Economy
Zenith Bank Plc: Earnings Beat as Forex Income Spike Dwarfs Huge Provision
By Vetiva Research
- High interest rate environment lifts top line despite flat loan growth
- Elevated OPEX and Interest cost persist
- Provision in Power and Telecom assets pressure asset quality
Marked deviations from estimates as earnings beat
Zenith Bank released its audited H1’17 result posting marked deviations from our expectations across most line items. Notably, following a 58% q/q rise in Gross Earnings in Q2’17 standalone, the top line rose 77% y/y to ₦380 billion for the H1’17 period – beating our ₦282 billion estimate.
Particularly, despite a 3% decline in loans and advances, Interest Income rose 45% y/y to ₦262 billion (Vetiva: ₦226 billion) – supported by a strong interest rate environment. In the same vein, Interest Expense spiked 127% y/y to ₦123 billion following a significant uptick in cost of funds (H1’17: 6.4% vs. H1’16: 3.2%) – coming in higher than our ₦89 billion estimate.
Consequently, Net Interest Margin moderated 40bps y/y to 7.7% (Q1’17: 8.7%). More conspicuously, Non-Interest Income rose to ₦118 billion (H1’16: ₦34 billion) – dwarfing our ₦55 billion estimate.
Particularly, the bank recorded an FX trading income of ₦46 billion – largely driven by income from forward contracts within the period. Also, T-bills trading income rose significantly to ₦18.8 billion from ₦2.2 billion in the prior year.
Fee and commission income growth however came in more modest, up to ₦38 billion from the ₦31 billion recorded in H1’16.
Amidst rising NPL ratio (H1’17: 4.3% vs. Q1’17: 3.2%), ZENITHBANK reported a significant rise in loan loss provision, up 198% y/y to ₦42 billion vs. our ₦16 billion estimate. According to management, the increase in impairment charge was largely driven by higher provisioning across the Power and Telecoms sectors.
We recall that ZENITHBANK had the highest exposure to Etisalat and believe the bank must have taken a conservative approach to make provision for a portion of their exposure to the telecoms company.
Despite this, Operating Income rose 47% y/y to ₦215 billion–22% ahead of our ₦176 billion estimate.
Surprisingly however, Operating Expense rose substantially in Q2’17, up 54% q/q – a trend management attributed to inflation and currency pressure despite a relatively more stable FX environment and a sticky downward inflationary trend within the period.
Notwithstanding, PAT rose to ₦75 billion – beating our ₦65 billion estimate.
We highlight that ZENITHBANK restated its prior year’s profit, expensing an AMCON levy of ₦9.4 billion which had previously been capitalized.
Hence H1’16 PAT was restated to ₦35.5 billion (Previous: ₦44.8 billion).
Overall, the Board declared an interim dividend of ₦0.25 per share – same as prior year and in line with our estimate.
Earnings revised higher on higher interest rates
We have updated our model to reflect the marked deviations across most line items. Whilst we cut our loan growth forecast for FY’17 to a mild 2% (Previous: 8%), we raise our Interest Income estimate to ₦535 billion (Previous: ₦452 billion) – supported by the strong interest rate environment.
Similarly, we raise our Interest Expense forecast for FY’17 to ₦245 billion (Previous: ₦178 billion), pressured by the elevated funding cost.
Also, following the outperformance in H1’17, we revise our Non-Interest Income higher to reflect the spike in FX income from forwards and futures transaction recorded in Q2’17. Despite the raise, we remain conservative about the persistence of this income line in the coming quarters and taper down the run rate for the year.
Driven by the impairment in asset quality observed over the second quarter, we double our loan loss provision expectation for FY’17 to ₦66 billion (H1’17: ₦42 billion) – translating to a cost of risk of 2.9%. Furthermore, in line with the trend observed in Q2’17, we raise our Operating Expense estimate to ₦254 billion (Previous: ₦191 billion). Overall, our PAT forecast is raised to ₦143 billion (Previous: ₦131 billion).
