Zenith Bank had a press release after it announced 7% increase in 2014 H1 results which I reviewed here. When an MD, CFO and an ED gets to comment on a result it is very important to read between the lines. Having read through their comments I observed the trio made no mention of “Profitability” or “Profitability Growth” which to me suggest they are more interested in keeping things stable at the moment. Growth was mentioned 8 times but mostly as it relates to its risk assets. This cautious approach is quite understandable considering the regulatory headwinds that have shaken the industry lately. For those, looking to profitability growth to boost profits, well you might have to wait a bit more.
Peter Amangbo GMD/CEO said: “Zenith Bank’s strong results for the first half of 2014 further confirm our continued leadership in consistently delivering superior performance and returns. Driven by our innovative processes, cutting edge technology and committed staff, the group recorded total revenue of N184.8 billion for the second quarter, which represents an 8% increase over the 2013 half year. The group also recorded profit before tax (PBT) of N 57.9 billion compared with PBT of N 54.1 billion recorded in the same period in 2013, an increase of 7% YoY.
The group’s strategic focus on creating competitively priced, high quality risk assets is evident in the YoY growth of loans and advances to N1.4tn (10.7% growth), with a significant decrease in cost of risk from 0.68% to 0.44% .The growth in risk assets (priced to maximise returns) was effectively matched by a corresponding increase in competitively priced deposits with a view to maximizing net interest margin.
Zenith Bank Plc remains stable and adequately capitalised, which positions it strategically to take advantage of emerging business opportunities. The Group’s liquidity ratio of 61% and capital adequacy ratio of 23%, which are above the regulatory limits of 35% and 16% respectively, further confirm the group’s capacity to expand.
The second half of 2014 has high prospects of increased economic growth and development, presenting the group with ample prospect to grow its customers and business volume. We therefore anticipate enhanced returns on investment and value-add for our myriad of stakeholders in the years ahead.”
Mr. Amangbo further commented on the group’s businesses by segment and geographical location stating that: “The core banking operations of Corporate, Retail banking and Custodial services contributed 90% of group profit for the six months ended June 30, 2014. The group’s continuous consolidation of its foreign banking subsidiaries resulted in a 10% contribution from those entities to the group profit before tax, compared to 7% in the prior year.
He also noted that the disposal of the non-core banking subsidiary in compliance with regulations has not had any negative impact on the group’s performance as well as balance sheet size. He further stated that, as the foreign banking subsidiaries mature in their respective markets, their contribution to the group will continue to increase, expressing the optimism of a better performance by these subsidiaries in the years ahead.
Ebenezer Onyeagwu, (Executive Director Credit &Risk Management Division) commented: “The group continued with its strategic growth of risk assets in the first half of 2014, resulting in a growth of 10.7% ( NGN 1.41tn) of these assets. The nature and quality of our risk assets remain one of the best within the industry given that the group closed the second quarter with an NPL ratio of 2.8% and a cost of risk below 1%. With a loan-to-deposit ratio of 55.8%, the group is well positioned to grow its risk assets as more acceptable business opportunities emerge. The group has capacity to explore and take advantage of emerging opportunities for growth in the country and in all other locations where we have presence, given its strong capital base, high capital adequacy ratio and competitive loan deposit ratio.”
Stanley Amuchie (Chief Financial Officer) while commenting on the result noted that: “In the first half the group continued to consolidate its revenue generating capacity as well as increase its market share.” He further noted that the group’s YoY growth in gross earnings and non-interest income of 7.8% and 30.1% respectively are notable achievements that will be sustained during the year. In spite of the increasing cost of operations, which is influenced by the unusual operating environment, the group was able to maintain a stable cost of funds and cost-to-income ratio between June 2013 and June 2014. He noted that the group remains committed to maintaining its outstanding operational and customer service standards through a well motivated staff force amongst other things, while striving to operate more efficiently.
Get the press release here