Zenith Zips past recession, but…

Chidi Samuel || Zenith Bank Plc has shown more than a passing romance with success. Its financial results for 2016 shows that the money lender was able to grow its gross earnings by 17.4 percent as it pulled off a decent net interest income of N240.2bilion, representing a 6.9 percent growth in its core lending activities on a year-on- year basis. However, impairment losses from loans gone badly dragged back profit figures by a disturbing N30billion as loan loss provisions as a proportion of loans outstanding rose from 0.79 percent in 2015 to 1.41 percent in 2016. Nevertheless, the bank was still able to redeem an impressive profit after tax performance of N129.7billion up fromN105.7billion in 2015, representing a rise of 22 per cent.

Furthermore, the bank’s profit before tax rose by a cheery 24.8 per cent from N125.6 billion in 2015 to N156.7billion in 2016. Much of the banks operational improvement appears to have come from  growth in the banks fee -based income which rose from N61billion in 2015 to N68billion in 2016 (a forward shove of 11.5 percent), a 56.4 per cent rise in the bank’s trading income which rose from N18.2billion in 2015 to N28.4billion in 2016 and a sharp rise in banks other incomes which galloped from N5.3billion in 2015 to N26.6billion in 2015, representing a dramatic 402 per cent growth in its miscellaneous incomes ranging from incomes generated from foreign currency revaluation gains (a line item that rose by a staggering  809 percent between 2015 and 2016), gains on the disposal of equipment (a balance sheet figure that went from N39million in 2015 to N239 million in 2016) and dividend income from its equity investments which actually tumbled down from N545million in 2015 to N349million in 2016, a fall of 35.9 per cent, reflecting difficulties faced by companies listed on the stock exchange as they try to push back against the effects of recession in the course of the year.

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A slight source of worry is the bank’s massive growth in its forward and futures currency liabilities. The bank’s derivative assets rose from N8.5billion in 2015 to N82.9billion in 2016, a whopping derivatives growth of roughly ten times or 875 per cent. This has increased the riskiness of the banks underlying liability structure even though it has bolstered revenue by N20billion up from N2billion in the contemporary period of the previous year 2015.

All in all the bank has shown sustained earning power and market resilience, a boon to stock market investors who have become increasingly accustomed to more morbid results as the Nigerian All Shares Index stumbled -6.93 percent year to date.