April 24, 2026/Cordros Report
In this update, we present our 2026E outlook for Zenith Bank Plc (ZENITHBANK) following the release of its 2025FY results. Our thesis for ZENITHBANK in 2026E centres on our expectations of a decline in credit costs, reflecting improved asset quality and already elevated coverage levels. Specifically for 2026, we expect a 59.3% y/y decline in impairment charges, alongside loan growth of 15.0% y/y and a 49.2% y/y increase in non-interest income, driving a 51.3% y/y rise in profitability to NGN1.57 trillion (2025FY: NGN1.04 trillion). Based on our estimates, we derive a year-end target price of NGN161.33/s, implying a 20.4% upside and supporting a BUY rating. Furthermore, we expect ZENITHBANK to sustain strong shareholder returns, with 2026E DPS projected at NGN15.33/s (interim: NGN1.83/s, final: NGN13.50/s), translating to a payout ratio of 40.0% and a dividend yield of 11.4% based on the last close of NGN134.00/s. On our 2026E estimates, the stock is expected to trade at 0.9x PB and 3.5x PE.
We expect sustained momentum in earnings trajectory: We expect ZENITHBANK’s gross earnings to grow by 12.2% y/y to NGN4.70 trillion in 2026E, supported by steady expansion in core earnings (+7.0% y/y) and a strong recovery in non-interest income (+49.2% y/y). Interest income is projected to rise by 7.0% y/y to NGN3.93 trillion, underpinned by a 10.0% y/y increase in earning assets to NGN29.93 trillion. On funding, interest expenses is forecasted to increase by 2.1% y/y to NGN1.06 trillion as ZENITHBANK sustains a high quality funding mix. Consequently, NII is forecast to grow by 8.9% y/y to NGN2.87 trillion, while NIM moderates to 10.3% (2025FY: 13.7%) due to asset yields declining. We also anticipate that impairment charges will decline by 59.3% y/y to NGN302.18 billion, implying a cost of risk of 2.5% (2025FY: 6.7%). We see non-interest income reaching NGN643.83 billion in 2026E (+58.8% y/y), driven by fee growth and a normalisation in trading income from a low 2025 base impacted by lower fair value gains Combined with controlled cost growth (+17.7% y/y), this is expected to support a healthy CIR of 34.2% (2025FY: 33.6%) and drive PAT growth of 51.3% y/y to NGN1.57 trillion.
Shift to normalised credit costs: The CBN’s full provisioning directive in 2025FY created a one off but material earnings drag across the sector. For ZENITHBANK, the impact was particularly pronounced as impairment charges rose to NGN742.19 billion, equivalent to 71.3% of pre impairment profit. Despite this, the bank delivered PAT of NGN1.04 trillion, the highest in the sector, underscoring the strength of its earnings franchise, supported by a resilient core income base and a strong low-cost deposit structure. Looking ahead, we expect a normalisation in credit impairment charges to drive strong earnings growth. Impairment charges are projected to decline by 59.3% y/y to NGN302.18 billion, implying a cost of risk of 2.5% (2025FY: 6.7% | 2024FY: 7.3%), which we view as more consistent with the bank’s underlying credit profile. This moderation, alongside sustained revenue growth, is expected to support a 57.7% y/y increase in PBT to NGN1.99 trillion in 2026E.
Valuation: Our target price of NGN161.33/s is derived from an equal-weighted blend of a Dividend Discount Model (DDM) and a Gordon Growth Model (GGM). Under the DDM, applying a 25.0% cost of equity and a 40.0% average payout ratio across the forecast horizon yields a valuation of NGN159.01/s. For the GGM, we anchor on a 25.0% cost of equity and assume a normalized long-term growth rate, resulting in a valuation of NGN163.65/s. The equal-weighted average of both methodologies implies a target price of NGN161.33/s.
