FSDH Initial Reaction: Zenith Bank 1Q24 results 
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May 7, 2024/FSDH Report

Key Performance Highlights:

• Zenith Bank recorded a robust set of numbers for 1Q24, with the gross earnings jumping 189.1% YoY to N780.6 billion and the net profit climbing 291.4% YoY to N258.1 billion in 1Q24. The gross earnings were driven by a 154.9% YoY growth in interest income, further supported by a 521.7% growth in trading income and a 69.0% YoY rise in net fee and commission income, slightly offset by a 32.7% YoY drop in other operating income to N3.2 billion.
   
• The Group’s Interest and similar income vaulted 154.9% YoY to N488.5 billion, while the Interest and similar expenses soared 157.0% YoY to N182.1 billion. The rise in interest income was primarily driven by a growth in interest income from loans and advances to customers, Treasury Bills income, and income from the government and other bonds. On the other hand, the Group’s interest expense increased primarily due to growth in the borrowed funds, a rise in time deposits, and an increase in the savings accounts. Consequently, the net interest income rose 153.7% YoY to N306.4 billion in 1Q24, up from N120.8 billion in 1Q23. Furthermore, impairment charges increased 624.1% YoY to N56.0 billion in 1Q24. After impairment, the net interest income rose 121.5% YoY to N250.5 billion in 1Q24.
   
• In 1Q24, the Group’s net fee and commission income grew 69.0% YoY to N57.7 billion, driven by credit-related fees, account maintenance fees, and foreign withdrawal charges. Trading income increased 521.7% YoY to N210.7 billion in 1Q24, primarily due to gains on other trading books. However, the Group reported other operating income of N3.2 billion in 1Q24, versus an operating income of N4.7 billion in the prior period due to lower loan recovery and net monetary loss from the hyperinflationary economy. The Bank’s personnel expenses rose 85.0% YoY to N42.9 billion in 1Q24, while the operating expenses soared 118.9% YoY to N149.2 billion in 1Q24 due to higher Fuel and maintenance charges, insurance premiums, bank charges, and AMCON levy. It should be noted that the double-digit top-line growth spurred the bottom line as the Group recorded a 269.7% YoY surge in profit before tax to N320.2 billion in 1Q24. The Group’s effective tax rate went down to 19.3% in 1Q24 from 23.8% in 1Q23, and the Company reported an after-tax profit of N258.3 billion in 1Q24, up 291.4% YoY, compared to N66.0 billion in 1Q23. Accordingly, the Group earnings per share grew to N8.22/share in 1Q24 from N2.10/share in 1Q23.
   
• Sequentially, the Company recorded a 2.7% QoQ decline in gross earnings to N780.6 billion in 1Q24. The net interest income decreased 4.5% QoQ to N306.5 billion, primarily due to a 19.2% rise in interest and similar expenses. However, this was offset by a 92.6% QoQ increase in net fee & commission income to N57.7 billion in 1Q24, compared to N30.0 billion in 4Q23. The Company reported an operating income increase of 20.4%, mainly due to the significant rise in other operating income QoQ. Although the Company paid the income tax at an effective tax rate of 19.3% in 1Q24, up from 16.6% in 4Q23, it reported a net profit of N258.3 billion in 1Q24 compared to N242.7 billion in 4Q23, a 6.4% QoQ expansion.

Market Reaction: The investor reaction to the 1Q24 results was positive as the Zenith bank stock increased 0.58% to close at N34.80 vs. a 0.89% fall in the All-Share Index on 6/5.

Zenith Bank Earnings Highlight 1Q24

Source: Company Financials, FSDH