Tuesday, August 18 2015 5:22 PM / Research
In the face of sustained macro-economic challenges, with corresponding strict industry regulations, which have capacity to adversely impact both liquidity position and lending capacity of the industry, Zenith Bank has been able to deliver as regards its top-line and bottom-line performance on year-on-year basis, driven by strong and liquid capital posture.
Central Bank raised CRR to 31% on both public and private sectors fund, while restriction on foreign currency borrowings to 75% of shareholders’ fund was recently introduced.
As mentioned above, the bank has been able to grow its gross earnings by 24.21% and increased its profitability posture by 12.01% on year-on-year basis- this has been driven by improved earnings capacity despite concerns in interest expenses posture. Nevertheless, the interest margin remains healthy and impressive with 33% growth on QoQ.
We observed improved risk assets management with corresponding growth in loan book, which impacted core income stream positively- an indication of healthy lending capacity and income stream.
Also, we commend the improved operating efficiency as cost-to-income-ratio moderated at 54,40% against 56.51% recorded in 2014 comparable period. This reflects input from cost-management strategies.
In addition, the NPL ratio posture remains impressive to close lower at 1.40% against 2.80% recorded in half-year 2014- the posture is better than 1.80% recorded in FY’14. This further buttressed the improved risk management noted above.
Summarily, below are the key takeaways from the Half-Year earnings presentation as presented by the management of the bank;
· The impact of stiff regulatory environment would be minimal, and it would have no effect on liquidity posture;
· Improved loan book with a significant decline in non-performing loans;
· All assets in Oil&Gas sector are performing;
· State government loans are converted to FG-Bonds at 15.5% coupon rate;
· Growth in impairment was induced by increased provisions to accommodate the associated risks of recent loan growth;
· No serious exposure to downstream of Oil & Gas sector;
· Deposit records weak growth due to increase in cost of funds;
· There is possibility of conversion of dollar loan to Naira loan;