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 Aduragbemi Omiyale
A collaboration to enable fast money transfers into Nigeria has been entered into between Flutterwave and Xoom, PayPal’s international digital money transfer service.
The partnership allows Xoom transfers to be converted by Flutterwave and settled locally in Naira, enabling quick transfers directly into recipients’ bank accounts at Access Bank, UBA, Zenith Bank, First Bank, GTBank, and additional participating banks across Nigeria.
The deal also enables Xoom’s global network with Flutterwave’s local payout infrastructure, allowing users globally to send funds directly into Nigerian bank accounts with improved speed and efficiency.
Nigeria is the leading remittance recipient in Sub-Saharan Africa, receiving over $20 billion in personal remittances in 2024. Despite this volume, receiving international payments has historically remained complex due to FX constraints and settlement delays. This collaboration helps address those challenges in a market of more than 232 million people, where the ICT sector is projected to contribute 21 per cent of GDP by 2027.
By combining Xoom’s expansive reach with Flutterwave’s local compliance and banking partnerships, the two companies are providing a more accessible financial corridor for the continent.
Xoom, a PayPal service, is a fast and secure international digital money transfer service that enables consumers to send money, pay bills, and reload phones for friends and family in approximately 160 markets globally.
As part of PayPal’s global payments ecosystem, Xoom leverages advanced fraud protection, compliance capabilities, and a trusted global network to help millions of customers move money quickly and securely across borders.
“We’re excited to have been chosen by Xoom for their Nigeria expansion. Millions of Nigerians rely on money from abroad to support everyday needs, whether it’s families receiving help from loved ones, freelancers getting paid for their work, or individuals earning income from the global economy. This helps make it easy and more reliable for people in Nigeria to receive funds and stay connected to opportunities beyond borders,” the chief executive of Flutterwave, Mr Olugbenga GB Agboola, stated.
By Aduragbemi Omiyale
An initiative known as Nigeria Lightning Rounds, designed to expand funding opportunities for Nigerian startups and small businesses by connecting founders with local and international investors, has been launched by ProvidusUnity Bank, in partnership with US-based global venture firm and accelerator, gener8tor.
Scheduled to be held on July 15, 2026, Nigeria Lightning Rounds will feature carefully selected startups engaging with targeted investors who have expressed interest in supporting Nigerian innovation.
Participating founders will have the opportunity to pitch their businesses through focused 15-minute virtual sessions facilitated by gener8tor and ProvidusUnity Bank’s networks.
The program will focus on high-growth sectors including fintech, healthtech, manufacturing, sustainability, and AI, but welcomes SMEs from all industries, with intending participants urged to apply via https://www.gener8tor.com/lightning-rounds/nigeria.
“We recognise that access to capital remains one of the biggest challenges facing entrepreneurs in Nigeria. Through our partnership with gener8tor, we are creating a platform that connects promising Nigerian founders with investors who can provide the support required to scale their businesses,” the Head of Business Development at ProvidusUnity Bank, Mr Ernest Elue, stated.
“The partnership reinforces ProvidusUnity Bank’s commitment to strengthening Nigeria’s entrepreneurial ecosystem by supporting innovation, enabling access to opportunities, and creating pathways for businesses with high-growth potential,” he added.
Also commenting, the Director of Lightning Rounds at gener8tor, Ms Elizabeth Larios, said, “gener8tor is thrilled to partner with ProvidusUnity Bank to extend the Lightning Rounds model into Nigeria.
“This collaboration reflects our commitment to building equitable ecosystems and driving capital to the most promising and underrepresented entrepreneurs.”
Lightning Rounds are a signature initiative of gener8tor’s investment platform, which has facilitated thousands of investor-startup meetings globally. The format is optimised to eliminate friction, reduce bias in early-stage fundraising, and help founders secure capital from investors aligned with their mission and stage. gener8tor’s previous Lightning Rounds for Nigerian Founders in 2025 featured 18 participating Investors and led to 50 investment meetings facilitated.
By Modupe Gbadeyanka
The verification of the depositors of the 46 microfinance banks, whose operating licenses were revoked by the Central Bank of Nigeria (CBN) over a week ago, has commenced.
The exercise, aimed at refunding those whose funds were trapped in the small lenders, is being conducted by the Nigeria Deposit Insurance Corporation (NDIC).
In a statement on Thursday, the agency said its staff members have been positioned at the offices of the affected banks across the country to attend to depositors.
It was disclosed that depositors of the defunct banks, who had their Bank Verification Numbers (BVNs) linked to their accounts in the failed banks, will be paid through their alternative accounts in existing banks.
However, depositors whose BVNs were not linked to their accounts in the failed banks have been encouraged to visit the affected banks’ offices with proof of account ownership, a passport photograph, verifiable means of identification (Driver’s Licence, Permanent Voter’s Card, International Passport or National ID Card) and BVN.
NDIC also stated that depositors can alternatively file their claims online through its website: www.ndic.gov.ng, to complete the Pre-Verification Claims Form by clicking on the Search Bar, and typing Pre-Verification Claims Form; opening the Form and filling in their details. They can also do so by clicking the link: https://ndic.gov.ng/ndic-pre-verification-claims-form/ or by visiting any of the NDIC offices closest to them to file their claims.
For further enquiries, the corporation can be reached on any of the following lines: 09037273810, 09038197064, 08104220807, 09064657140.
