October 12, 2026/Cordros Report
Zenith Bank Plc published its audited H1-26 financial results after close of business on Friday (09 October), reporting a 19.1% y/y decline in profit after tax (PAT) to NGN430.76 billion (H1-25: NGN532.17 billion). The decline was driven by FX trading losses alongside a significantly higher effective tax rate, which more than offset the benefit of the sharp reduction in impairment charges. Nonetheless, the Board proposed an interim dividend of NGN1.50/s (H1-25: NGN1.25/s), translating to a dividend yield of 1.11% based on the last closing price of NGN134.70/s.
Interest income declined by 8.9% y/y to NGN1.68 trillion (H1-25: NGN1.84 trillion), as lower income from investment securities (-15.9% y/y) and loans and advances to banks (-40.3% y/y) outweighed the modest increase in income from loans and advances to customers (+1.1% y/y). The decline in investment securities income reflected a 47.3% y/y reduction in investment securities holdings. Conversely, the growth in interest income from loans to customers was supported by a 25.5% y/y increase in loans to customers.
Meanwhile, interest expense declined by 13.0% y/y to NGN421.80 billion (H1-25: NGN484.54 billion), driven by a 75.4% y/y reduction in interest expense on borrowings to NGN32.52 billion, following a 98.3% y/y decline in the underlying borrowings to NGN11.13 billion. This more than outweighed a 10.7% y/y increase in interest expense on customer deposits to NGN387.30 billion. Consequently, the cost of funds moderated to 3.1% in H1-26 from 4.2% in 2025FY indicating a lower funding cost.
However, the moderation in interest expense was insufficient to offset the decline in interest income, resulting in a 7.4% y/y contraction in net interest income to NGN1.25 trillion (H1-25: NGN1.35 trillion). Notwithstanding this decline, an 81.5% y/y reduction in credit impairment charges to NGN141.12 billion supported a robust 87.4% y/y increase in net interest income after loan loss expenses (LLE) to NGN1.11 trillion. Meanwhile, net interest margin declined to 8.8% in H1-26 from 13.7% in 2025FY, as the contraction in interest income was stronger than the decline in interest expense.
Non-interest income declined by 74.2% y/y to NGN158.16 billion, largely due to FX trading, which moved from a gain of NGN268.49 billion in H1-25 to a loss of NGN284.90 billion in H1-26. The higher net fees and commission (+39.6% y/y), FX revaluation gains (+198.9% y/y) and improved loan recoveries (+148.1% y/y) were insufficient to provide respite. Nonetheless, the stronger growth in net interest income ex LLE outweighed the decline in non-interest income, causing a 5.3% y/y increase in operating income to NGN1.27 trillion (H1-25: NGN1.21 trillion).
Meanwhile, operating expenses expanded by 9.0% y/y to NGN633.76 billion (H1-25: NGN581.43 billion), driven by higher IT (+52.1% y/y), personnel (+2.9% y/y), and depreciation (+23.6% y/y) expenses. Accordingly, the cost-to-income ratio deteriorated to 44.9% from 29.5% in H1-25.
Overall, profit before tax increased by 1.9% y/y to NGN637.60 billion (H1-25: NGN625.62 billion). However, the 121.3% y/y increase in income tax expense to NGN206.84 billion (H1-25: NGN93.45 billion), which raised the effective tax rate to 32.4% from 14.9% in H1-25, offset the growth in pre-tax earnings. Consequently, profit after tax declined by 19.1% y/y to NGN430.76 billion (H1-25: NGN532.17 billion).
Comments: ZENITHBANK recorded strong growth in net interest income ex LLE, supported by a significant reduction in impairment charges. However, weaker non-core income and a higher tax burden ultimately weighed on PAT. Looking ahead, lower investment securities holdings and yields are likely to constrain core earnings, although improved loan growth could provide some support. Additionally, stronger fee and commission income and a potential reversal of trading losses could support near-term earnings. However, the elevated tax burden remains a key uncertainty and downside risk to profitability. Our estimates are under review.
