September 12, 2023/InvestmentOne Report

• Gross earnings of N967.26billion, up 158.25%q/q, 138.97%y/y          
• Net interest income of N261.86billion, up 16.79%q/q, 41.74%y/y
• Profit before tax of N350.36billion, up 204.55%q/q, 169.50% y/y
• Profit after tax of N291.73billion, up 241.94%q/q, 161.85%y/y

The recently released financial report by Zenith Bank Plc for the first half of the year showed that the Group witnessed an impressive performance in the period on the back of favorable macro-economic conditions. In specifics, gross earnings grew by 138.97% y/y to N972.26 billion in H1 2023 from N404.76 billion in H1 2022. This was majorly propelled by the significant uptick recorded in both interest income and non-interest income in the period under review. Precisely, net interest income expanded by 41.74% y/y to N261.86 billion in H1 2023, despite the significant 169.49% y/y increase in interest expense to N153.56 billion due to the pronounced increase of 71.86% y/y in interest income to N415.43 billion in the same period. The report further disclosed that the utmost drivers of the higher interest income stemmed from placement with banks and discount houses (+458.03% y/y), treasury bills (+226.78%) and loans and advances to customers (+55.51% y/y). In addition, the current high interest rates in the Nigerian economy also contributed to the increase noted in interest income as the Central Bank of Nigeria (CBN) remain resolute on quelling inflationary pressures. Meanwhile, non-interest income also advanced by 246.14% y/y from N148.98 billion in H1 2022 to N515.69 billion in H1 2023. 

Looking down the line, trading gains stood at N103.03 billion in H1 2023, representing an increase of 20.94% y/y mostly driven by the gain on other trading books which spiked from N3.13 billion in H1 2022 to N77.96 billion in the review period. More so, other operating income recorded substantial rise in H1 2023 to N368.75 billion, recovering from the N655 million loss seen in the corresponding period of 2022. This was majorly caused by the harmonization of the previous multiple foreign exchange regime by the CBN in a bid to solve the persistent FX liquidity crisis and adopted a system that reflects market determined rate. This led to a devaluation of the Naira from the former N460/$ level to over N700/$, which pushed the Bank’s earnings due to gains from FX revaluation. 

Meanwhile, there was a significant jump of 727.75% y/y in impairment charge on financial and non-financial instruments to N207.93 billion, while personnel expenses (+44.56% y/y) and operating expenses (+18.77% y/y) also recorded increases in the first half of 2023. However, bottom line came in impressive given the elevated income earned by the Group in the period, which was sufficient to outweigh expenses incurred. Hence, profit before tax (PBT) stood at N350.36 billion, 169.50% higher than what was recorded in H1 2023. Furthermore, despite the 215.35% y/y surge in income tax expense, profit after tax rose from N111.41 billion in H1 2022 to N291.73 billion in H1 2023, representing a whooping increase of 161.85% y/y. Consequently, the group declared an interim dividend of N0.50, which is more than the N0.30 declared in the same period last year. 

Sequentially, gross earnings rose at a noticeable pace of 158.25% q/q mostly propelled by the increase in interest income (+16.78% q/q) and non-interest income (+508.84% q/q) in the review period. Meanwhile, net fees and commission witnessed a decline by 71.37% q/q. However, PBT and PAT increased significantly by 204.55% q/q and 241.94% q/q, reflecting the impressive performance recorded by the Group.

Overall, the result posted was highly commendable, given the significant improvement recorded across major income lines in the first half of the year. We highlight that this was particularly on the back of favorable macroeconomic conditions and policies stemming from the exchange rate unification and high interest rates on loans and advances. Going forward, we expect the Group to continue its positive performance through the end of the year driven by increased business activities and the Group’s positioning in the financial sector in Nigeria.