Zenith Bank to Maintain Investments in Retail Segment

By Dipo Olowookere

The management of Zenith Bank has assured that it will continue its investments in the retail segment of the banking business so as to deliver value to its stakeholders.

The lender made this disclosure while giving an insight into its performance in the first quarter of this year.

The bank also said it will remain committed to creating more opportunities for businesses by supporting them through selective risk asset creation.

“We shall continue our investments in the retail segment of the market as we consolidate our leadership position in the corporate segment while maintaining a strong balance sheet,” the financial institution said.

In Q1 2019, Zenith Bank recorded improved numbers across key metrics, driven by a solid performance in all business segments.

This resulted in a profit before tax of N57 billion, representing a 6 percent growth over the N54 billion achieved in the corresponding period in 2018.

The firm’s on-going commitment to cost optimisation on the income statement and statement of financial position ensured earnings per share increased by 7 percent to N1.60 compared with Q1 2018.

Also, the company’s retail franchise continues to increase as retail deposits grew by N80 billion between December 2018 and March 2019 representing a 9 percent growth notwithstanding the fact that total customer deposits dropped marginally by 3 percent.

Zenith Bank attributed this decline to the rebalancing of the deposit mix as expensive purchased deposits were forgone in favour of cheaper and stickier retail deposits.

The volume and value of transactions across its electronic and digital platforms continue to grow as new customers are being acquired.

“Our balance sheet continues to strengthen as liquidity ratio is at 66.7 percent, loan to deposit ratio closed at 43 percent, and capital adequacy ratio ended the period at 25 percent respectively and remain above the relevant regulatory thresholds as at March 31, 2019.

In the first three months of this year, the gross earnings of Zenith Bank depreciated by 6.6 percent and this was attributed to the growth in net interest income and operating income by 23 percent and one percent respectively.

The effective management of cost-to-income ratio, cost of funds and cost of risk offset top-line declines to deliver an enhanced operating income in the period.

The bank’s risk and asset quality continues to improve as cost of risk dropped significantly by 52 percent from 0.9 percent in the prior year to 0.4 percent for the period.

This was achieved as impairment charges declined by 54 percent (N2.5 billion year on year reduction).

The cost of funds also improved, declining by 25 percent from 4 percent in Q1 2018 to 3 percent at quarter-end. This was supported by a 22 percent decrease in interest expense of N10 billion over the same period, affirming the company’s robust treasury and liquidity management.

“Our prudent cost management led to a 5 percent decline in our cost-to-income ratio by 5 percent from 53.3 percent in 2018 to 50.9 percent in the period with an absolute reduction in operating expenses by N2.3 billion year-on-year,” the bank said.