Zenith Bank Plc Q1 2019 Initial Impression: Decent Performance

April 18, 2019/InvestmentOne Report

  • Net interest income of N86.1billion, up 28.4% q/q; down 10.2% y/y
  • Non-interest income of N32.7billion, down 26.5% q/q, up 22.9% y/y
  • Profit before tax of N57.3billion, down 11.0% q/q; up 6.1% y/y
  • Profit after tax of N50.2billion, up 2.0% q/q; up 6.7 y/y 

Zenith bank released its Q1 2019 results yesterday, reporting a 28.4% q/q (-10.2% y/y) growth in net interest income, a 26% q/q (+22.9% y/y) drop in non-interest income and a 48.0% q/q (-54.2%) decline in impairment charges. The combined effect of the aforementioned trio was not enough to mitigate the effect of the 37.9% q/q (-7.0% y/y) rise in total expenses, as PBT dropped 11.0% q/q (+6.1% y/y) to N57.3nillion. However, PAT was up 2.0% q/q (6.7% y/y) on the back of a lower effective tax. 

The Bank’s net-interest margin improved to 8.6% in Q1 2019 from 7.5% in Q4 2018, largely on the back of the 10bps moderation in Cost of Funds (CoF) to 3.0% and a marginal uptick in net loans to N1.8trillion.  

Furthermore, we highlight that the increase in opex was mainly as a result of the bank’s AMCON charge taken in Q1 2019. We expect to see this trend across its peers in Q1 2919. Consequently, the bank’s cost to income ratio deteriorated to 50.0% from 47.4% in Q4 2018 (vs. 52.2% in Q1 2018). 

Finally, asset quality improved slightly with NPL ratio moderating slightly by 13bps q/q to 4.8%, even as absolute NPLs were down 6.8% q/q. The bank’s Cost of Risk (CoR) also improved to 0.4% in Q1 2019 from 0.9% in Q4 2018.  

Going forward, Zenith Bank remains a BUY with a TP of N38.6, indicating an upside potential of  84.8% based on yesterday’s closing price of N20.9k 

ZENITH BANK PLC Q1 2019 (YE: DEC) (N millions)

Q1 2019

Q/Q

Y/Y

Interest Income

122,480

21.3%

-14.1%

Interest Expense

-36,343

7.2%

-22.2%

Net Interest Income

86,137

28.4%

-10.2%

Non-interest income

32,656

-26.5%

22.9%

Profit before provisions

118,793

6.5%

-3.0%

Loan Impairment charges

-2,096

-48.0%

-54.2%

Total Opex

-59,404

37.9%

-7.0%

PBT

57,293

-11.0%

6.1%

Tax

-7,059

-53.4%

2.0%

Tax rate

12.3%

-1119bps

-50bps

PAT

50,234

2.01%

6.7%

Source: Company financials, Investment One Financial Services Research

Q1 2019 BANKS COMPARISON SHEET

NGN billion (unless stated otherwise)

 

ACCESS

ZENITH

Key Income Statement Figures

Gross Earnings

160.1

158.1

Net Interest Income

56.8

86.1

Non-interest Income

46.8

32.7

Total Expenses

-55.1

-59.4

Loan Impairment Charges

-3.4

-2.1

Profit Before Tax

45.1

57.3

Y/Y PBT Growth

 

64.4%

6.1%

Dividend (Kobo per share)

nil

nil

EPS (kobo per share)

139

160

Key Balance Sheet Figures

Total Assets

6,427

5,877

Total Liabilities

5,851

5,098

Total Equity

576

779

Key Ratios

Net Interest Margin

5.6%

8.9%

Cost of Fund

4.4%

3.0%

Cost to Income

53.2%

50.9%

NPL ratio

10.2%

4.9%

Liquidity (bank level)

47.6%

66.7%

Cost of Risk

0.5%

0.4%

Capital adequacy ratio (bank level)

19.1%

25.0%

ROE

30.9%

25.2%

ROA

2.9%

3.4%

Source: Company financials, Investment One Financial Services Research

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