February 27, 2017/Cordros Research

Click here to download Zenith Bank Plc Annual Report-31 December, 2016

Zenith Bank Plc (ZENITHBANK) just released its twelve months earnings report for the year ended December 2016. The Bank reported an increase in earnings per share (EPS) to N4.12 for the period, compared with an EPS of N3.36 in the previous year. Profit before tax (PBT) expanded by 28.4% while return on average equity (RoAE) improved to 20% versus the 18.4% recorded in 2015. The full year result outperformed consensus. The Board proposed a final dividend of N1.77 (vs. N1.55 in 2015FY), which in addition to the N0.25 paid as interim dividend equates to N2.02 (vs. N1.80 in 2015FY) for the full year.

Net interest income improved by 6.9% y/y, but similar to the third quarter (-8.8%), net interest income declined in Q4, but this time, by a wider margin (-19.8%). Interestingly, interest income fell by only 5.2% q/q (mirroring the 5.6% reduction in net loans from end-September level) while interest expense jumped by 17% q/q (as customer deposit grew by 10.8% from end-September level).

Non-interest income grew an impressive 45.9% y/y, benefiting from the surprise 283.6% q/q growth reported in Q3’16 (on the back of a massive improvement in foreign exchange related income). Expectedly, non-interest income dropped by 53.1% q/q in Q4’16, after foreign exchange trading income fell to N8.3 billion (from N14.6 billion gain reported in Q3’16) while a revaluation loss of N5.4 billion was reported (from N28.2 billion gain reported in Q3’16).  

Impairment charges expanded 106.4% y/y and also increased by 39.2% q/q (after falling by 35.8%q/q in Q3’16). Operating expense climbed 4% y/y (-43.3% q/q), with cost-to-income ratio down 630bps to 48%.

On a q/q basis, PBT fell by 38.9%, after (1) 19.8% decline in net interest income (following a 5.2% decline in interest income and 17% increase in interest expense); and (2) 39.2% increase in impairment charges, more than offset a 43.3% decline in opex.