Nigeria’s largest bank by net asset, Zenith Bank disclosed in its half year Investor Presentation that 29.9% of its non-performing loans are oil and gas-related loans. The bank currently has a total non-performing loan of N134.8 billion out of which its oil and gas loans amount to about N40 billion (29.9% of the loans).
The company has an NPL ratio of 4.51% as of June 2021 compared to 4.29% as of June 2020 mostly due to an increase in oil and gas NPL. Zenith Bank has a diverse loan portfolio of N2.99 trillion out of which Upstream and Downstream oil and gas numbers are 18.4% and 4.9% respectively, totaling 23.3% of total loan portfolio. The bank informed investors it diversified its portfolios over the last one year to support asset quality.
However, Zenith Bank’s oil and gas non-performing loans of about N40 billion means just 5.9% of total oil and gas loans are bad, a slight increase from the same period in 2020. Oil and gas loans as a percentage of non-performing loans was 29.87% in 2020 or N37.3 billion.
The bank also reported that foreign currency loans as of June 2021 was $2.8 billion, a drop from $3.1 billion reported same period in 2020. Again, oil and gas-related loans make up its largest chunk with about $1.4 billion, though down from $1.6 billion a year earlier. Zenith Bank has also restructured about 37% of its oil and gas loans.
Zenith Bank Plc, one of Nigeria’s most capitalized financial institutions, also proposed to pay the total sum of N9.42 billion as interim dividends to its shareholders for the half year period ended 30th of June, 2021. The company is expected to pay an interim dividend of 30 kobo per share on all the outstanding 31,396,493,786 ordinary shares of the company, amounting to N9.42 billion
Zenith Bank had earlier declared a half year profit of N106.12 billion in HY 2021, indicating a slight increase of about 2.2% YoY.
Other highlights of Zenith Bank results
- Interest income declined by 6% YoY due to the prevailing low yield environment which affected yields on some marketable securities.
- On the other hand, Interest expense declined by 26% YoY due to the rebalancing of deposit mix and the declining yield environment.
- Contribution of non-interest income to total revenue increased from 37.3% to 41.0% YoY. This was driven by the growth recorded in fees on electronic products (91%), account maintenance fee (51%) and agency & collection fees (50%).
- ROAE declined from 21.5% to 18.8% YoY due to the 15.6% YoY increase in capital base and the slow recovery of the economy.
- Cost-to-income ratio increased from 54.4% to 56.1% YoY due to inflationary pressure and regulatory costs.
- Capital adequacy and liquidity ratios during the period stood at 22.0% and 69.9% respectively.