By Dipo Olowookere
The cost of funds optimisation strategy of the management of Zenith Bank Plc improved the net profit recorded in the first quarter of 2020.
An analysis of the financial statements of the tier-one lender by Business Post showed that the profit before tax increased by 3 percent to N58.8 billion in the period from N57.3 billion in Q1 2019.
It was observed that the profitability was mainly due to the twin effects of continuing top-line growth and focused cost-of-funds optimisation.
In the first three months of this year, the cost of funds reduced significantly to 2.6 percent from 3.0 percent in March 2019, translating to a 10 percent year-on-year decrease in interest expense to N32.8 billion from N36.3 billion.
Despite this drop, the low yield environment necessitated the repricing of interest-bearing assets which in turn resulted in a 13 percent compression in net interest margin, decreasing from 8.9 percent in March 2019 to 7.7 percent in the current period.
The financial institution also recorded a 6 percent increase in gross earnings from N158.1 billion in March 2019 to N166.8 billion for the period.
This top-line growth was driven by the 43 percent expansion in non-interest income from N32.7 billion in the prior-year period to N46.6 billion in March 2020.
Zenith Bank has continued to gain customer acceptance with customer deposits increasing by 5 percent from N4.26 trillion in December 2019 to N4.46 trillion in the current period.
The customer deposit mix rebalancing remains on-track as the group added N150 billion in savings account balances in Q1 2020, supported by its retail drive.
Zenith Bank’s total assets increased by 12 percent growing from N6.35 trillion in December 2019 to close at N7.13 trillion in the current period.
In the quarter, gross loans grew by 11 percent from N2.46 trillion in December 2019 to N2.74 trillion within the period.
