Alabingo Finance Report|Zenith Bank defiled the challenging operating environment to grow its pre-tax profit by 6.1 per cent year-on-year in the first three months of 2019, propelled by significant 54.2 per cent drop in its impairment provisions for non-performing loans and non-interest which was up 22.9 per cent during this period.
The country’s sluggish economic growth took its toll on the revenue of the bank as it was down -6.55 per cent to N 158.11 billion March 2019, compared to N169.19 billion recorded in the same period last year.
The decline in revenue is traceable to investment and other operating income which dipped -35.06 per cent in the first three months of this year, though interest income increased 4.94 per cent and fee and commission income was higher by 14.35 per cent during this period.
“The Bank had a challenge growing its interest income in the period with a decline of 10.2 per cent y/y. On the other hand, non-interest income was up by 22.9 per cent y/y. The increase in the non-interest income and a drop in impairment charges boosted the pre-tax profit to N57.3 billion, i.e. a modest increase of 6.1 per cent y/y,” explained Moses Ojo, Head, Research and Business Development, PanAfrican Capital.
He noted that there was a noticeable improvement in the NPL ratio, even though cost/income ratio increase slightly.
“In our view, the bank is expected to aggressively grow its core side of the business in the quarters ahead,” Ojo opined.
Zenith Bank made significant progress in cutting down its impairment charges on toxic loans, declining -54.17 per cent to N2.09 billion in Q1 2019, instead of N4.57 billion provided for non-performing loans in Q1 2018.
The bank was also more prudent in the first three months of the year as its operating expenses were lower by -7.03 per cent to N59.40 billion, on the back of lesser spending on fuel and maintenance and other expenses.
Zenith Bank cost to income ratio improved to 50.0 per cent in Q1 2019 from 52.2 per cent in Q1 2018.
It was, however, able to grow profit after tax by 6.7 per cent year-on-year on the back of a lower effective tax.
The bank asset quality improved slightly with Non-performing Loans (NPLs) ratio diminishing slightly by 13 basis points quarter-on-quarter to 4.8 per cent, even as absolute NPLs were down 6.8 per cent quarter-on-quarter.
Its Cost of Risk (CoR) also improved to 0.4 per cent in Q1 2019 from 0.9 per cent in Q4 2018.
The lender’s total assets declined -1.29 per cent during the period under review to N5.88 trillion as its loans and advances dropped slightly -1.69 per cent to N1.79 trillion in March.
Similarly, Zenith Bank raked in lower deposits, declining -3.22 per cent to N3,57 trillion, compared to N3.69 trillion in March 2018.
Its share has declined -9.33 per cent to N20.90 this year as the investors sought safety outside the Nigerian equity market due to uncertainties that trailed the 2019 general elections.
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