By Aduragbemi Omiyale
Zenith Bank Plc and other financial institutions benefitted from the raising of the benchmark interest rate, known as the Monetary Policy Rate (MPR), by the Central Bank of Nigeria (CBN) in the first quarter of 2024.
Details of the financial statements of the lender in the first three months of this year showed that the interest income of Zenith Bank surged by 155 per cent to N489 billion from the N192 billion reported in the quarter ended March 2023.
Whenever the CBN hikes the MPR, banks adjust their interest rates on loans given to customers, making them earn more from funds given out at the previous lower rates.
It was observed that the repricing of the risk assets, owing to the increase in the central bank’s MPR at 24.75 per cent, coupled with the growth in non-interest income, lifted the gross earnings by 189 per cent to N781 billion from N270 billion in Q1 of 2023 despite the challenging operating environment and tightening monetary policy stance.
The organisation posted an impairment charge of N56 billion in the period under review compared with N8 billion in the corresponding period of last year, primarily driven by the significant growth in risk assets as a result of the revaluation of its USD loans, which necessitated additional impairment on the bank’s foreign currency-denominated loans.
The cost of funds grew by 48 per cent to 4 per cent from 2.7 per cent on a year-on-year basis due to the high-interest rate environment, while interest expense increased by 157 per cent to N182 billion from N71 billion.
Despite the year-on-year rise in interest expense, net interest margin (NIM) grew by 20 per cent to 8.3 per cent from 6.9 per cent, while the profit before tax (PBT) surged by 270 per cent to N320 billion from N87 billion, with profit after tax (PAT) soaring by 291 per cent to N258 billion from N66 billion.
In addition, Return on Average Equity (ROAE) and Return on Average Assets (ROAA) jumped by 114 per cent and 119 per cent, respectively, due to improved profitability.
Gross loans, which are largely funded by customer deposits, grew by 30 per cent to N9.2 trillion from N7.1 trillion in December 2023, as customer deposits also grew by 11 per cent on a year-to-date basis to N16.8 trillion from N15.2 trillion in December 2023, underpinning continued customer confidence in the Zenith brand, with total assets expanding by 19 per cent to ₦24 trillion within the same period.
Dipo Olowookere