September 2, 2024/CSL Research
Zenith Bank’s H1 2024 audited numbers showed a strong 176.7% y/y growth in Interest Income driven by growth in Interest Income on both Net Loans and Investment Securities. Net Loans to Customers grew 41.7% in the first half of the year. (Inclusive of the impact of devaluation on foreign currency loans). Interest Expense also grew strongly, up 182.9% y/y. Customer Deposits grew 29.4% in H1 2024 relative to the December 2023 position (inclusive of the impact of devaluation). Overall, Net Interest Income grew 173.1%y/y.
Net Fee and Commission Income also grew strongly, up 149.6% y/y but declined 10.1% in Q2 compared with Q1. 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, commission on agency and collection services and commission on letters of credit.
Source: Company, CSL Research |
Other Income (Trading gains and Other Operating Income) grew significantly, up 67.4% y/y to N789.7bn from N471.8bn in H1 2023, mainly driven by significant gains on other trading books, which grew to N871.6bn in H1 2024 compared with only N77.96bn in H1 2023.
Impairment charge grew significantly, up 99.7% y/y to N415.3bn in H1 2024 from N207.9bn in H1 2023, bringing H1 2024 annualised Cost of Risk (COR) to 9.7% compared with 7.3% for FY 2023. Most of the H1 impairment charge was taken in Q2 2024 as Impairment Charge grew 542.0% q/q to N359.3bn in Q2 2024 from only N55.97bn in Q1 2024.
OPEX grew 115.3% y/y to N472.1bn in H1 2024 mainly driven by growth in personnel expenses (up 106.0% y/y) which we attribute to cost-of-living adjustments to salaries and growth in Other Operating Expense (up 125.2%y/y). The bank saw significant 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). The higher y/y growth in Opex when compared with the 107.6% y/y growth in Total Operating Income led to a slight deterioration in Cost to Income Ratio (ex-provisions) to 29.2% in H1 2024 compared with 28.2% in H1 2023.
Overall, PBT grew strongly, up 107.5% y/y to N727.0bn in H1 2024 from N350.4bn in H1 2023 while Net Profit grew 98.1% y/y to N578.0bn bringing H1 2024 annualised ROAE to 41.9% compared with 36.6% for FY 2023.
The management proposed an interim dividend of N1.00/s, up from N0.50/s paid last year.
We have a Buy recommendation on the stock with a target price target of N56.77/s. Current Price: N38.25/s.
Kindly click on the below link to download the full report.
CSL Zenith Bank H1 2024 Quick Take.pdf
