Key highlights
- Zenith Bank reported a profit of N223.9 billion down from the N244.5 billion reported a year earlier.
- The bank is installing a brand new IT architecture to cope with the increasing need for online banking and spent N30.9 billion on IT during the year.
- Despite these challenges, the bank’s top line grew by 24%, and it maintained strong performance with gross earnings just shy of a trillion, total deposits growing by 38%, and total assets by 30%.
Zenith Bank has stated that it is in the process of installing a brand-new IT infrastructure to cope with the surging demand for online banking transactions.
This follows the central bank’s swift move towards cashless transactions that exposed the infrastructure capability of some traditional commercial banks.
Zenith, Nigeria’s largest bank by profitability and a member of the Tier 1 Banks (FUGAZ) reported a profit of N223.9 billion down from N244.5 billion reported a year earlier.
The bank cited several economic headwinds including the Ghanaian sovereign bond default as a major contributory factor to its profit drops. The bank also identified naira scarcity as a major operational challenge as it increased pressure on its infrastructure.
In response, the bank stated that it was in the process of installing a “brand new IT architecture” for the bank, to enable it to cope with the increasing need for online banking.
During the year, the bank reported it spent a whopping N30.9 billion on IT up from N28.7 billion. IT expenses were the highest single operating expenses the bank incurred (asides from the AMCON levy).
Despite all these challenges, the bank was still able to maintain and deliver a decent very strong performance with the top line growing by 24%.
- Gross earning was just shy of a trillion rising to N921.1 billion during the year up from N736.6 billion a year earlier.
- On a standalone, the bank (without Ghana operations) recorded a year-on-year improvement in profitability by 4%.
- Total deposits grew by 38% and total assets by 30%, notwithstanding the hemorrhage the bank suffered in Ghana as a result of the impairment it had to take on Ghanaian instruments.
- The bank’s deposits grew from N6.4 trillion to N8.9 trillion during the year.
Zenith Bank Plc had its Analysts’ earnings call on March 31, 2023, where its MD/CEO Ebenezer Onyeagwu and CFO Mukhtar Adam (Ph.D.) responded to analysts’ questions regarding the bank’s 2022 full-year results.
Nairametrics listened in on the earnings call curating some of the vital feedback given to investors, with a focus on the bank’s exposure to Ghana.
On what to expect from the non-interest income line, especially the volume of e-banking transactions given the cash crunch.
- The bank expects its non-interest income to grow. Even though there was a challenge in the industry because of the unprecedentedly high transaction
- Because of that the bank just like other banks remediated its system to cope with the high transaction. Aside from this, the bank is installing a brand new IT architecture.
On deposit and how much of the interest rate hikes have been able to pass on the deposit.
- The bank is in a margin business, as such, once costs move, the lending rate is adjusted up or down depending on the movement.
- The bank only ensures it does not suffer margin compression and to achieve that, it steadily reprices its interest rates.
On what effective tax rate to expect going forward
- The effective tax rate moved up to 20% from the range of 12% – 13% because of the withdrawal of tax holidays on treasury bills.
On net long FX currency position
- The long position hovers around $1 billion, offering strong FX liquidity.
On reclassification of Deposits and efforts to address the increase in the cost of funds.
- The deposit has not been classified, but only that the retail bucket of the Deposit has continued to The bank has continued to have different retail products and that has supported the growth.
- Costs of funds moved up because of the rate hike So that have guided the cost of fund that reflects the hike.
Is the bank considering a Holdco structure this year or in the near-term future?
- The bank has already announced it has CBN’s in-principle approval to transition to Holdco.
- The bank has a six-month period to implement that. Work is ongoing in terms of getting the necessary approval.
On the bank’s contribution to revenue and PAT.
- In terms of performance, the bank as a stand-alone would have achieved 103%, but because of the hemorrhage in Ghana, Group-wise performance stood like that.
- But Zenith Bank UK grew by over 315% in profitability. Other subsidiaries have contributed but the bank still remains the flagship business of the
