Key Performance Highlights:
In line with other Nigeria-based banks, Zenith Bank also exhibited solid FY23 performance, with the gross earnings jumping 125.4% YoY to N2,131.7 billion and the net profit almost tripling to N676.9 billion. The growth in gross earnings was primarily marked by a 111.9% YoY growth in interest income, further supported by a 166.6% YoY surge in trading income to N567.0 billion, and a huge 583.5% spurt in other income, slightly offset by a 17.7% YoY fall in net fee and commission income.
The Group’s Interest and similar income more than doubled to N1,144.7 billion in FY23, compared to N540.2 billion in FY22, primarily driven by the growth in the size of risk assets and their effective repricing, alongside the rise in the yield of other interest-bearing instruments over the year. This was partially offset by a 135.4% YoY growth in Interest and similar expense to N408.5 billion in FY23 due to increased borrowed funds, times deposits, savings and current account. Consequently, Zenith Bank managed to double the Net Interest Income to N736.2 billion compared to last year (FY22: N366.6 billion). The higher impairment charge of N409.6 billion (FY22: N123.2 billion) on account of increased changes in ECL allowance in loans and advances resulted in a Net Interest Income after impairment charges of N326.6 billion, up 34.2% YoY.
The robust growth in Trading income from N212.7 billion to N567.0 billion in FY23 and the rise in Other income (mainly due to Foreign currency revaluation gain) from N35.5 billion to N242.6 billion was partially offset by a 17.7% YoY fall in Net fee and Commission income to N109.3 billion. This fall in Net fee and commission income was reflected by higher Fees and Commission expenses. Further, Non-Interest Income surged 141.2% YoY to N918.9 billion, compared to N381.0 billion in FY22.
In FY23, the Bank’s Personnel expenses surged by 44.0% YoY to N124.4 billion, while Operating expenses increased by 30.8% YoY to N291.7 billion primarily due to higher Fuel and maintenance, AMCON levy, Outsourcing services, and Deposit insurance premium. The Bank’s Profit before tax was N796.0 billion, up 179.6% YoY. Further, the Income tax expense increased 96.0% YoY to N119.0 billion in FY23. Consequently, Profit for the year jumped 202.0% YoY to N676.7 billion in FY23, compared to N223.9 billion in FY22. Earnings per share skyrocketed from N7.14 in FY22 to N21.55 in FY23.
The Bank’s 4Q23 performance marked strong topline as well as the bottom-line growth. Gross earnings soared 147.0% YoY to N802.7 billion in 4Q23, powered by solid interest and non-interest income growth. Profit for the year increased 294.3% YoY to N242.7 billion.
The cost of funds grew from 1.9% in FY22 to 3.0% in FY23 due to the high interest rate environment. Notwithstanding the 32% growth in operating expenses in 2023, the Group’s cost-to-income ratio improved significantly from 54.4% in FY22 to 36.1% in FY23 due to improved topline performance. Return on Average Equity (ROAE) increased from 16.8% in FY22 to 36.6% in FY23, underpinned by improved gross earnings. Return on Average Assets (ROAA) also grew from 2.1% to 4.1% in FY23. The Bank’s Total assets increased by 66% from N12.3 trillion in FY22 to N20.4 trillion in FY23, largely due to growth in total deposits and the revaluation of foreign currency deposits. Gross loans grew by 71% from N4.1 trillion in FY22 to N7.1 trillion in FY23 due to the revaluation of foreign currency loans and the growth in local currency risk assets. Additionally, the Non-Performing Loans (NPL) ratio increased marginally from 4.3% to 4.4% in FY23 despite the heightened risk environment and challenging operating environment. Note that the Capital Adequacy ratio remained within regulatory thresholds at 21.7%. (FY22: 19.8%)
The board proposed a final dividend payout of N3.50 per share, bringing the total dividend to N4.00 per share. (FY22: N3.20). The dividend will be payable on May 8, 2024, to shareholders whose names appear in the Register of Members at the close of business on April 25, 2024.
In 2024, the Group will complete the transition to a holding company structure, which is anticipated to position it advantageously for exploring emerging opportunities in the Fintech space while bolstering its digital and retail banking initiatives. Furthermore, the Group is undertaking urgent necessary actions to meet the new minimum N500 billion equity capital requirements to maintain its international authorization within the timeframe stipulated by the Central Bank of Nigeria (CBN).
Market Reaction: The investor reaction to the FY23 results was subdued as the stock declined 3.73% to N40.00 versus a 0.71% decline for the All-Share Index on 12/4.
Source: Company Financials, FSDH
