April 7, 2026/InvestmentOne Report
Core Business Income Dominates Gross Revenue: Zenith bank delivered a profit after tax (PAT) above the NGN1.00trn mark, largely in line with our expectation, as the bank sustained the impressive performance recorded in the previous year despite the contraction in non-interest income. Essentially, the result underscores the strength in core business income given the 34.96% YoY rise in interest income to NGN3.67trn (87.62% of gross earnings) at the end of FY:2025. Interest earned on loans and advances grew by 20.17% YoY to NGN1.82trn despite the relatively weak 4.85% expansion in the loan book in the same period. Meanwhile, interest on placement (+27.07% YoY to NGN210.07bn), treasury bills (+94.76% YoY to NGN1.13bn) and bonds (+15.32% YoY to NGN507.93bn) also contributed to the growth in interest income. Notably, net interest income saw a significant 52.67% jump to NGN2.64trn due to the slight 4.13% increase in interest expense, which reflects the stability in CASA mix (76.39% in FY:2025 vs 76.75% in FY:2024) and commendable cost management.
Non-Interest Income Shrinks Amid Dip in Trading Gains: Non-interest came in lower by 58.46% YoY to NGN519.04bn, reiterating our view on cooling one-off gains and smaller contribution from noncore business income to gross revenue. Specifically, the steep decline emanated from the dip in other trading books to NGN140.44bn loss, compared to NGN1.12trn gain in FY:2024, resulting in a NGN63.11bn trading loss. However, fee and commission income grew by 13.91% YoY to NGN405.89bn, driven by account maintenance fee (+26.09% YoY to NGN91.95bn), foreign currency transaction fee (+118.53% YoY to NGN29.46bn) and commission on letters of credit (+75.88% YoY to NGN49.10bn), which provided support for non-interest income in the period under review.
Earnings Stay Resilient: In terms of costs, OPEX expanded by 23.26% YoY to NGN1.04trn, driven by higher regulatory cost (+54.66% YoY to NGN142.59bn), general running expenses (+32.73% YoY to NGN30.46bn), deposit insurance premium (+39.05% YoY to NGN77.39bn) and professional fees (+56.69% YoY to NGN20.78bn). Consequently, PBT moderated by 4.78% YoY to NGN1.26trn, while PAT was marginally higher by 0.74% YoY to NGN1.04trn amid the lower income tax expense (-24.20% YoY to NGN222.82bn).
Focusing on Q4:2025, PBT and PAT settled at NGN345.96bn and NGN276.35bn, respectively, representing the best quarterly performance after Q1:2025, given the significant impairment charges incurred particularly in Q2:2025 as the bank wrote off bad loans under regulatory forbearance. Overall, earnings dipped by 22.97% YoY to NGN25.32 per share amid the share dilution from the recent capital raise. Similarly, ROE and ROA resulted in 23.23% (vs. 32.52% in FY:2024) and 3.39% (vs. 4.10% in FY:2024). Following the resilience in earnings, the bank declared a final dividend of NGN8.75 (dividend yield of 8.50%) as against the NGN4.00 (dividend yield of 8.79%) paid to shareholders in FY:2024.
Outlook: Our outlook remains positive for ZENITHBANK due to the resilience in earnings despite pressure from impairment charges and lower non-interest income. We particularly like the fact that core business income dominated gross revenue in FY:2025, as this suggests better earnings sustainability. For FY:2026, we expect interest income to contribute about 88.44% to gross revenue, driven by our expectation for stronger (42.58% in FY:2026 vs 4.58% in FY:2025) loan growth in 2026.
Elsewhere, we expect better fee and commission income to support non-interest income amid higher income from digital, electronic and other financial services. Moreover, earnings are expected to be supported by lower impairment charges, reflecting recent write offs and better macroeconomic fundamentals. We highlight that possible downside risks include spike in OPEX and weaker than expected loan growth. However, we are optimistic about higher net interest income and resilient earnings. Consequently, we recommend a STRONG BUY on the ticker.
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