ZENITH BANK'S BEGINNING OF WISDOM

Like for some other banks in Nigeria, the fear of loan default has indeed become the beginning of wisdom for Zenith Bank plc or so says its nine months figures to September released recently.

According to the figures, at a period loans and advances to its customers dropped by 11.1% to N2156.7bn, Zenith bank increased impairment provision for doubtful debts by 115.3% to N47.053bn particularly, buried in that provision was the 298% increase in impairment provision for term loans to N41.9bn from N10.5bn.

Hence that Zenith ended the nine months with 30.8% increase in profit before tax to N152.552bn was a miracle of sorts worked by 398.5% leap in trading income to N81.8bn and 2.13% decrease in personnel expenses to N53.74bn.

Of course, it also helped that operating expenses grew by 29.9% to N107.8bn compared to 39.7% increase in gross earnings to N531.266bn driven by the leap in trading income.

Interest income remained flagship earner at N361.789bn but its 26.6% growth was rubbished by much higher 67.2% rise in interest related expense to N160.297bn and of course, 53.2% drop in net fee and commission to N33.268bn did not help at all. Ditto 48.3% drop in Other income to N16.547bn.

So naturally, because the profit before tax growth was behind the gross earnings increase, Zenith bank ended the nine months with 28.7% profit margin, down when compared to 30.7% at the same time in 2016.

Pity for Nigeria, with banks like Zenith bank running scared of their customer loan portfolio, less and less money will go into financing businesses while government finance, especially of the Buhari type hell bent on mounting debts for never ending  military operations and to give free food to pupils who end up only learning  to be ignorant in this computer century, continues to be the more reliable cow to milk.

So, to end the year better than it ended 2016, Zenith bank will still need to do more to earn more from treasury bills, bonds and forex trading while the coast is clear; continue to bank on Central bank support for current account maintenance fees and work harder on its operating expenses.

If not, 2017 from the nine months trend, will be worse than 2016 for Zenith bank,even though 2016 was the recession  year and 2017 the gradual recovery one. Of course, there is likely to be profit increase but watch what happens to the bottom line.

ZENITH BANK PLC       Nbn Nine Months.
                                                                         2017                             2016
Gross Earnings                                              531,266                        380.35
Interest income                                              361.789                        285,674
Interest expense                                               150.297                          95.857
Impairment charges                                          47,053                          21.858
Fee and Commission                                        33.268                          71.021
Trading income                                                 81.809                          16.410
Other income                                                    16.547                          31.986
Personnel expenses                                           53.740                         54.911
Operating expenses                                        107.801                         82.979
Profit before tax                                             152.552                       116.587
Profit margin %                                                 28.7                             30.7
Loans and advances                                     2156.7                           2425.3
Customers deposits                                      3062.2                           2692.0


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