ZENITH BANK PLC: ONCE UPON AN UGLY HEAD.

Well, it sure looks like the issue of growing provision for loan loss is rearing its ugly head one again in Nigerian banking after 2008 battle. In the case of Zenith Bank PLC it had a very visible growth rate in the figures to September 2015.
According to results released last week loan loss provision almost doubled to N9725m from N4882m ( up 99.2%) thus helping in no small measure to depress the bank's growth in profit before tax to be behind gross earnings increase.
Zenith's PBT for the period came to N104052m representing 19.9% increase. However, this compares unfavorably with the 23.1% rise in gross earnings thus pushing profit margin down to 30.9% from 31.7% even though still ahead of 2014 full year's 29.7%
Loan loss provision was not the only source of pressure on the bottom line. Interest income growth at 20.5 % to N256737n was not only behind gross earnings rate but also, was well short of the 36.9% rise in interest expense.
Indeed, as fees and commission increased by 9.36% Zenith was saved from drop in profit by 73.3% increase in trading income to N15914m from N9183m; Sound growth in income from other sources ( from N1373m to N9702m) and relatively lean 3.95% rise in personnel cost to N17918m.
Operating expenses growth also helped in a way because at 23.7% it was in step with earnings growth.
Finally, if the 2014 trend holds this year, income from other sources has room to chip in a lot more although loan loss also has the potential to push in the opposite direction.
THUS:
* Zenith has a bullet to try to bite better in the third quarter viz loan loss provision .
* Meanwhile, no shaking Zenith is still on course to make profit and declare dividend for 2015 financial year.

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