Thursday, April 19, 2018 /03:45 PM /FBNQuest Research
Event: Zenith Bank reports Q1 2018 results
Implications: Muted reaction from the market likely; we believe the bank is on track to meet its FY2018 PBT guid. of N210bn
Positives: Double-digit PBT and PAT y/y growth
This afternoon, Zenith Bank (Zenith) published its Q1 2018 results. PBT of N54bn grew 22% y/y and puts the bank on track to meeting its full year target of N210bn in our view. Revenue growth was mixed: funding income grew 36% y/y while non-interest income fell -10% y/y. Notwithstanding, total revenues grew by a healthy 22% y/y and helped to offset a 33% y/y rise in opex. A -42% y/y reduction in loan loss provisions also helped. PAT grew faster than PBT (by 33% y/y) because of a helping hand from other comprehensive income (N4.8bn), thanks mainly to fx translation gains.
The bank’s earnings were close to our forecasts. We are surprised at the revenue split, however. The q/q changes are material: 70% in magnitude for both. We suspect some reclassification is at play here. As such, we choose not to place too much emphasis on the separate revenue lines, but the total revenue instead which was in line with our forecast. Q1 results are not audited. As such, we also would not make too much of the differences between the opex and provisions figures compared with ours for now.
On the balance sheet, a -16% q/q decline in the loan book is a major surprise. Zenith’s loan book has now declined, consistently, from a peak of N2.3trn in Q1 2017 as non-interest income and govt securities have been preferred to lending. The bank guides to loan growth of 10% for the full year. With govt yields continuing to trend down, loan growth will have to pick up substantially over the coming quarters.
On the back of these results, we would not expect a significant change to consensus estimates (FY2018 PBT of N199bn). We expect the market’s reaction to be muted. We continue to believe that the bank can meet its FY PBT guidance of 2018 of N210bn. Our estimates are under review. We rate Zenith shares Outperform.
Zenith Bank Q1 2018 results: actual vs. FBNQuest Capital Research estimates (N millions)
Source: NSE; FBNQuest Capital Estimates