In the second half of 2025, Zenith bank delivered a modest topline improvement, as gross earnings rose by 19.96% YoY to NGN2.52trn. This was driven by higher income, reflecting solid performance from core business. Specifically, interest income increased by 60.00% YoY to NGN1.84trn amidst the moderating but still attractive interest rate environment.

Thus, the bank earned higher interest on the loan book (+53.31% YoY to NGN935.75bn), bank placement (+71.12% YoY to NGN121.08bn) and investment securities (+67.07% YoY to NGN782.41bn). However, interest expense saw a slight 11.55% YoY uptick to NGN484.53bn, bringing net interest income to NGN1.35trn, 89.45% YoY higher than what was recorded in H1:2024.

Non -Interest Income Slows Down Amid Lower Trading Gains: In the period under review, non-interest income was subdued, as seen from the 28.41% YoY decline to NGN681.51bn. This decrease mainly stemmed from the 41.20% YoY contraction in trading gains to NGN467.79bn following a 44.56% YoY decrease in gain on other trading books. We opine that the decline in overall trading gains can be traced to moderating interest rate volatility and the sustained stability in exchange rates amid various market-driven reforms. However, income on fees and commission (+21.09% YoY to NGN196.43bn) and other operating income (+395.32% YoY to NGN17.29bn) supported non-interest income in H1:2025.

Surge in Impairment Charges Drags Earnings: Impairment charges surged by 83.20% YoY to NGN760.81bn, mostly propelled by the 124.70% YoY jump in expected credit loss on loans and advances. We suspect that this may not be unconnected with rapid absorption of bad loans in compliance with regulation on forbearance in a bid to sustain interim dividend payment to shareholders. Meanwhile, OPEX increased by 23.16% YoY to NGN581.43bn due to higher personnel expenses (16.11+% YoY to NGN134.57bn) and operating expenses (+23.42% YoY to NGN411.29bn).

As a result of the observed pressure from cost, bottom-line dropped compared to the same period in 2024, as profit before tax (-13.95% to NGN625.63bn) and profit after tax (-7.93% to NGN532.18bn) both declined. In the same vein, EPS fell to NGN12.95 (-29.66% YoY) amid the dual impact of share dilution and weaker earnings. Similarly, ROE and ROA also came in lower at 25.43% and 3.37% (vs. 41.90% and 4.80% in H1:2024) respectively. The bank declared an interim dividend of NGN1.25 (dividend yield of 1.87%) as against the NGN1.00 (dividend yield of 2.20%) paid to shareholders in H1’2024.

Outlook: Looking ahead, we expect an improvement in earnings by year end, which should be supported by further growth in interest income, as interest rates remain at attractive levels. Non-interest income is expected to stay modest, reflecting stable exchange rates and mild interest rate volatility. Elsewhere, we expect the surge in impairment charges to moderate, following the exit from the central bank’s forbearance regime. From a trading perspective, P/E ratio has moved from the region of 1.46x from the start of the year to 2.41x as of H1:2025, suggesting that the stock might be in the overbought territory. Thus, we hold a NEUTRAL recommendation on the ticker given recent market and trading dynamics.

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