September 11, 2023/CSL Research

Zenith Bank’s H1 2023 audited numbers showed 71.9% y/y growth in Interest Income driven by growth in Interest Income on both Net Loans and Investment Securities. Net Loans to Customers grew 25.9% in H1 compared with December 2022 inclusive of the impact of devaluation. Interest Expense grew strongly, up 169.5% y/y. Interest on current, savings (due to MPR increases), term deposits, and borrowed funds all showed a significant uptick. Customer Deposits were up 29.5% y/y in June 2023 compared with December 2022 (inclusive of the impact of devaluation). Overall, Net Interest Income grew 41.7% y/y and 16.8% q/q.

Net Fee and Commission Income declined significantly down 31.8%y/y and 71.4% q/q. Income from financial guarantee contracts issued, Fees on electronic products, commission on agency and collection services, and corporate finance fees all declined y/y. The Fee lines that showed y/y growth were credit-related fees, account maintenance fees, foreign currency transaction fees and commission, asset-based management fees, Foreign withdrawal charges, and Auction fees income.

H1 2O23

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Source: Company’s Financials, CSL Research.

Other Income (Trading gains and Other Operating Income) grew significantly, up 458.1 y/y to N471.8bn from N84.5bn in H1 2022, mainly due to significant revaluation gains of N355.6bn in H1 2022 compared with a revaluation loss of N2.5bn in H1 2022.

Impairment charge grew significantly, up 727.7% y/y to N207.9bn in H1 2023 from N25.1bn in H1 2022, bringing H1 2023 annualised Cost of Risk (COR) to 8.8% compared with 1.4% for H1 2022. We believe some of the Impairments may be related to exposure to Ghana Eurobonds.

OPEX grew 22.8% y/y. The lower y/y growth in Opex when compared with 133.0% y/y growth in Total Operating Income led to a strong improvement in Cost to Income Ratio (ex-provisions) to 28.2% for H1 2023 compared with 53.5% in H1 2023.

Overall, PBT grew strongly, up 169.5% y/y to N350.4bn for H1 2023 while Net Profit grew 161.8% y/y to N291.7bn bringing H1 2023 annualised ROAE to 36.9%.

The management proposed an interim dividend of N0.50/s compared with N0.30/s in June 2022.

We have a Buy recommendation on the stock with a target price target of N37.60/s. Current Price N34.80/s. Our estimates are being reviewed.

Kindly click on the below link to download the full report.

​CSL Zenith Bank H1 2023 quick take.pdf​