Zenith Bank Plc yesterday released its financial statements for the 12 months ended December 2017.
According to the results, Gross earnings increased from ₦507 billion in 2016 to ₦740 billion in 2017. Profit before tax increased from ₦156 billion in 2016 to ₦203 billion in 2017, while profit after tax rose from ₦129 billion in 2016 to ₦177 billion in 2017.Earnings per share also increased from ₦4.12 in 2016 to ₦5.66 in 2017.
The bank recommended a final dividend of ₦2.45, bringing total dividend paid for the 2017 financial year to ₦2.70. This equates to a 47% payout ratio.
Blowout in trading gains
Trading gains played a key role in the superlative results recorded by the firm. Income from trading gains jumped massively from ₦28.3 billion in 2016 to ₦157 billion in 2017. Trading gains comprised derivatives income, treasury bill trading income, and bond trading income.
Derivatives income increased from ₦20.7 billion in 2016 to ₦68 billion in 2017. Treasury bills trading income rose massively from ₦8.6 billion in 2017 ₦88.8 billion in 2017. Bond trading income bounced back from a loss before tax of ₦328 million to a profit of ₦368 million.
Interest income driven by treasury bills
Interest income rose from ₦384 billion in 2016 to ₦474 billion in 2017, largely due to income from treasury bills. Income from treasury bills spiked heavily from ₦60 billion in 2016 to ₦109 billion in 2017.
Fees and commission income did well
Fees and commission income also performed satisfactorily as it moved from ₦68 billion in 2016 to ₦90 billion in 2017. Account maintenance fee was the best performer in this segment. Account maintenance fees rose from ₦17.3 billion in 2016 to ₦27.7 billion in 2017, thus comprising 30.7% of other income.
African and European segments revenue remain small
Revenue from Africa increased in Naira terms but remained largely unchanged in terms of the proportion of profit. Revenue increased from N39 billion in 2016 to ₦53 billion in 2017.
They also contributed to 8.4% of the bank’s profit after tax for 2017, a slight increase from the 8.2% contribution to 2016 profits of ₦129 billion. Other parts of Africa comprise Zenith Bank branches in Ghana, Sierra Leone, and The Gambia.
Revenue from Europe moved up slightly from N12 billion in 2016 to ₦14.3 billion in 2017. And its proportion of profit after tax moved to 2.01% in 2017, a huge improvement from the 0.4% it contributed in 2016.
Impairments up by over 200%
Perhaps as a reflection of the difficult macroeconomic conditions in 2017, impairments rose by over 200%. Impairment loss on financial assets rose from ₦32.3 billion in 2016 to ₦98.2 billion in 2017. Impairments on term loans had the highest increase from ₦19.0 billion in 2016 to ₦65.9 billion in 2017.
Reports indicate some of the impairments from one time charges taken on the Etisalat loan of which Zenith Bank was one of the main lenders.
Expenses up by 42%
The bank’s expenses also went up by 42% from ₦104 billion in 2016 to ₦148 billion in 2017. Key expense drivers were the AMCON levy which took ₦21.4 billion, Fuel and Maintenance at ₦19 billion, Information Technology at ₦12.6 billion and Deposit Insurance Premium at ₦11.6 billion.
Zenith Bank has often struggled with keeping expenses down, an achiles heel when compared to their rival Guaranty Trust Bank.
Sorry, this is not an analysis, it just compares year on year performance. An analysis would be a deep dive into how they made the money and how it affects the Nigerian economy.
Banks sit on billions of naira and yet startups can access loan effortlessly. Are we suppose to give them an applause or award ? I don’t get it!