UBA ads

Zenith’s numbers in 9M 2019 showed a decline in yield on Loans to customers and on money market instruments. On the positive side, funding cost continues to improve, declining to 2.95% from 3.3% in 9M 2018.

Despite a steep decline in Non-Interest Income in Q3 relative to Q2 2019, Non-Interest Income growth continues to support the bank’s y/y growth in profit.

Zenith’s 9M annualised Return on Average Equity (ROAE) of 23.8% compares with our revised estimate of 22.6% for FY 2019 and with 23.7% for FY 2018. Capital Adequacy Ratio (CAR) of 23.8% (without the full impact of IFRS 9; we estimate 21.9% for FY 2019e post adjustment for IFRS transition) remains comfortably above current regulatory minimum of 15.0%.

Reported liquidity ratio of 63.8% is well above those of many of its peers. The bank also reports healthy asset quality ratios with annualised Cost of Risk (COR) of 1.1%.

The bank still rates well based on capital adequacy, sustainable long-term dividend yield, and stable asset quality. We retain our Buy recommendation on Zenith with a revised target price of N34.24/s from N33.41/s previously (current price: 17.35/s). Trading at 0.63x book value, valuations appear attractive. Based on our assumption of N2.80/s dividend for 2019e, dividend yield comes to 16.1% at current levels.

[READ MORE: Oil: International oil companies scale down on Nigeria operations]


9M 2019 Interest Income was down 5.1% y/y but up 16.5% q/q (Q3 compared to Q2). The y/y decline was attributed to a decline in yields on both money market instruments and on Loans and Advances to customers. We attribute the Q/q growth in Interest Income to the strong loan growth in Q3. The bank’s Net Loans to customers were up 13.4% within the quarter, bringing 9M Net Loan growth to 12.1%.

Standard chartered

Interest Expense was also down 2.9% y/y despite a 6.6% y/y growth in Interest Bearing Liabilities, resulting in an improvement in Cost of Funds to 2.95% in Q3 2019 compared with 3.3% in Q3 2018. The bank’s funding cost has been declining gradually since the spike in 2017-according to management, this has been supported largely by a re-balancing of the bank’s deposit mix in favour of cheaper retail deposits.

Deal book 300 x 250

Overall, Net Interest Income was down 6.1% and NIMs declined to 8.69% in 9M 2019 compared to 9.6% in 9M 2018.

Standard chartered

PBT grew 5.3% y/y and 18.6% q/q while Net profit was up 4.5% y/y. The bank’s annualised Return on Average Equity (ROAE) of 23.8% compares with 23.7% for FY 2018. We forecast FY 2019e RoAE of 22.6%.


Loans and advances

The bank’s Net Loans to customers were up 13.4% in Q3 quarter, bringing 9M loan growth to 12.1%. We model 2019e loan growth of 15.1% in line with management’s guidance. As at 9M 2019, we compute gross loan to total funding of 51.5% for the Nigerian bank without taking into consideration the effect of the 1.5% weighting on SMEs, Retail, Mortgage and Consumer loans and without adding investment securities such as corporate and state government bonds to gross loans.

Deposit growth

Customer Deposits were up 21% y/y but are only up 7.1% year to date. We believe banks will not be so keen on increasing deposits given CBN’s minimum LDR of 65% by December 2019. Consequently, we assume 8.0% deposit growth for FY 2019e compared with Management’s 10% guidance.

Update on asset quality

The bank reported relatively healthy asset quality ratios. Impairment charge was up 27.3% y/y but declined in Q3 compared to Q2. We highlight that the bank’s Impairment charge was up significantly in Q2 compared to Q1.  The bank’s 9M annualised Cost of Risk (COR) of 1.14% was significantly higher than our previous 0.8% assumption for FY 2019e.   We have revised our COR assumption for FY 2019e to 1.2% considering the strong loan growth and expected increase in expected credit loss. Non-Performing Loan ratio of 4.95% and coverage ratio of 148% appears a strong buffer.




Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

PO Box 9117,

Lagos State,



Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.