Zenith Bank posts impressive profits, shareholders returns despite challenges
Zenith Bank Plc in its 2015 audited accounts maintained an impressive growth in profitability and dividend, reaffirming the bank’s position as one of the most profitable and well managed financial institutions in the country.
The bank made history as it crossed N4 trillion mark in total assets while its profit for the period also hits N105.66 billion.
From the profit and loss figures, the bank sustained growth in gross earnings that impacted positively on profit after tax when its rose by 7.2 per cent despite macro economy challenges.
The bank released its audited results for the full year ended December 2015, showing a strong performance across most indicators on the back of sustained cost efficiency, effectively risk management and improved profits.
On the heels of impressive profit, Zenith Bank management delights shareholders for the first time in history pay interim dividend of N0.25 and a final dividend of N1.55, making a total dividend of N1.88 at the end of 2015 financial year.
Zenith Bank is an internationally focused commercial bank, providing a wide range of banking products and services to corporate, commercial and retail customers in Nigeria, W/Africa and Europe.
The Bank’s management was able to grow margin and improve key ratios despite the prevailing tight liquidity and harsh regulatory environment that was expected to impact negatively on the financial performance of most listed financial institutions on the Nigerian Stock Exchange (NSE).
For the year review, the bank witnessed strong earnings capacity and growth, solid and liquid capital base, good returns on investments and excellent customer services.
Sustained growth in NII despite tough operating environment
For the full year ended December 2015, Zenith Bank reported a growth of 7.2per cent in gross earnings to N432.5 billion in 2015 from N403 billion in the corresponding period of 2014. Interest income grew by 11.1 per cent to N348.2billion from N313 billion in 2014; driven by a strong growth of 15.6 per cent in loan & advances to customers to N2 trillion in 2015 from N1.76 trillion recorded in 2014.
Interest expenses on the other hand grew by 15.6 per cent to N123.6 billion in 2015 from N106.9billion in 2014. The consistently high interest rate environment throughout the period and increase in the banks Cash Reserve Ratio (CRR) and FG implementation of the Treasury Single Account resulted in increase in competition of deposits amongst banks and hence increase in interest expenses.
Expectedly, the bank’s Net Interest Income (NII) grew significantly by 8.8 per cent from N206.5 billion in 2014 to N224.58 billion in 2015.
On this, Zenith Bank’s Net Interest Margin (NIM) declined YoY by 3.6 per cent (from 8.4per cent in 2014 to 8.1 per cent in 2015) as yields on government securities dropped during 2015 financial year.
Zenith Bank’s reported non-interest income of N84.58 billion for the year ended December 2015 from N90.1 billion in the corresponding period of 2014.
Increase in profitability
Despite higher operating expenses, Zenith Bank’s maintained a stronger operational efficiency in a tradition that the bank strongly adhere to.
The bank has been able to consistently sustain its effective cost management strategies and hence profitability.
However, the bank operating expenses grew by 2.6 per cent to N167.9 billion in 2015 from N163.7 billion in 2014 while operating income increased by nearly four per cent to N293.5 billion from N163.7 billion in 2014.
The increase in operating expenses was partly attributable to a growth of 12per cent in Asset Management Corporation of Nigeria (AMCON) expenses and deposit insurance premium.
AMCON expenses rose from N14.3 billion in 2014 to N17 billion in 2015, as a result of the Bank’s growth in total assets.
Impairment charges on loons increase significantly by 19.97per cent to N15.67 billion in 2015 from N13.06 billion in 2014. The increase can be attributed to the aggressive growth in risk asset creation as evidenced by an increase of 15.6per cent in loans and advances to N2 trillion in 2015 from N1.75 trillion in 2014.
The combination of a strong growth in operating expenses and loan impairment charges prevented a higher profitability growth for the year under review.
