March 27, 2025/Cordros Report
Zenith Bank Plc (ZENITHBANK) published 2024FY audited financials after the close of business yesterday (March 26). The bank’s net profit surpassed the NGN1.00 trillion mark, increasing by 52.6% to NGN1.03 trillion, resulting in an earnings per share of NGN32.87 (2023FY: NGN21.55). The result was driven by growth across both the interest (+137.7% y/y) and non-interest (+19.7% y/y) income lines. Additionally, the board proposed a final dividend of NGN4.00/share (2023FY: NGN3.50/share), translating to a dividend yield of 8.2% based on the last closing price of NGN48.90/share (March 26), bringing the total dividend for 2024FY to NGN5.00/share (2023FY: NGN4.00/share). Noteworthily, following the capital raise exercise conducted by the bank through rights issues (5.23 billion shares) and a public offer (4.44 billion shares), the bank’s total outstanding shares have increased to 41.07 billion units.
Interest income increased markedly by 137.7% y/y to NGN2.72 trillion, supported by elevated interest rates in 2024 and growth in the group’s earning assets (+58.0% y/y to NGN23.21 trillion). We note that the bank’s FCY-denominated loans increased by 60.3% y/y to NGN5.78 trillion, primarily due to the steep devaluation of the naira, which increased the FCY portion of total loans to 58.0% (2023FY: 55.0%). Parsing through the contributory lines, the bank generated higher income from loans and advances to customers (+125.9% y/y to NGN1.52 trillion), investment securities (+165.6% y/y to NGN1.04 trillion), and loans and advances to banks (+102.0% y/y to NGN165.32 billion). As a result, the group’s earnings yield increased to 11.7% (2023FY: 7.8%). Zenith Bank’s asset quality also improved, with a non-performing loan (NPL) print of 3.1% (2023FY: 4.4%).
Similarly, the elevated interest rate environment led to higher funding costs for the bank, as interest expense increased by 143.0% y/y to NGN992.47 billion. Precisely, ZENITHBANK incurred higher costs on customer deposits (+102.8% y/y to NGN622.01 billion), driven by deterioration in the bank’s CASA mix to 76.7% (2023FY: 78.6%). Likewise, borrowing costs (+270.5% y/y to NGN367.40 billion) increased following the rise in the bank’s interest-bearing borrowings (+22.2% to NGN2.05 trillion). Accordingly, the bank’s net Interest income (ex-LLE) surged by 227.7% y/y to NGN1.07 trillion, after accounting for the higher loan impairment charges (+60.8% y/y).
Further in, the bank reported a 19.7% y/y increase in non-interest income to NGN1.10 trillion, as the higher gains from trading (+94.0% y/y to NGN1.10 trillion) and net fees and commission income (+89.3% y/y to NGN206.87 billion) outstripped the FX revaluation loss (NGN178.02 billion) recorded in the period. Thus, the bank’s operating income grew by 74.3% y/y to NGN2.17 trillion.
Operating expenses increased by 87.6% y/y to NGN843.35 billion, following the higher costs incurred on personnel expenses (+64.1% y/y to NGN204.17 billion), fuel and maintenance (+145.1% y/y to NGN100.90 billion), and regulatory fees – AMCON levy (+228.7% y/y to NGN92.20 billion) and deposit insurance premium (+98.4% y/y to NGN55.66 billion). Given that OPEX grew faster than operating income, the bank’s operational efficiency declined as the cost-to-income ratio (ex-LLE) settled at 38.9% (2023FY: 36.1%).
Eventually, ZENITHBANK’s profit before tax expanded by 66.7% y/y to NGN1.33 trillion. Following the one-off levy on FX revaluation gains, the bank incurred a windfall tax of NGN63.31 billion, bringing total tax expense for 2024 to NGN293.96 billion. Consequently, PAT grew by 52.6% y/y to NGN1.03 trillion.
Comment: ZENITHBANK demonstrated resilience across all financial indicators. We like that the bank effectively repriced loans in line with the current interest rate environment, resulting in a robust top line. Additionally, despite the increased risk in 2024, the bank’s asset quality improved, and robust risk management policies resulted in an improved Capital Adequacy Ratio (2024FY: 25.6% | 2023FY: 21.7%). Looking ahead to 2025E, we anticipate increased credit creation to support growth in interest income amid expected rate cuts. However, due to our expectations of a less volatile naira in 2025, we anticipate limited earnings growth, as most of the bank’s non-interest income stems from FX gains. Our estimates are under review.