We revise our target price to ₦30.73 (Previous: ₦28.00)
Whilst we see the recent uptick in NPL ratio (H1’17: 4.3% vs. Q1’16: 3.2%) as a pressure point for earnings in the coming quarters following the restructuring of Etisalat’s loan exposure and the subsequent takeover, we highlight ZENITHBANK’s impressive liquidity and capital ratios.
With capital adequacy and liquidity ratios of 21% and 61% (regulatory benchmark of 15% and 30%) respectively, we believe the bank is well positioned to take advantage of the market opportunities.
Given the earnings outperformance, we revise our target price to ₦30.73 (Previous: ₦28.00). Although we have seen a strong rally in the stock in recent time (ytd return: 63%), we believe the bank remains largely undervalued. ZENITHBANK trades at FY’17 P/B: 1.0x and P/E: 5.8x vs. Tier I banks’ average P/B: 1.1x and P/E: 5.8x respectively.
Source: Vetiva Research
By Aduragbemi Omiyale
The Nigeria Police Force (NPF) has promised to work with the Securities and Exchange Commission (SEC) and the Nigerian Exchange (NGX) Group Plc for the prevention of financial crime, and the reinforcement of trust and confidence in Nigeria’s capital market.
The Inspector General of Police, Mr Kayode Egbetokun, gave this assurance on Wednesday at the closing gong ceremony in his honour at the NGX in Lagos.
The police chief said, “A transparent and well-regulated capital market is vital to Nigeria’s economic growth. The Nigeria Police Force remains committed to working with regulators and market operators to prevent financial crime, protect investors, and uphold the integrity of our financial system.”
Earlier in his welcome address, the chairman of NGX Group, Mr Umaru Kwairanga, commended the leadership of the police in supporting market integrity.
“Market integrity is a shared responsibility. By honouring the Inspector-General of Police, we are reinforcing the importance of institutional alignment in protecting investors and preserving trust in our financial system.
“Strong collaboration between regulators, enforcement agencies, and market infrastructure institutions is essential to building a resilient and credible market that supports economic growth,” he stated.
The Director-General of SEC, Mr Emomotimi Agama, while speaking, emphasized the importance of coordinated enforcement, noting: “Investor protection is at the core of market regulation, and today’s engagement highlights how critical collaboration with law enforcement is to achieving that mandate. This partnership strengthens our enforcement capacity, enhances deterrence against illegal investment activities, and reinforces confidence in the Nigerian capital market.”
As for the chairman of NGX Limited, Mr Ahonsi Unuigbe, “A transparent and orderly market can only thrive where rules are respected and misconduct is addressed decisively. The presence of the Nigeria Police Force in this collective effort sends a strong signal that safeguarding the market is a national priority.”
Similarly, the chief executive of NGX Group, Mr Temi Popoola, stressed the importance of aligning innovation with oversight, pointing out that, “Technology and market growth must be supported by strong enforcement and investor protection frameworks. Our collaboration with the SEC and the Nigeria Police Force reflects a unified approach to preserving the credibility of Nigeria’s capital market.”
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rallied by 0.09 per cent on Wednesday, February 4, amid renewed appetite for unlisted stocks.
This lifted the NASD Unlisted Security Index (NSI) by 3.18 points to 3,641.30 points from the previous session’s 3,641.30 points and raised the market capitalisation by N1.9 billion to N2.180 trillion from the N2.178 trillion quoted on Tuesday.
The bourse recorded three price gainers and four price losers at the midweek session.
The advancers were led by Air Liquide Plc, which went up by N2.04 rise to end at N22.53 per share versus the previous session’s N20.49 per share, Central Securities Clearing System (CSCS) added 97 Kobo to sell at N44.97 per unit versus N44.00 per unit, and Acorn Petroleum Plc appreciated by 2 Kobo to N1.37 per share from N1.35 per share.
