Zenith bank which is currently the second-largest bank in Nigeria with a total asset size of about N6.3 trillion naira as at December 31, 2019, has seen its share price take a hit lately due to tightened monetary policies of the Central Bank of Nigeria. The recent break down in talks between Saudi led OPEC and Russia, in addition to the global surge in the coronavirus outbreak, has compounded the woes of the Nigerian tier 1 bank, negatively affecting its profit margin and share price.
Zenith Bank share price is down ▼9.84% closing at N16.95 naira, trading close to its 52-week low price which was N16.00 naira with a yearly change in share price down ▼32.06%, and its market capitalization falling to N531 billion naira as at 9th March 2020.
The fall in the prices of Zenith Bank share price has triggered a significant sell-off of its stock, as tightened monetary polices enacted by the Central Bank of Nigeria to focus more on providing loans and advances to the real sector, small businesses, while keeping their non-performing loans under check, might limit the performance of the share price of the bank.
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However, based on its released Financial results for 2019, Zenith Bank recorded an impressive profit after tax of N208.8 billion in 2019, with an ▲18.0% YoY profit after tax growth in fourth quarter of 2019. This was driven by non-interest income, which grew by about ▲47.1%, also Zenith bank’s profit after tax also grew ▲8.0% in 2019 compared to N193 billion ($530million) from 2018.
Income on electronic products continued to grow with an upward increase of▲108% from N20.4 billion in 2018 to N42.5 billion in 2019.
In addition, Zenith Bank had reported a slow ▲2.8% year to year in operating cost which was supported by an upsurge in non-interest revenue. Fees and commission were up ▲22.0% while the “other income line” grew by 34.5% based on ▲46.9% surge in trading income.
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Finally, on the Zenith bank’s current stock price, we believe that with the ▼N16.95, there is certainly a disparity between its recent the stock price, the impressive financial results released in the last 5 years and its recent announcement last week of N2.50 kobo dividend, bringing the total dividend paid for 2019 to N2.80 naira amid an unfavourable operating environment.
In addition, Zenith bank stock price is highly undervalued in lieu of its price-earnings ratio at 2.55 earnings per share (E.P.S) at 6.65, price to book value (showing the net value from the book value and total shares of the company) at 0.5655 and remains as one the most liquidly traded stock in the Nigerian local bourse as at 9th March 2020.