Thursday, Oct 19, 2017 1:35PM/ FBNQuest
Zenith Bank reports
Q3 2017 results
positive reaction by the market likely
PBT up 26% q/q, beat our forecast by 32%
Weaker-than-expected funding income
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
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.
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.
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.
estimates are under review. We rate the shares Outperform.
Bank Q3 2017 results: actual vs. FBNQuest Research estimates (N