On the flip side, Geo-Fluids Plc lost 55 Kobo to sell at N6.26 per unit versus N6.81 per unit, Nipco Plc depreciated by 48 Kobo to trade at N259.00 per share versus N259.48 per share, FrieslandCampina Wamco Nigeria Plc declined by 40 Kobo to N63.10 per unit from N63.50 per unit, and Industrial and General Insurance (IGI) depleted by 1 Kobo to 65 Kobo per share from 66 Kobo per share.
Yesterday, the volume of trades slid by 64.5 per cent to 2.5 million units from 7.0 million units, the value of transaction decreased by 53.2 per cent to N17.7 million from N37.9 million, and the number of deals went down by 47.1 per cent to 18 deals from 34 deals.
CSCS Plc remained the most traded stock by value on a year-to-date basis with 16.0 million units valued at N652.6 million, followed by FrieslandCampina Wamco Nigeria Plc with 1.7 million units exchanged for N111.2 million, and Geo-Fluids Plc with 11.7 million units traded for N76.1 million.
CSCS Plc was also the most active stock by volume on a year-to-date basis with 16.0 million units sold for N652.6 million, trailed by Mass Telecom Innovation Plc with 13.3 million units worth N5.3 million, and Geo-Fluids Plc with 11.7 million units valued at N76.1 million.
By Adedapo Adesanya
The Naira rallied at the different segments of the foreign exchange (FX) market on Wednesday as supply continues to outweigh demand, giving it an edge against the United States Dollar.
In the parallel market, the Nigerian Naira improved its value on the greenback yesterday by N5 to quote at N1,450/$1 compared with the previous day’s N1,455/$1, and at the GTBank FX desk, it gained N3 to trade at N1,383/$1, in contrast to Tuesday’s exchange rate of N1,386/$1.
In the the Nigerian Autonomous Foreign Exchange Market (NAFEX), which is also the official market, the Naira firmed up against the Dollar at midweek by N14.63 or 1.1 per cent to settle at N1,358.28/$1 versus the preceding session’s N1,372.91/$1.
Against the Pound Sterling, the domestic currency appreciated on Wednesday by N14.16 to N1,863.43/£1 from the previous day’s N1,877.59/£1, and gained N13.73 on the Euro to end at N1,606.03/€1 versus the N1,619.76/€1 it was exchanged a day earlier.
The strengthening of the Naira value has been driven by the injection of forex into the financial markets by foreign investors seeking attractive investments in the emerging markets, helping to boost Nigeria’s external reserves, which provide the Central Bank of Nigeria (CBN) with the capacity to support the local currency.
As of February 4, 2026, the reserves reached $46.59 billion.
The local currency has been able to find a solid path despite no indications of any intervention from the apex bank in recent week, strengthening the case of price discovery.
Policy moves by the CBN is also offering a backbone for the FX market as it considers some strategic reforms through a policy known as the Single Regulatory Window.
In its 2025 Fintech Report, the central bank said this scheme will significantly reduce time-to-market for new digital financial products by streamlining licensing and supervisory processes across multiple agencies.
Meanwhile, the cryptocurrency market was in red amid a broad sell-off in global technology stocks, with reports showing that liquidity was notably thin, amplifying price moves and contributing to forced liquidations. The decline followed a sharp sell-off in global technology stocks overnight, where concerns over the pace of artificial intelligence adoption and rising capital spending by major firms weighed heavily on valuations.
Bitcoin (BTC) lost 7.9 per cent to sell at $70,534.94, Ripple (XRP) declined by 11.2 per cent to $1.42, Binance Coin (BNB) slumped by 9.4 per cent to $689.70, Ethereum (ETH) crashed by 8.9 per cent to $2,072.46, and Solana (SOL) dipped by 8.7 per cent to $89.86.
In addition, Dogecoin (DOGE) depreciated by 6.9 per cent to $0.1008, Cardano (ADA) slipped by 6.8 per cent to $0.2792, Litecoin (LTC) dropped 5.1 per cent to trade at $57.56, and US Dollar Tether (USDT) went down by 0.1 per cent to $0.9980, while the US Dollar Coin (USDC) closed flat at $1.00.
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