Zenith Bank has announced its financial results for the second quarter of 2024, revealing a remarkable surge in profitability. The bank reported a pre-tax profit of N406.8 billion for the quarter, representing a staggering 370% increase compared to the N86.8 billion recorded in the same period last year.
This exceptional growth was primarily fueled by significant gains in foreign exchange trading, which bolstered the bank’s bottom line.
A key highlight of Zenith Bank’s performance was the substantial increase in gains from its trading activities, which soared to N871.6 billion for the first half of 2024, compared to just N77.9 billion in the corresponding period of 2023.
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The strong performance in forex trading has positioned Zenith Bank to potentially become the first Nigerian commercial bank to surpass N1 trillion in annual profits by the end of the year. With pre-tax profits already at N727 billion for the first half of 2024, the bank is well on track to achieving this milestone.
Key Financial Highlights
Net Interest Income: Zenith Bank’s net interest income rose sharply to N408.6 billion, marking a 238% increase year-on-year. This growth reflects the bank’s ability to generate higher revenue from its core lending activities.
Loan Impairments: Despite the robust profit growth, the bank faced significant challenges in managing its loan portfolio. Loan impairments for the second quarter alone amounted to N359.3 billion, a massive 4548% increase from the previous year. This brought the total impairments for the first half of 2024 to N415.2 billion, surpassing the N409.6 billion recorded for the entire year of 2023.
Operating Income and Expenses: The bank’s operating income also saw a significant rise, reaching N677 billion, a 264% increase from the previous year. However, operating expenses grew by 172% to N270 billion, underlining higher costs associated with the bank’s expanded operations.
Earnings Per Share (EPS): Zenith Bank reported an EPS of N10.2, a 434% increase from the previous year, highlighting the significant return on equity generated for shareholders.
Loans and Advances: The bank’s loan portfolio grew by 131%, with loans and advances reaching N9.29 trillion. This growth indicates the bank’s continued commitment to supporting economic activities through lending.
Deposits and Assets: Total deposits surged by 115% to N19.6 trillion, while total assets grew by 106% to N27.5 trillion, underscoring the bank’s strong liquidity and asset base. Net assets also saw a 121% increase, reaching N3.19 trillion.
In terms of segment revenue, Zenith Bank’s Nigerian operations were the primary contributor to the group’s profits, generating N645.3 billion. In contrast, its international operations contributed N81.7 billion, highlighting the bank’s strong domestic presence and its expanding global footprint.
Commentary on Performance
Zenith Bank’s stellar performance in the second quarter of 2024 was largely driven by its forex trading activities, which generated N871.6 billion in gains, compared to N77.9 billion in the previous year. The bank explained that this figure includes N123 billion in profits on derivatives, up from N65.2 billion in the previous year.
Despite these gains, the bank faced considerable challenges with its loan portfolio. Analysts note that the impairment loss of N359.3 billion in the second quarter alone underscores the difficulties in managing credit risks in a volatile economic environment. To put this into perspective, the total impairment charge for the first half of 2024, at N415.2 billion, has already exceeded the full-year impairment charge of N409.6 billion for 2023.
This significant rise in impairments is believed to be a highlight of the bank’s exposure to credit risks, which could pose challenges to its profitability in the coming quarters. However, according to analysts, the bank’s strong forex gains and robust core earnings have provided a cushion against these losses, allowing it to deliver impressive results despite the challenges.
This robust financial performance comes at a crucial time for Zenith Bank as it is currently in the market to raise N290 billion, following the N500 billion recapitalization directive by the Central Bank of Nigeria. The substantial profits recorded, particularly the forex gains, are expected to provide a significant boost to the bank’s capital-raising efforts.
Investors and stakeholders are expected to view the bank’s ability to generate such impressive profits, even amid challenging economic conditions, as a strong indicator of its financial health and operational resilience.