Alabingo Finance Report |
Interest earned from government securities and placement with banks and discount houses were crucial to the improved revenue Zenith Bank recorded in the first quarter of 2018.
Zenith Bank increased gross earnings 15 per cent to N169.19 billion in Q1 2018 as interest income up picked 21 per cent on the back of 89 per cent rise in income from investment in treasury bills and government and other bonds that went up 13 per cent. This is despite the -2 per cent decline in interest made from loans and advances.
Other operating income, which improved 177 per cent help mitigate the impact of -10 per cent contraction in non-interest income to N26.57 billion as a result of -26 per cent decline in income from financial guarantee contracts issued and -71 per cent drop in corporate finance fees. Foreign exchange trading income was also down -86 per cent.
” In the period, we delivered Gross earnings of N169 billion representing a growth of 14.5 per cent compared to the same period last year, which was led by a 20.8 per cent upswing in interest income. Our asset mix continues to do well, driven by interest earned on government securities and our corporate business. This growth in interest income translated into an improved Profit before Tax (PBT) growth of 22.2 per cent and a Profit after Tax (PAT) increase of 25.5 per cent compared to March 2017, at N54 billion and N47 billion respectively,” the management of Zenith Bank explained in a release.
In spite of the coming into effect of IFRS9 on January 1, 2018, which mandates commercial lenders to be forward looking in providing for expected loan losses, Zenith Bank made significant progress in cutting down its impairment charges on credit loss by -42 per cent to N4.57 billion in March 2018. This is traceable to a -10 per cent drop in its loans and advances to N2.03 trillion from N2.25 trillion in Q1 2017 as the banking sector grapples with rising NPL. The industry average NPL reached over 15 per cent against 5 per cent regulatory benchmark set by the Central Bank.
Zenith Bank NPL ratio climbed to 4.3 per cent, which was 34.4 per cent higher than 3.2 per cent it had at the end of 2017.
The managing director, Cowry Assets Management Company, Johnson Chukwu, believe with the Nigerian economy rebounding, there is gradual pay down on existing loans, but banks have not been able to create more risk assets, which also dragged down their interest income.
Deposits from customers decreased marginally -1.2 per cent to N3.4 trillion compared to N3.44 trillion in the preceding year.
Meanwhile, significant 237 per cent leap in derivative assets and 95 per cent rise in dues from other banks managed to mitigate to the drop in the bank’s risk asset as total assets were up marginally 1.2 per cent to N5.68 trillion.
Group’s Capital Adequacy Ratio (CAR) and Loan-to-Deposit ratio stood at 22.3 per cent and 50.7 per cent respectively, providing the Group with ample opportunities for growth and stability.
The bank spent more to make money in the first quarter of 2018 as its cost-to-income ratio was 4 per cent to 54.2 per cent.
“The macro-environment continues to improve and we remain optimistic about the stability and liquidity in the FX market, declining inflation rate and firm crude oil prices to support economic growth. We aim to strategically explore all available opportunities to expand our customer base and businesses while consolidating on our industry position,” the CEO of the Zenith Bank, Peter Amangbo noted.
