Following the release of its 2018 audited financial statements which showed an 11.30 percent rise in profit, shares of Zenith Bank, Nigeria’s second-biggest lender, jumped Tuesday, to their highest level in more than seven months.
The stock gained 5.63 percent to N25.35 after the close of business on the floor of the Nigerian Stock Exchange (NSE), causing the year-to-date return of the tier-one lender to improve to 9.98 percent, outperforming the NSE Banking Index which stood at 8.8 percent as well as the All Share Index at 3.1 percent.
The surge was “on the back of the results released by the bank,” said Fola Abimbola, an equity research analyst at Lagos-based investment bank, FBN Quest. “There is more buying interest on the stock.”
Zenith Bank had shed 3.03 percent to N24 in the previous trading session amid sell-offs witnessed by most stocks that traded at the Lagos bourse in reaction to last weekend’s election postponement by the Independent National Electoral Commission.
According to Abimbola, the stock would likely continue to rally in the coming days as “there is nothing negative on the stock in particular.”
Besides Zenith Bank’s profit growth in 2018, the improved valuation was also seen as a reaction from investors seeking higher returns from their investment in the form of dividend payment.
A final dividend of N2.50 for every share of 50 kobo proposed by the lender for its shareholders translates to a dividend yield of 10.1 percent, higher than the market’s average dividend yield of about 5 percent. This implies investors can get more cash flow for every Naira invested in a stock.
“You will expect investors who are looking at cash flows arising from dividend payment to hunt for bargains,” said Gbolahan Ologunro, an analyst at CSL Stockbrokers Limited.
In the financial statements filed at the NSE, the lender grew pre-tax profit by 16.24 percent to N231.69 billion despite gross earnings paring by 15.41 percent to N630.34 billion from N745.19 billion.
Profit after tax rose to N193.42 from N173.79 billion recorded in the preceding year, while earnings per share also grew 11.21 percent from the previous year to N6.15.
These profits were triggered by net interest income, which increased to N277.22 billion from N159.76 billion reported in the previous year, reflecting improved macroeconomic fundamentals.
“The risk of default in the environment has enabled their customers to service their obligation as and when due,” said Ologunro.
At the sound of closing gong on Tuesday at Customs Street, Zenith Bank was the second-most traded stock by volume as over 37 million units of shares valued at N925.54 million were traded in 691 deals.
OLUWASEGUN OLAKOYENIKAN
