November 21, 2025/Cordros Report
In this note, we lower our year-end target price for ZENITHBANK to NGN72.01/s from NGN73.83/s, reflecting a downward revision to earnings forecasts driven by weaker loan growth expectations and a deeper contraction in non-interest income. Our revised 2025E EPS is now NGN24.40 (-25.8% y/y), compared to our previous forecast of NGN28.76 (-12.6% y/y). This adjustment reflects a more conservative outlook on credit creation, as we now expect loans and advances to customers to decline by 4.6% y/y (Previous: +5.3% y/y), following management’s cautious lending stance and elevated impairment charges. In addition, we now forecast non-interest income to contract by 42.9% y/y (Previous: -36.6% y/y), following the steeper moderation in FX-related gains. We also revised our gross DPS estimate to NGN6.25 (Previous: NGN7.25), implying a dividend yield of 10.4% based on the last closing price of NGN59.85/s. On our estimates, the stock trades at a 2025E P/E of 2.5x and P/B of 0.5x.
Non-core normalization pressures earnings: For 2025E, we adjust our earnings outlook for ZENITHBANK, reflecting a more moderate core income growth. We now project gross earnings to grow by 9.7% y/y in 2025E (Previous: 13.9% y/y), with core income rising 30.7% y/y (Previous: 44.9% y/y), supported by still elevated interest rates and a larger investment securities base (+23.5% y/y). We also make marginal upward adjustments to our cost of fund forecast to 4.6% (Previous: 4.3%), given sustained pressures from customer deposit repricing. Consequently, we reduce our net interest income projection to 40.5% y/y (Previous: 48.3% y/y). On asset quality, we now forecast loan impairment charges to increase 22.7% y/y, translating to a cost of risk of 8.5% (Previous: 10.0%). Meanwhile, we make a downward adjustment to our OPEX forecast to 25.1% y/y (Previous: 43.3% y/y), following the better-than-expected cost outturn recorded by the bank and the banking industry at large. As a result, we estimate a CIR (ex-LLE) of 34.2% (Previous: 32.5%). Further down the line, we now expect PBT to contract by 10.1% y/y (Previous: +3.5% y/y), while PAT is projected to decline by 3.0% y/y. Overall, we forecast EPS at NGN24.40, representing a 25.8% y/y decline, driven by earnings pressure and the dilutive impact of the additional shares issued.
Lower COR forecast supports profitability outlook: Over the past two years (2023FY: NGN409.61 billion; 2024FY: NGN658.81 billion), Zenith Bank has maintained elevated provisioning levels, reflecting asset quality pressures from naira devaluation and a weaker macro environment. The trend continued in 9M-25, with credit impairment charges rising to NGN781.52 billion, driving a cost of risk of 9.9% (9M-24: 7.3%) and a coverage ratio of 211.1% (2024FY: 223.0%). We believe these measures will help ease the provisioning burden in the near term, supporting profitability in the interim. Our model projects a 5-year EPS CAGR of 14.4% over the forecast horizon.
Valuation: Our year-end target price of NGN72.01/s is based on a blended valuation: DDM (60.0%), Gordon Growth Model (30.0%), and relative P/E and P/B (5.0% each). Under the DDM, using a 28.3% CoE, we arrived at NGN66.37/s, while the GGM (CoE: 28.3%, 5-year average RoE: 22.6%) produced NGN90.00/s. For multiples, we applied a 2.0x tier-1 average P/E to our 2025E EPS of NGN24.40/s, giving NGN48.80/s, and a 0.5x tier-1 average P/B to the 2025E BVPS of NGN114.87/s, yielding NGN54.85/s.
