Monday, August 06, 2018 /01:24 PM / NSE
The Zenith Bank Group recorded a Profit before Tax (PBT) of N107.4 billion for the period representing a 16% growth over N92.2 billion in H1 2017. Amidst a challenging operating environment, the Group optimised its bottom line through efficient treasury and liquidity management which resulted in a 39% decline in interest expense over the prior period, enhanced asset quality as impairment charges fell significantly by 77% compared to H1 2017 and ramped up the volume of transactions leading to a 24% increase in fee and commission income over the same period last year.
Gross earnings and interest income reduced by 15% and 13% respectively, driven by lower trading income, declining yields on assets and a reduction in the loan book by 6%. Despite the decline in top line, the Group mitigated these knock-on effects by strengthening its Net Interest Margins (NIM) to 10.1% (adjusted) for H1 2018 compared to 8.6% (adjusted) for H1 2017 reflecting significant improvements in the Group’s operational efficiency. Also, the Group’s focus on cost effectiveness continues to deliver benefits as Cost-to-Income ratio declined from 56.7% in H1 2017 to 54.9% in the current period while cost of funds fell by 47% from 6.4% in H1 2017 to 3.4% in the current period. The Group’s risk metrics also improved significantly as cost of risk reduced by 75% from 3.6% in H1 2017 to 0.9% in H1 2018 while the coverage ratio increased by 59.8% from 143.4% to 229.2% over the same period, demonstrating a prudent disposition to credit risk management.
The Group is making significant progress in retail banking evidenced by a remarkable increase in the volume of transactions on various electronic platforms as well as increase in customer acquisitions. This has translated into increase in fees on electronic products which grew by 87%, growth in retail deposit balances, as well as increase in Zenith’s share of the industry’s retail business. During the six months to June 2018, fees and commission income was N47bn compared to N38bn in June 2017, showing a 24% growth. Between H1 2017 and H1 2018, volume of transactions on various electronic platforms grew by over 100%. With this emphasis on retail business, the Group is on course to diversifying its funding and income base.
Total deposits as at June 2018 was N3.2 trillion representing a decline of 8%
(N272bn) from December 2017 FYE figure of N3.4 trillion, with total assets at N5.3 trillion reflecting a 6% reduction from N5.6 trillion as at December 2017 FYE.
The reduction in deposits was as a result of a deliberate strategy to reduce reliance on expensive fixed deposits while growing cheaper savings deposit by 12% from FYE 2017 (N48bn increase YTD) and consolidating on the retail drive.
As the operating environment continues to stabilize across the economic indices of inflation, a foreign exchange market, and healthy foreign reserves, management’s outlook is positive going into the second half of the year. The Group continues to deploy strategies aimed at increasing its retail segment markets share while consolidating on its leadership in the corporate segment.