportunities for women and vulnerable groups across Oyo State. She noted that the ministry remains open to collaborating with organisations such as Stanbic IBTC, development partners and the private sector to drive financial inclusion, entrepreneurship and sustainable economic empowerment.
The Nigeria Business Summit Regional Tour forms part of Stanbic IBTC’s broader commitment to empowering entrepreneurs through capacity building, financial inclusion and strategic business support, helping enterprises unlock new opportunities for growth and long-term success.
The Ibadan leg built on the momentum of previous tour stops in Katsina and Aba.
By Adedapo Adesanya
The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, says Nigeria anticipates remittances from citizens living abroad to increase by two-thirds in 2026 as it seeks to bolster its foreign-exchange reserves to $1 billion monthly.
“We are expecting that by the end of the year, we will hit about a billion Dollars a month from diaspora remittances,” he said at the 14th Annual BusinessDay CEO Forum in Lagos on Thursday, themed From Stability to Shared Prosperity.
Mr Cardoso said remittances are expected to be boosted from more than $600 million currently, banking on the CBN’s deliberate target at remittances to diversify reserve sources beyond oil earnings.
According to him, the apex bank engaged Nigerians abroad, banks and international partners to identify barriers to official remittance flows.
He said the lender subsequently reviewed policies to ensure easier movement of funds into and out of the country.
Mr Cardoso described the approach as providing free entry and free exit for foreign exchange.
He said the reforms helped double diaspora inflows within one year and exceeded initial expectations, also projecting annual remittances could reach about $8 billion if the current momentum was sustained, adding that the development reflected growing confidence in Nigeria’s financial system and foreign exchange market.
Mr Cardoso said reforms introduced by the apex bank had restored stability in the foreign exchange market and improved investors’ confidence.
He identified exchange rate unification as one of the central bank’s major achievements under the reforms programme.
According to him, replacing multiple exchange rate windows with a market-driven system eliminated distortions and improved transparency.
Mr Cardoso said improved foreign exchange liquidity and stronger reserves were among the gains from the reforms.
He said Nigeria’s net external reserves had risen from about $3 billion at the start of the reforms to above $40 billion currently, noting that gross external reserves had grown to about $52 billion, representing about 10 months of import cover.
According to him, the reserves are designed to shield the economy from external shocks and excessive market volatility.
He said the reserves were not meant for routine interventions or day-to-day exchange rate management.
