Zenith Bank Plc kicked off the earnings season for Nigerian banks last week as it released its full year 2013 financial results.
Most financial market analysts said the results were in line with forecasts, despite the harsh operating environment that confronted banks last year.
Last year, the Central Bank of Nigeria (CBN) raised the cash reserve requirements (CRR) on public sector deposits to 50 per cent from 12 per cent. It also reduced and removed a number of fee income lines, including ATM and CoT charges. In the same breath, the AMCON levy was raised to 0.5 per cent from 0.3 per cent, amongst others.
However, Zenith Bank’s 2013 results showed profit before tax (PBT) and profit after tax (PAT) of N110.6 billion and N95 billion in 2013 respectively. This represents a PBT growth of 8.3 per cent and a six per cent drop in the PAT.
Its gross earnings also climbed by 14.4 per cent to N351.4 billion at the end of 2013, compared to the N307 billion it was at the end of 2012, while its interest income jumped by 17.5 per cent to N260.1 billion, as against the N221.3 billion it was the previous year.
But Zenith Bank’s interest expense rose by 9.7 per cent to N70.8 billion in the year under review, from N64.6 billion, while net interest income increased by 20.7 per cent to N189.3 billion in 2013, from N156.8 billion the previous year.
The bank declared dividend per share of N1.75 in 2013, as against the N1.6 it paid out last year. This reflected an eight percent dividend yield. Its Capital Adequacy Ratio and liquidity ratio stood at 26 per cent and 64 per cent respectively.
Banking Analyst at Renaissance Capital (RenCap), Mr. Adesoji Solanke noted that given the revenue and cost pressures, there were clear challenges to Nigerian banks’ earnings growth delivery capabilities.
Solanke commended Zenith Bank over the strong credit growth of 26 per cent year-on-year and 13 per cent quarter-on-quarter in the fourth quarter of 2013. This, he revealed was largely driven by power sector deals.
He however added: “Overall, these were decent numbers from Zenith Bank in context of the challenging operating environment for the Nigerian banks.
“With 19 per cent of its total assets now sitting as cash balances in zero-to-low interest yielding accounts at the CBN, Zenith’s ability to still deliver RoA in excess of three per cent is commendable.”
To analysts at BGL Securities Limited, the bank exceeded expectations, especially with the prevailing monetary tightening environment that was expected to impact negatively on financial performance of most banks.
“Revenue growth was driven by an increase in customers’ deposits which the bank used judiciously in creating higher margin risk assets to limit the effects of regulatory policies,” BGL added.
To CSL Securities Limited, a division of First City Monument Bank, the Zenith Bank 2013 Full year results were in line its estimates, adding that it showed strong resilience in the face of regulatory changes to tariffs and the CBN’s policy changes.
“We have a hold rating on Zenith with a target price of N23.00,” it added.