TUES, MAY. 02 2023-theGBJournal|Zenith Bank Plc (ZENITHBANK) published its Q1-23 unaudited financial report last Friday, which showed that the bank delivered double-digit expansion both at the top-line (+41.0% y/y) and bottom-line (+13.4% y/y) during the period.
The group in the period recorded an increase in its Q1-23 EPS to N2.10 (+13.5% vs NGN1.85 in Q1-22).
Interest income grew by 51.6% y/y to N191.63 billion, underpinned by the higher income from investment securities (+44.7% y/y to NGN55.87 billion), loans and advances to customers (+41.1% y/y to N123.87 billion), and cash and balances with banks (+51.6% y/y to NGN191.63 billion).
Management highlighted that the income growth from loans and advances to customers was due to the group repricing its risky assets during the period. On the higher income from investment securities, we attribute it to the higher yields in the fixed-income market.
More significantly, interest expense spiked by 174.1% y/y to N70.84 billion, reflecting the 140bps increase in the bank’s cost-of-funding (CoF) to 2.7% in Q1-23.
During the period, ZENITHBANK incurred higher interest costs on deposits from customers (+160.4% y/y to N45.76 billion) and other borrowings (+195.2% y/y to N24.42 billion), reflecting the higher interest rate environment.
Accordingly, net interest income settled higher by 20.1% y/y at N120.79 billion. Eventually, the bank’s net-interest margin (NIM) for the period declined to 6.9% from 7.3% in the corresponding period of the prior year.
The bank’s non-interest income (NII) advanced by 27.1% y/y to N72.75 billion in Q1-23. We attribute the higher income from NII to the expansions in net fees and commissions income (+2.0% y/y to N34.15 billion) and gains on investment securities (+4.0% y/y to N33.89 billion).
In the same vein, the gains on FX revaluation amounting to N1.21 billion (vs a loss of NGN10.48 billion in Q1-22) further supported the growth in non-interest income.
This expansion in NII, alongside the growth in net interest income, led to a 23.0% y/y increase in operating income to N185.81 billion.
Further down, operating expenses rose by 19.5% y/y to N99.21 billion, with the most pressure exerted by AMCON levy (+22.5% y/y to N37.92 billion), personnel expenses (+7.6% y/y to N23.17 billion), and NDIC premium (+31.9% y/y to N6.56 billion).
Consequent to the bank’s operating income growing faster than opex, the bank’s cost-to-income ratio (ex-LLE) settled lower at 53.4% (Q1-22: 55.0%).
All in, profit-before-tax grew by 27.4% y/y to NGN86.61 billion. Subsequently, ZENITHBANK’s ROAE and ROAA printed 18.7% and 2.1%, respectively.
”We like that ZENITHBANK delivered impressive earnings, despite the higher CoF incurred in Q1-23,” Cordros Research analysts said in the review of the bank’s performance.
They also expect the group to record stronger income growth in 2023E, on the back of improved risk creation, higher yields in the fixed-income market, and strong NII growth.
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