WHY 2018 OFFERED ZENITH BANK NO NEW ZENITH.

Apparently it was a year that looked certain to offer Zenith Bank not a new zenith to scale but potential to seek a new bottom.

According to the full year figures released this week by the bank, gross earnings declined by 15.4% to N630,344m from 2017's N745.189m.

This was principally because income from trading activities dived by 49.22% to N80,202m from N157,974m; other operating income declined by 20.04% to N17,947m; net fee and commission dropped by 0.89% to N81,814m and interest income went down 7.28% to N144,458m.

Decoded all income streams of Zenith Bank slowed down dangerously in 2018 year but the bank still ended up with 16.22% rise in profit before tax to N231,685m and with a much stronger bottom line of 36.8% compared to 26.7% in 2017. How come?

Simple. First, there was 65.3% slump in impairment provision to N18,372m from 2017's N98,227m and this is hoping it was because the bank's loan portfolio had become far less toxic.

In addition, interest expense that generated the 7.28 lower interest income, dropped by 33.3% to N144,458m thus leading to 14.6% rise in net interest income in spite of the gross decline.

Another good line of defense was that Other operating income dropped by 4.83% to N137,897m from N144,893m and as an icing on this cake, personnel cost grew by only 6.36% to N68,556m; that is well behind the growth recorded in net interest income.

Never mind that it was a close call, as the year drew to a close the Board of directors heaved sigh of relief and with some glee, recommended N2.50 per share final dividend bringing year round dividend to N2.80 per share, since an interim of N0.30 per share had been paid earlier.

The key to the near future still remains how realistic was the collapse of impairment provision by 65.3%. From the figures, the bank's non performing loans are dominantly in oil and gas; general commerce and transportation. Perhaps the economy will recover faster in 2019 to make these sectors less risky?

Not surprising, Zenith bank paid more attention to government finance in 2018 with exposure to Federal government bonds almost doubling to N484,899m from N250,639m in 2017 but of course, this may  have helped to bring down interest expense through far less debt recovery or administration costs apart from beefing up income.

Now, may be, Zenith Bank could resume aiming at new zenith in 2019 and put 2018 behind it.

ZENITH BANK: Nm Full year.
                             2018.              2017
Gross earnings 630344.         745189
Interest income 440052.        474628
Interest cost.      144458         216687
Net interest.       295594.         257991
Net fee & Comm. 81814.          82548
Trading income    80202.         157974
Other op. income 17947.          22444
Personnel cost     68556.          64459
Operating cost    137897          144893
Profit before tax  231685.         199319
Profit margin %        36.8.              26.7

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