• Net interest income of N366.63billion, down 14.71%q/q, up 14.28%y/y         
• Non-interest income of N380.96billion, up 168.30%q/q, 23.28%y/y.
• Profit before tax of N284.65billion, up 127.98%q/q, 1.53% y/y.
• Profit after tax of N223.91billion, down 21.20%q/q, 8.44%y/y.

Zenith Bank Plc published its much-awaited FY 2022 numbers which revealed a c.23.51% growth in gross earnings to N945.55 billion. The results showed that interest income grew by 26.33% y/y to N540.17 billion, buoyed by growth in income from loans and advances to customers (+26.77% y/y) and investment securities (+25.37% y/y). The higher income from loans and advances can be attributed to the increased credit creation (+19.58% y/y to N4.01 trillion) by the bank during the year. In the same vein, interest expense expanded by 62.50% y/y to N173.54 billion, reflective of the growth in customers deposits (+38.68% y/y to N8.98 trillion) and jump in borrowings (+28.38% y/y to N963.45 billion). We believe that the higher interest rate environment and the shrinking CASA mix of the bank (+84.65% in FY 2022 vs +93.01% in FY 2021) contributed to the higher cost of funds. Regardless, net interest income came in higher at 14.28% to N366.63 billion. Moving forward, non-interest income rose by 23.28% y/y to N380.98 billion, against the backdrop of improvement in net fees and commission (+27.74% y/y) amid increased digital transactions and trading income (+26.98% y/y). This combined to drive a 18.70% y/y improvement in profit before provision.

Moving down the income line, impairment charges ballooned by 105.65% to N123.25 billion, majorly driven by write-downs on investment securities (N62.74 billion) and financial asset (N19.04 billion) of the bank. Well, the global rise in interest rate environment and country specific issues in Ghana were the major drivers of the steep rise in impairment charges. According to the report in the financial statement, the impairment allowance on Ghana’s debt instruments totalled N58.80 billion, even as the total debt instruments of Ghana in the books stood at N202.40 billion.

As such, the elevated impairment charges combined with the expansion in OPEX (+23.49% y/y) led to a weaker y/y pre-tax (+1.53% y/y) and after-tax profit (-8.44% y/y) to N284.65 billion and N223.91 billion, respectively. Finally, the bank declared a final dividend of NGN2.90 (+7.40% y/y) which represents a yield of about 12.08% (as at yesterday’s price). 

On a sequential basis, the headliner was the growth in non-interest income (+168.30% q/q) which offset the weaker net interest income (-14.71% q/q), thus supporting the 56.82% y/y q/q jump in profit before provisions. Despite the q/q rise seen in loan impairment charges (+619.53%) and OPEX (+10.21%), the PBT still came in higher at c.13.17%. However, the higher tax burden (39.61% versus 13.17% in the previous quarter) weighed on PAT performance as it came in weaker at -21.20% q/q.  

Overall, the bank recorded growth in key revenue generating lines, despite the impairment charges recorded by the bank on its debt instruments significantly weighing down on the bottom-line performance. Nonetheless, we view Zenith bank as one of the quality names in the sector as the bank remains resilient (efficiency and strong capital base) in the face of weak macroeconomic environment.