Proshare - Facebook Proshare - Twitter Proshare - Google+ Proshare - Linked In Proshare - RSS Feed

Zenith Bank Reports Q3 2017 Results Records Weaker Than Expected Funding Income

Proshare

Thursday, Oct 19, 2017 1:35PM/ FBNQuest Research


Event:                       Zenith Bank reports Q3 2017 results

Implications:        Mixed/delayed positive reaction by the market likely

Positives:                PBT up 26% q/q, beat our forecast by 32%

Negatives:               Weaker-than-expected funding income 

Zenith Bank’s Q3 2017 results which have just been published show low single digit y/y declines in both PBT and PAT. Although profit before provisions of N114bn showed a greater decline (-8% y/y),  those on the provisions and opex lines proved significant, helping to limit the decline on the PBT line. Both revenue lines contributed to the decline in profit before provisions: while funding income was flattish, non-interest income fell -16% y/y because of base effects. 

Also on a q/q basis, because of base effects again, the bank recorded a marked fall of -42% q/q for non-interest income. Notwithstanding, non-interest income actually surprised positively, coming in much stronger than we had expected. Given a lackluster performance in funding income however, the impact of the better-than-expected non-interest income result was not felt. A significant positive surprise in loan loss provisions was the main reason for Zenith’s better-than-expected PBT (and PAT) result. 

The market is likely to take some time to digest these results. On the one hand, the y/y comparables show declines on revenues and earnings. And the q/q changes in revenue are also weak, similar to what we have observed for other tier 1 banks. On the other hand, the positive surprise on the provisions line is significant. Some will argue that Q4 may throw up some major negative surprises on this line in particular – effectively a justification to discount the surprise in Q3. 

While we would not dismiss this view completely, we doubt the extent of a q/q jump in provisions in Q3 will be of such magnitude to validate consensus’ N173bn FY 2017E PBT estimate. To our mind, this forecast is very conservative. As such, we expect a positive reaction to these results, even if delayed. We would encourage investors to buy into any sell-off on the back of these results. 

Our estimates are under review. We rate the shares Outperform. 

Zenith Bank
Q3 2017 results: actual vs. FBNQuest Research estimates (N millions) 
Proshare Nigeria Pvt. Ltd. 

Source: NSE; FBNQuest Estimates

Proshare Nigeria Pvt. Ltd.

Related News

1.              Zenith Bank Plc Announces Closed Period
2.             Zenith Bank Plc. - Set for an Impressive FY-2017 Performance, Amid Credit Loss Pressure
3.             Zenith Bank Plc Announces the Retirement of Mr. Olusola Oladipo from Its Board.
4.             Zenith Bank Plc H1 2017 Conference Call & Earnings Presentation - The Key Takeaways
5.              Zenith Bank Plc H1 Results – Forward Hump Boosts Earnings
6.             Zenith Bank Plc - Earnings Beat as FX Income Spike Dwarfs Huge Provision
7.              ZENITHBANK Declares N75.32bn PAT in Q2 2017 Results, Proposes 25 Kobo Interim Dividend (SP:N24.00k)
8.             ZENITHBANK Declares N37.49bn PAT in Q1 2017 Results, (SP:N14.9k)
9.             ZENITHBANK Declares N129.6bn PAT in 2016 Audited Results; Proposes N1.77k Final Dividend,(SP:N14.73)
10.         Zenith Bank Plc to Hold Board Meeting on January 24th, 2017
11.           Zenith Bank Plc Records Slight Strong Q3 2016 Results; Maintains Outperform Rating
12.          ZENITHBANK Declares N100.07bn PAT in Q3 2016 Result, (SP:N14.75k)
13.          Zenith Bank Plc Earnings Update - More Prudence as Bank Adopts New Impairment Model
14.          ZENITHBANK Half-Year Earnings Presentation: The key takeaways
15.          Zenith Bank Plc Earnings Miss as Loan Loss Expense Pressures PAT
16.          Zenith Bank Plc Records Group Capital Adequacy Ratio of 19% in Q2'16
17.          Zenith Bank Reports Q2 2016 Results; Significant FX-Related OCI Gains Boosted PAT
18.         Zenith Bank Plc Records Group Capital Adequacy Ratio of 19% in Q2'16
19.          ZENITHBANK Declares N44.84bn PAT in Q2 16 Result Proposes 25k Interim Dividend SP N15.60k

READ MORE:
Related News