Zenith Bank Plc one of the leading Nigeria lenders, on Monday kicked off the full year earnings season of banks with an impressive result for the period ended December 31, 2016.
The results at the Nigerian Stock Exchange (NSE) show Zenith Bank Plc gross earnings of N507.997billion against N432.535billion in 2015, an increase of 17.45percent.
Profit before income tax (PBT) in 2016 was N156.748billion against N125.616billion in 2015. Profit After Tax (PAT) rose to N129.652billion from N105.663billion in 2015.
The Board of Directors of the bank proposed a final dividend of N1.77 kobo per share which in addition to the N0.25kobo per share paid as interim dividend amounts to N2.02 kobo per share (31 December 2015: N1.80 kobo per share) from the retained earnings account as at 31 December 2016.
Basic and diluted earnings per share increased to 412kobo from 336kobo in 2015, an increase of 22.62percent. The bank’s proposed final dividend of N1.77 implies a yield of 12 percent usingFriday’s closing price of N14.73kobo.
On the back of these results, analysts expect the dividend and strong PBT to provide support for Zenith Bank Plc shares. The share price rose to N14.81.
“Indeed it was an impressive performance for Zenith Bank Plc. Investors are better off with the result and dividend payout. Zenith has trailed the blaze despite macroeconomic challenges that banks faced last year. The performance of Zenith Bank confirms our earlier view that tier-one lenders will always weather the storms,” Sewa Wusu, head research at SCM Capital Limited told BusinessDay.
Also, Olubunmi Asaolu team of research analysts at FBNQuest said, the bank’s PBT was impressive, “beating our forecast”.
“We expect the dividend and the strong PBT result to provide support for the shares. Given the better-than-expected non-performing loan (NPL) ratio, the market’s expectations for 2017 earnings may improve, however. Our estimates are under review. We rate Zenith shares Outperform,” saidFBNQuest analysts.
Interest and similar income also increased to N384.557billion from N348.179billion in 2015, an increase of 10.45 percent driven largely by loans and advances to customers, Treasury bills and other government securities.
The bank’s fee and commission income increased to N68.444billion in 2016 from N60.904billion in 2015, an increase of about 12.38percent; while trading income increased to N28.398billion in 2016, largely due to FX revaluation gains from N18.150billion in 2015. The bank grew its total assets to N4.739trillion from N4.006trillion in 2015, up by 18.29percent.
The bank posted an increase in customer deposits of 16.64 percent to N2.98 trillion, an increase from N2.557trillion in 2015.
Impairment on loans and other credit losses expanded by 106.41percent year-on-year (y/y) to N32.35billion, (FY’15: N15.67bn).
DLM Research analysts said interest income was the most significant driver of Zenith Bank earnings “despite rising at a much slower pace relative to revenue growth.”
The proposed dividend will be presented to the shareholders of the bank for approval at the next Annual General Meeting (AGM).
If the proposed dividend is approved by the shareholders, the Bank will be liable to pay additional corporate tax estimated at N12.52 billion representing the difference between the tax liability calculated at 30% of the dividend approved and the tax charge reported in the statement of profit or loss and other comprehensive income for the year ended 31 Dec 2016. Payment of dividends is subject to withholding tax at a rate of 10 percent in the hand of qualified recipients.