September 2, 2024/Cordros Report
Zenith Bank Plc (ZENITHBANK) published their H1-24 interim financial results at the close of business on Friday (30 August), reporting a 98.2% y/y expansion in EPS to NGN18.41 (H1-23: NGN9.29). The stellar growth across the bank’s core (+176.7% y/y) and non-core (+74.4% y/y) income lines supported the significant increase in the group’s earnings. The Board proposed an interim dividend of NGN1.00/share (H1-23: NGN0.50/share), translating to a dividend yield of 2.6% based on the last closing price of NGN38.25/share.
The group recorded a 176.7% y/y growth in funded income to NGN1.15 trillion, supported by the (1) high-interest rate environment and (2) elevated yields in the fixed income market amid utilization of FX revaluation gains to grow its earning assets (+48.9% YTD to NGN22.32 trillion). Across the contributory lines, the group generated higher income from loans and advances to customers (+140.3% y/y to NGN610.36 billion), investment securities (+234.7% y/y to NGN468.32 billion), and loans and advances to banks (+228.5% y/y to NGN70.76 billion), in the review period.
Interest expense advanced by 182.9% y/y to NGN434.36 billion, as the elevated interest rate pushed the group’s funding costs higher. Specifically, the bank incurred higher costs on customers’ deposits (+116.1% y/y to NGN259.98 billion) despite improving CASA mix to 86.3% (2023FY: 78.6%). Similarly, the bank’s borrowing cost increased significantly by 429.0% to NGN172.97 billion following the increase in interest-bearing borrowings (+81.5% YTD to NGN3.04 trillion). After accounting for credit impairment charges (+99.7% y/y to NGN415.29 billion), net interest income (ex-LLE) settled at NGN299.78 billion (+455.8% y/y).
Elsewhere, non-interest income (NII) surged by 74.4% y/y to NGN899.33 billion, as the gains from trading investment securities (+672.2% y/y to NGN795.57 billion) and higher net fees and commission income (+149.6% y/y to NGN109.62 billion) were sufficient to offset the foreign exchange revaluation loss of NGN2.65 billion in H1-24, relative to the revaluation gain of NGN355.59 billion recorded in H1-23. Consequently, the expansion in non-interest income and net-interest income led to the growth of operating income (+110.5% y/y to NGN1.20 trillion).
Operating expenses expanded by 115.3% y/y to NGN472.08 billion, triggered by the increased costs incurred on personnel expenses (+106.0% y/y to NGN115. billion) and NDIC insurance premium (+88.9% y/y to NGN22.65 billion) in the review period. Consequent to the faster OPEX growth relative to operating income, the cost-to-income ratio (ex-LLE) deteriorated, settling at 39.4% (relative to 38.5% in H1-23).
Overall, profitability came in significantly higher, as the profit-before-tax grew by 107.5% y/y to NGN727.03 billion. Likewise, PAT grew by 98.1% y/y to NGN578.00 billion, despite a higher income tax expense (+154.2% y/y to NGN149.03 billion).
Comment: ZENITHBANK’s H1-24 results align with our expectations, as the elevated interest rate environment underpinned the bank’s interest income growth. We expect the group to close the year positively, driven by the underlying impact of higher interest rates and trading gains from financial instruments over H2-24. Our estimates are under review.
