Zenith Bank, the largest bank in Nigeria by Net Assets released its 9months earnings report with Gross Earnings rising 25% to N229b year on year. This is about N70b more than what GTB posted to put it into better perspective. Breaking it down further, the bank posted a 23% rise in Net Interest Income when compared to same period last year to N119.7b. Total operating income including commission and fees was N164.7b in line with the quarterly average of N55b set in the first half of the year.
For years now, the bank’s huge operating expenses has been its achilles heel regularly eating up over N55 for every N100 of operating income it makes. GTB, the most efficient of the lot has its operating expenses eating up about N40 for every N100. Considering the size of the bank, operating expenses averages just over 3% of its total assets this quarter a figure that is in line with it peers in the same period. This suggest for the bank to post operating profit margin of close to 50% it will have to reduce operating expenses by over 45% or look for another N40b in operating income.
But thats wishful thinking at least in the short term. Big banks with large assets don’t necessary translate to high margins or indeed impressive returns on equity. The bank’s 9months return on average equity of 15.7% puts it above inflation already with 3months to go in their financial year. Zenith haas made profits year after year and can bank on its economies of scale to rise high above others in revenue. Could they hit the N100b mark in earnings after tax by year end? I don’t see that coming not with taxes and provisioning?
Zenith Bank has always claimed its taking “Nigerian Banking to new heights”. A phrase name that is incidentally named after its head office. The height of profitability in the industry may not belong to it for now but this result just about confirms the bank is growing at a double digit percentage in both income and earnings. A result that is bound to boost their share price meaning analyst may well put a hold and/or buy to the stock.
Zenit Bank 9months unaudited accounts for 2012 in posted on the website of the NSE.