May 6, 2024/CSL Research

Zenith Bank’s Q1 2024 unaudited numbers showed a strong 154.9% y/y growth in Interest Income driven by growth in Interest Income on both Net Loans and Investment Securities. Net Loans to Customers grew 114.7% y/y (Q1 2024 compared with Q1 2023) but were up 31.9% in Q1 2024 compared with the December 2023 position (inclusive of the impact of devaluation on foreign currency loans). Interest Expense also grew strongly, up 157.0 y/y. Customer Deposits grew 83.7%y/y but increased 10.7% in Q1 2024 relative to the December 2023 position (inclusive of the impact of devaluation). Overall, Net Interest Income grew 153.7% y/y.

Net Fee and Commission Income also grew strongly, up 69.0% y/y. The y/y growth was due to significant increases in credit related fees, account maintenance fee, income from financial guarantee contracts issued, fees on electronic products, foreign withdrawal charges and commission on letters of credit.

ZENITH BANK Q1 2O24

Source: Company’s Financials, CSL Research

Other Income (Trading gains and Other Operating Income) grew significantly, up 454.0% y/y to N213.9bn from N38.6bn in Q1 2023, mainly driven by significant gains on other trading books, which grew to N186.3bn in Q1 2024 compared with only N4.3bn in Q1 2023. The bank reported foreign currency revaluation gains of N3.4bn in Q1 2024 compared with N1.2bn in Q1 2023.

Impairment charge grew significantly, up 624.1% y/y to N56.0bn in Q1 2024 from N7.7bn in Q1 2023, bringing Q1 2024 annualised Cost of Risk (COR) to 2.8% compared with 7.3% for FY 2023.

OPEX grew 103.5% y/y to N201.9bn in Q1 2024 mainly driven by growth in personnel expenses (up 85.0% y/y) which we attribute to cost of living adjustments to salaries and growth in expense items such as information technology (FX based), outsourcing services, licenses, registrations and subscriptions, fuel, and maintenance (subsidy removal) and AMCON levy (growth in balance sheet size). However, the lower y/y growth in Opex when compared with 198.7% y/y growth in Total Operating Income led to a strong improvement in Cost to Income Ratio (ex-provisions) to 34.9% for Q1 2024 compared with 51.3% in Q1 2023.

Overall, PBT grew strongly, up 269.7% y/y to N320.2bn in Q1 2024 from N86.6bn in Q1 2023 while Net Profit grew 291.4% y/y to N258.3bn bringing Q1 2024 annualised ROAE to 40.0% compared with 36.6% for FY 2023.

We have a Buy recommendation on the stock with a target price target of N56.77/s. Current Price N34.6/s.

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

​​​CSL Zenith Bank Q1 2024 Quick Take.pdf​​​