By Goddy Egene
Shareholders of Zenith Bank Plc are to receive an interim dividend of 30 kobo per share for the half year ended June 30, 2019. The dividend, which amounts to N9.42 billion, will be paid out of the profit after tax (PAT) of N88.9 billion announced by the bank yesterday. Zenith Bank reported gross earnings of N331.6 billion, a marginal increase of 2.9 per cent compared with N322.2 billion in the corresponding period of 2018.
Net interest income fell from N154 billion to N142.5 billion, while credit impairment charges rose by 48.2 per cent from N9.3 billion to N13.7 billion. The bank ended the period with a profit before tax of N111.7 billion, up by four per cent compared with N107.4 billion, while PAT grew faster by 8.7 per cent to N88.9 billion, from N81.7 billion in 2018.
Commenting on the results, analysts at Cordros Capital Limited said the gross earnings recorded remained in line with their 2019 full year (FY-19) estimate and would settle 1.30 per cent lower based on the current run rate.
“The top-line growth was primarily supported by the 23.86 per cent expansion in non-interest income, which was boosted by net fees and commissions (+33.62 per cent) and trading gains (+22.53 per cent) income growth. The growth in non-interest income is outpacing our FY-19 estimate, which at the current run-rate would settle 5.40 per cent higher,” they said.
Cordros Capital noted that on the other hand, interest income declined by 6.15 per cent, driven by weak risk asset creation and declining yields on fixed-income securities.
“Consequently, income from loans and advances to customers declined by 21.43 per cent, completely offsetting the 21.1 per cent growth in income from investment securities. Similarly, interest expense declined by 3.51 per cent, partly offsetting the impact of the declining interest income, however, net interest income still printed 7.43 per cent lower,” they added.
According to them, the bank’s macro-prudential ratios are above par, with only the non-performing loans ratio settling above the regulatory limit (5.3 per cent relative to 5.0 per cent statutory limit).
“All other ratios are settled well above regulatory minimums; Liquidity ratio (74.6 per cent relative to 30 per cent), Capital Adequacy (25 per cent relative to 16 per cent). We note that the bank’s current reported loans to deposit ratio (51.2 per cent) is below the new minimum LDR of 60 per cent. However, this does not seem to have been adjusted for the new weightings for the retail, SMEs, consumer credit and mortgage segments. We will seek clarity here, as the financials do not hold enough information on exposures to these segments, save for consumer credit which is 1.93 per cent of the gross loans exposure. Hence, we could not accurately recalculate the LDR,” they said.