For the year, the Group delivered an impressive profit before tax of N125.6 billion, an increase of 4.9 per cent over the N119.7billion reported in 2014 while profit after tax grew by 6.2per cent to N105.66 billion from N99.5 billion in 2014.
Zenith Bank maintained its leading position in terms of margin and cost efficiency. The bank value creation for its shareholders, recorded 18.4 per cent in Return on Average Equity (ROAE) from 18.70 while Return on Average Assets (ROAA) stood at 2.70 per cent as against 2.9 per cent recorded in 2014.
Stronger growth in assets
The Group’s balance sheet remained strong with 6.7 per cent growth in Total Assets, from N3.76 trillion in 2014 to N4 trillion in the year under review.
Loans advances to customers grew by 15.6 per cent to close at N2 trillion in 2015 from N1.76trillion in 2014. Despite the implementation of the Treasury Single Account (TSA) by the FGN, customer deposits remained relatively stable with a marginal year-on-year of 0.8 per cent from N2.5 trillion in 2014 to N2.56 trillion in 2015.
This brings the group total liabilities to N3.4 trillion in 2015 from N3.2 trillion recorded in 2014.
Meanwhile, Shareholder’s funds grew by 7.5 per cent to N594 billion in 2015 from N552..6 billion in 2014
The bank continued to maintain a disciplined and prudent approach to loan growth in line with its Risk Management framework. The Bank’s Non-Performing Loans (NPL) ratio remained low at 2.18 per cent; up slightly from 1.75 per cent in the comparative period of 2014.
Zenith Bank advanced loans to Distributing Companies (DISCOs) located in high cash generating areas like Ikeja and Eko DISCOs and customers with other thriving businesses.
In addition, despite the increase in operating expenses, the bank’s cost to income ratio dropped to 57.2 per cent in 2015 from 57.7 per cent in 2014.
Zenith Bank outlook and prospects this year
Retail Banking: The bank is expected to continue to grow its retail business especially in liability generation. According to the bank, this will be achieved through the deployment of innovative products in mobile banking, internet banking and cards services. “The capturing of bio-data of all bank’s customers across the industry into a single data base has also boosted our retail banking business. Each customer now has a unique Biometric Verification Number (BVN) and this has helped to reduce fraud in the banking system”.
Agriculture: The Federal Government’s resolve to boost the agricultural sector in the country would no doubt create quite a number of opportunities in the areas of funding, job creation and indeed food security to Africa’s most populous nation. Various funding schemes to ensure that the country’s economy is diversified have been put in place. These include Commercial Agriculture Credit Scheme (CACS) that has 159 projects and Nigeria Incentive-Based Risk Sharing for Agricultural Lending (NIRSAL). Others are Seed and Fertilizer Scheme launched for banks to lend at a subsidized rate to local farmers and the value chain for the production of fertilizer. Zenith Bank has played a major role in this sector to support the various government’s projects aimed at boosting our economy.
Deposit Base: Our drive for low cost and appropriately mixed deposit base to fund our credit and money market transactions would continue in 2016. We are committed to be a dominant player in the money market space to drive up income and profitability going forward.
Customer Services: At the center of the Group’s pursuit of excellent customer service, we would continue to focus on strengthening our relationship management in a bid to surpass stakeholders’ expectations.
Investments in Technology and Product Innovations: The Group has over the years become synonymous with the use of ICT in banking and general innovation in the Nigerian banking industry. We have renewed our commitment in ensuring that all our activities are anchored on the e-platform and providing service delivery through the electronic media to all customers irrespective of place, time and distance.
Risk Assets: The Group would continue to seek opportunities to grow its risk assets while maintaining a low NPL ratio and sustaining our improved coverage ratio. We would continue to strive for the optimal protection of our shareholders’ wealth through the continuous review and improvement of our risk management culture and processes
Manufacturing and Real Sector: More emphasis will be placed on manufacturing and the real sector by providing support to local production. This is expected to drive the self sustainability policy of the federal government.
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