Zenith Bank Plc on Tuesday released its 2022FY audited numbers which indicate that the group’s interest income grew by 26.3% year on year to NGN540.17 billion, occasioned by the expansion in risky assets (+19.6% Year-to-date to NGN4.23 trillion).
The result also revealed an effective repricing of its interest-earning assets during the period. Consequently, the group generated higher income from loans and advances to customers (+26.8% y/y), loans and advances to banks (+81.3% y/y), and investment securities (22.4% y/y) in 2022FY.
Likewise, interest expense inched higher by 62.5% y/y to NGN173.54 billion, reflecting higher costs on deposits from customers (+103.4% y/y to NGN122.71 billion) and borrowings (+13.2% y/y to NGN48.75 billion).
Analyst at Cordros Research has attributed the higher costs on customers’ deposits to the steep growth in deposits (+38.7% y/y to NGN8.98 trillion) coupled with the moderation in the group’s low-cost deposits (CASA 2022FY: 84.6% vs 2021FY: 93.0%) during the period.
Following the impressive interest income growth, net interest income expanded by 14.3% y/y to NGN366.63bn.
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However, after accounting for credit impairment charges (+105.7% y/y to NGN123.25 billion), net interest income (ex-LLE) settled 6.7% lower year-on-year.
According to the press release which accompanied the financial result, Zenith bank management cited that the significant growth in impairment charges was due to the higher impairment expense for its Ghana subsidiary following the debt restructuring programme in Ghana.
Notably, impairment charges for its Ghana subsidiary grew to NGN56.18 billion in 2022FY from NGN1.95 billion in 2021FY.
Further analysis of the result indicates that non-interest income (NII) grew by 23.3% y/y to NGN380.97bn in the period, supported by expansions in net fees & commissions income (+27.7% y/y to NGN132.80 billion) and gains on investment securities (+27.0% y/y to NGN212.68 billion).
Also, operating expenses expanded by 17.3% y/y to NGN336.69 billion, reflecting the inflationary environment and the balance sheet expansion (the group’s assets grew by 30.0% to NGN12.29 trillion) leading to the higher non-discretionary regulatory expenses.
The analyst, in explaining the operating expense, noted that higher expenses were incurred on NDIC insurance premium (+25.9% y/y to NGN21.75bn), AMCON levy (+16.1% y/y to NGN44.01bn), personnel expenses (+8.2% y/y to NGN86.41bn), and other operating expenses (+25.4% y/y) following a surge in IT and maintenance costs.
Following the OPEX growth relative to operating income growth, the bank’s cost-to-income ratio (ex-LLE) settled higher at 54.4% (2021FY: 50.8%).
Overall, profit-before-tax settled marginally higher by 1.5% y/y to NGN284.65bn (2021FY: NGN280.37bn).
However, the 69.6% increase in income tax expenses put further pressure on profit after tax (-8.4% y/y to NGN223.91bn).
The analyst attributed the higher income tax expenses to the effective implementation of the Finance Act in 2022FY.
They acknowledge the group’s resilience despite the challenging business environment, saying, “We remain positive regarding the long-term outlook for the bank and expect financial performances to remain strong, supported by strong underlying fundamentals and strong management.”
Zenith bank’s board proposed a final dividend of NGN2.90 per share (2021FY: NGN2.80/s), which equates to a dividend yield of 11.6% based on the last closing price of NGN25.00/s (28 March).
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