[upme_private]Zenith Bank Plc released its 2013 H1 results showing a gross revenue increase of 13% to N171billion. Net Interest Income also rose 14.5% to N91.3billion (2012 H1: N79.7billion. The bank also posted a Net Operating profit rise of 7.6% to N52billion compared to N48.3billion in 2012. Pre-tax profits at the end of the period was N54billion compared to N50.1billion in the same period 2012.
- The 15.7% rise in Net Interest Income between 2013H1/2012H1 is lower than the 26% obtained in the corresponding period 2012H1/2011H1. The slow down may be connected to the 7% rise in Loans and advances as well as the subtle rise in deposit rates as bank customers become aware of the wide interest spread.
- Another reason may be due to the banks preference for investment in TB’s and Government Securities. At the end of 2012 the TB’s and Government Bonds constituted 33.6 and 12.3% of Interest income respectively. Both assets provide lower yields than commercial prime loans. However, this are just percentages as the bank added an extra N11.4billion in Net Interest Income.
- Loan loss doubled to N3.6billion this period adding N2.1billon between April and June in write offs to the N1.5billion written off in the firs three months of the financial year. The bank has now written off about N12.7billion in bad loans in the last 18months and about N29billion in the last 30months.
- Zenith Bank is heavily exposed to the Manufacturing (24.12%) and Oil and Gas (16.84%) sector of the company with both constituting a combined 41% of total loans and advances. Both sectors have been under pressure lately due to a combination of though economic environment as well as threat brought about my the shale gas oil supplies.
- About 70% of loans to the Oil and Gas sector was in the downstream. Flour Mills (4.5%), Cement (2%) and Food Processing (3.39%) took a combined 41% of loans to the manufacturing sector. The three sectors are highly competitive and have all seen massive investments over the last 24months.
- Commission and fees was in line with prior trends at N23.8billion this year despite the bank claims that the Central Bank’s directive to reduce fees hurt margins. Commission and fees did drop 16% in the three months leading to June 2013 (N11.2billion) compared to same period 2012 (N13.5billion) and was also lower than the N12.5billion posted in Q1. However, this shows the huge reliance on fees and other income to boos margins.
- But that is not too much of a worry considering the loss here may not be more than a billion or two. In fact commission and fees for H1 2012 was also lower than that of H1 2011 by 7.6%. The key issue was the extra N11billion in operating cost as pointed out below.
- Operating Expenses was the achilles heel this period as it ballooned to N70billion from N61billion this year. The bank is yet to release details of this expenses for one to understand if personnel cost was to blame.
- High operating cost took the banks cost to income ratio to 56% by my estimate 1% higher than the prior period.
- All other profitability margins remained low compared to the prior year
- Zenith Bank share price remained relatively flat at N20.95 on announcement of the result.
- Zenith Bank stock is included in Ugometrics Portfolio
Zenith Bank Plc released its 2013 H1 results in the website of the NSE[/upme_private]