October 31, 2023/CSL Research

Zenith Bank’s 9M 2023 unaudited numbers showed 71.7% y/y growth in Interest Income driven by growth in Interest Income on both Net Loans and Investment Securities. Net Loans to Customers grew 44.0% in 9M compared with December 2022 inclusive of the impact of devaluation on foreign currency loans. Interest Expense grew strongly, up 137.1% y/y. Interest on current, savings (due to MPR increases), term deposits and borrowed funds all showed significant uptick. Customer Deposits were up 49.1% in September 2023 compared with December 2022 (inclusive of the impact of devaluation). Overall, Net Interest Income grew 46.8% y/y and 8.7% q/q.

Net Fee and Commission Income declined, down 20.7%y/y but grew significantly in Q3 2023 compared with Q2 2023, up 262.3% q/q to N35.4bn from N9.8bn.

ZENITH BANK 9M 2O23

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Source: Company’s Financials, CSL Research.

Other Income (Trading gains and Other Operating Income) grew significantly, up 371.6% y/y to N527.8bn from N111.9bn in 9M 2022, mainly due to significant revaluation gains of N355.6bn in H1 2022. The bank reported additional revaluation gains of N22.5bn in Q2 2023 bringing total revaluation gains reported in 9M 2023 to N378.1bn. This compares with only N20.5bn in 9M 2022.

Impairment charge grew significantly, up 466.1% y/y to N210bn in 9M 2023 from N37.1bn in 9M 2022, bringing 9M 2023 annualised Cost of Risk (COR) to 5.5% compared with 1.3% for 9M 2022.

OPEX grew 20.4% y/y. The lower y/y growth in Opex when compared with 106.6% y/y growth in Total Operating Income led to a strong improvement in Cost to Income Ratio (ex-provisions) to 30.1% for 9M 2023 compared with 51.6% in 9M 2023.

Overall, PBT grew strongly, up 149.3% y/y to N505.0bn for 9M 2023 but declined 41.4% q/q due to significantly lower revaluation gains in Q3 compared with Q2. Net Profit grew 149.1% y/y to N434.2bn bringing 9M 2023 annualised ROAE to 35.1%.

We have a Buy recommendation on the stock with a target price target of N37.60/s. Current Price N33.15/s. Our estimates are being reviewed.

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