Zenith Bank Plc has regained banking industry leadership by the size of the balance sheet after losing the baton in 2019.
The bank lifted asset base by N393 billion or 5 per cent over the half-year closing figure to build the largest bank balance sheet of roughly N8 trillion at the end of the third quarter ended September 2020.
Over the nine months of the year, the bank has grown asset base by over N1.6 trillion or close to 26 per cent. The bank has not seen this level of asset expansion since the beginning of the current decade.
Leading the asset growth are cash and bank balances, which advanced by 92 per cent over the nine months period to N1.8 trillion.
Investment portfolio followed with a leap of 54 per cent to over N909 billion over the same period.
Net lending portfolio swelled by more than N405 billion or over 17 per cent to N2.7 trillion at the end of the third quarter. This excludes lending to other banks of over N810 billion.
The bank’s asset expansion is financed by an increase of N962 billion or over 22 per cent from the 2019 closing figure to N5.2 trillion at the end of September 2020.
Other liabilities expanded by 89 per cent to over N687 billion and borrowings grew by more than 80 per cent to N563 billion over the period.
Tax savings continued to be the critical factor in improving the bottom line at the end of the third quarter.
A drop of N7.5 billion in tax expenses changed the bank’s earnings story from flat growth in pre-tax profit to a 5.7 per cent improvement in after-tax profit at the end of September.
The bank’s management continued to face the challenge of rising loan default risk though a considerable slowdown was recorded within the third quarter. Credit loss expenses rose by 37 per cent year-on-year to over N25 billion at the end of September.
The figure is already above the N24 billion loan impairment expenses for the entire 2019 financial year.
Inability to grow earnings with assets continues to mark the bank’s operating story so far this year. Interest income, the biggest revenue line of the bank, went down slightly to under N319 billion, slipping from a 1 per cent improvement at half-year.
Fee and commission income continues to lose its position as the second-biggest revenue line for the bank.
It dropped by close to 20 per cent at the end of the third quarter, slowing down however from 40 per cent drop at half-year to close at N59 billion.
Two income lines – trading and other incomes also remained the revenue drivers for the bank this year. Trading gains grew by 34 per cent year-on-year to nearly N90 billion while other operating income rose by 53 per cent to N24.5 billion.
Robust growths in the two-income lines countered the poor performances of the main income lines and propped up gross earnings at the end of the period. Zenith Bank closed the third quarter with gross earnings of N509 billion, an increase of 3.6 per cent year-on-year. The strength to push revenue back to the 2017 peak of N745 billion was still missing at the end of the third quarter.
Interest expenses remain a big cost saving centre for the bank, dropping by close to 13 per cent at the end of the third quarter. At N93.6 billion, the bank saved close to N14 billion in interest expenses over the review period. That shifted the bank’s position from a decline in interest expenses to an increase of 5 per cent in net interest income at the end of the third quarter.
Operating expenses are still growing ahead of gross earnings for the first time in several years, leaving no room for cost-saving. Net profit margin edged up from 30 per cent at the end of half year to over 31 per cent at the end of the third quarter. This is also a slight gain from 30.6 per cent in the same period last year.
Despite the volatile behaviour of key revenue lines, the bank has been able to keep profit growing. The main strength for profit improvement so far this year has come from cost saving from tax expenses.
Zenith Bank closed the third quarter operations with an after-tax profit of over N159 billion, a year-on-year growth of 5.7 per cent. This is a slowdown from the growth of 17 per cent at half-year. Profit growth has slowed down to single digits over the past two years.
The bank earned N5.07 per share at half-year, improving from N4.80 per share in the same period last year. It paid an interim cash dividend of 30 kobo per share to shareholders at the end of half-year operations.