BACKGROUND
Zenith Bank Plc. was established in May 1990, and commenced operations in July of the same year as a commercial bank. The Bank became a public limited company on June 17, 2004 and was listed on the Nigerian Stock Exchange (NSE) on October 21, 2004 following a highly successful Initial Public Offering (IPO). The bank has a shareholder base of about one million. In 2013, Zenith Bank listed $850 million worth of its shares on the London Stock Exchange (LSE). The bank has over 500 branches and business offices in all states of the federation and the Federal Capital Territory (FCT).
In March 2007, Zenith Bank was licensed by the Financial Services Authority (FSA) of the United Kingdom to establish Zenith Bank (UK) Limited as the United Kingdom subsidiary of Zenith Bank Plc. Zenith Bank also has subsidiaries in Ghana, Sierra Leone, and Gambia. The bank also has representative offices in South Africa and The People’s Republic of China. Zenith Bank’s 2014 audited financial statement showed the lender overcoming the regulatory headwinds imposed by Central Bank of Nigeria’s (CBN) tightening policy. The impressive performance of the Nigerian lender can be attributed to growth in deposit and loan growth and savvy management of resources by the shareholders of the bank that culminated in overall operating efficiency.
DOUBLE DIGIT GROWTH IN GROSS EARNINGS
Gross earnings increased by 14.76 percent to N403.34 billion from N351.47 billion the same period of the corresponding year of (FY) 2013. The growth in gross earning was spurred by a 15.85 percent increase in interest income to N313.42 billion as against N270.53 billion last year, thanks to a 47 percent increase in Interest income from loans and advances in the review period The bank grew its non-interest income by 21% Year on Year (YOY). There was significant improvement recorded in income from foreign exchange, T-bills and bond trading activities (211%improvement YoY) in the review period.
On other hand, Interest expense jumped by 52.02 percent to N106.91billion in 2014 compared with N70.79 billion in 2013. Growth in interest expense was as a result of the Interest expense on borrowed funds Eurobond & multilateral agencies which increased significantly to match the growth in the medium to long term USD funding needs of the bank. The bank stellar performance has beaten analysts’ expectations by overcoming the regulatory headwinds caused by CBN’s decision to increase the Monetary Policy Rate (MPR) by 100 basis point to 13 percent.
Additionally, regulatory induced costs such as the Asset Management Corporation Charge (AMCON charge) is bleeding lenders profits. Nigeria banks are mandated to contribute 0.5 percent of their total assets annually to the sinking fund.The Bank had issued a $500million Eurobond Note from its $1bn Global Medium Term Note Programme. This is for the purposes of expansion of operation with a view to increasing share of the market.
ZENITH RECORDS PROFITS DESPITE AMID RISING OPERATING EXPENSES
Pretax profit increased by 8.32 percent to N119.79 billion in the review period from N110.59 billion the same period of the corresponding year 2013 while profit after tax moved by 4.32 percent to N99.45 billion in 2014 from N95.31billion the preceding year. The rise in profit is coming amid a 11.21 percent increase in operating expenses to N163.70 from N-147.19 billion last year. Also, the bank’s ability to effectively maintain an impressive loan and deposit growth and improved efficiency also help bolster profitability.The bank’s efficiency level was moderate as its cost to income ratio inched slightly by 1.1 percent to 57.74 percent in December 2014 from 57.10 percent recorded in December 2013.
STRONG BALANCE SHEET POSITION
The bank’s strong balance sheet is a manifestation of its improved loan and deposits and also its aggressive foray into risk assets creation. Total assets increased by 19.48 percent to N3.75 trillion in December 2014 compared with N3.14 trillion the same period of the corresponding year 2013. Total loans and advances jumped by 38.21 percent to N1.72 trillion in December 2014 from N1.25 trillion in December 2013 driven by increase in term loans of 66.6 percent in the review period. Its corporate lending to the downstream oil and gas sector is the highest with 13.75 percent followed by manufacturing 9.84 percent and upstream oil and gas 8.43 percent. Nonperforming loans (NPL) reduced to 1.80 percent in December 2014 as against 2.91 percent recorded in December of 2013-thanks to effective risk management entrenched through training and acculturation and also improved loan growth.
The bank’s NPL of 1.80 percent remains the lowest in the industry. Customer deposit spiked by 11.44 percent to N2.53 trillion in December 2014 compared with N2.27 trillion the preceding year due to increase in customer base. Demand deposit accounted for 50.9 percent, the largest percentage in total deposit, followed by domiciliary, 18.42 percent. This signifies increased risk assets. Loan to deposit ratio moved to 67.91 percent in December 2014 as against 55.01 percent recorded in December 2013, which means the bank is aggressive about lending while creating quality risk assets.
CAPITAL AND LIQUIDITY STILL ABOVE REGULATORY REQUIREMENT
Zenith Bank’s liquidity ratio was 46.80 percent in the review period, which is higher than the 30 percent regulatory requirement while capital adequacy was 20 percent which is well above the 15 percent regulatory requirement.
STORMING THE RETAIL SPACE WITH INNOVATIVE PRODUCTS.
Zenith bank is taking the retail space by storm with innovative products using high technology and innovative products. The bank has equally established itself as a leader in corporate and investment banking, with the KPMG’s ‘Nigeria Banking Industry Customer Satisfaction Survey of 2014’ confirming the bank’s position as the most customer focused bank in the country in both the retail and corporate segments.
With the bank’s entry into the retail space, more customers will now be able to access efficient service delivery that hitherto have been available to only high net worth customers and corporate. The bank’s offering in the retail space include the Aspire account targeting the youth; the eaZySave classic and eaZySave Premium accounts both of which have zero account opening balances; as well as the Zenith Premium Gold and Zenith Premium Platinum, both of which are COT free and interest bearing.
