Zenith Bank's 2016 Half Year Results: The key highlights

Zenith Bank released its 2016 Half year results showing pre-tax profits dropped 12.3% to N63.2 billion. Here are highlights of this results.

Commentary

Zenith Bank Plc. (Zenith) released audited H1 2016 results wherein gross earnings declined 6% YoY to N214 billion while PBT and PAT declined 12% and 16% YoY to N63.3 billion and N44.8 billion respectively.
Relative to our estimates, PBT is running largely in line while a higher effective tax relative to our forecasts drives PAT underperformance.
In addition, Zenith declared a dividend of N0.25 per share as in 2015
A quick scan through the numbers reveals a marked upswing in loan loss charges over Q2 16 (four-fold QoQ to N11.7billion) as driver of the softer earnings. The upswing pushed annualized cost of risk 80bps higher QoQ to 1.8% (H1 16: 1.2%, FY 16E: 1.3%).
Surprisingly despite having a sizable net long FCY position as at FY 15 (33% of net assets), Zenith reported small gains of N2.8billion in other income.
In addition, Zenith reported a 270bps contraction in CAR to 18.6% from FY 15 levels.
Zenith currently trades at P/E and P/B of 5.lx and 0.8x which are at discount to peer average at 8x and 0.8x respectively. Last trading price of N15.87 is at a premium to our FVE at N16.84 which implies a NEUTRALrating. Our estimates are under review.