Zenith Bank Plc, one of Nigeria’s leading financial institutions, has unveiled its unaudited financial results for the first quarter of 2024, showcasing impressive performance with a pre-tax profit of N320.194 billion.
This remarkable figure represents a staggering surge of 269.72% compared to the previous year’s performance. Notably, this pre-tax profit accounts for 40.23% of the bank’s pre-tax profit in the entire year of 2023, indicating a strong start to the fiscal year and suggesting a potential to surpass the previous year’s financial achievements if the current growth trajectory is sustained.
Despite persistent macroeconomic challenges such as elevated inflation, interest rates, and exchange rate volatility, Zenith Bank managed to navigate through these complexities, demonstrating resilience and agility in its operations. The challenging economic landscape contributed to higher interest income as well as increased impairment losses.
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However, a closer examination of the financial results reveals a combination of robust growth in interest income, primarily driven by lending activities, and substantial gains from trading income.
The group reported impressive gross earnings of N780.617 billion and a profit after tax of N258.341 billion in the first quarter. The surge in interest income, which reached N488.546 billion, was largely attributed to the expansion in the loan portfolio and the rise in interest rates.
Notably, interest income from loans and advances to customers accounted for 62% of the total interest income. Additionally, gains from trading activities, particularly gains on other trading books, surged to N186.334 billion, marking a significant increase from the previous year.
Despite the remarkable financial performance, the group also reported an impairment loss of N55.972 billion, with the majority allocated to the allowance for impairment on loans and advances. However, this impairment loss appears to be contained, representing only 18.26% of the bank’s net interest income.
Consequently, the bank’s net interest income after impairment loss remained robust at N250.478 billion, reflecting an impressive year-on-year increase of 122%.
The strong financial performance and growth trajectory are expected to improve investor sentiment. However, the bank faces the challenging task of meeting the Central Bank of Nigeria’s new capital requirement. With an additional N229 billion needed to meet the requirement, Zenith Bank is exploring various strategies to raise capital, including leveraging its robust and increasing retained earnings standing at N1.407 trillion.
Despite the bank’s strong performance, investors have expressed concerns about the new capital requirement, leading to a decline in the share price of banking stocks, including Zenith Bank. The bank’s share price experienced a year-to-date decrease of 10.48%, contrasting with the significant gains observed in the previous year, according to Nairametrics.
Nonetheless, Zenith Bank remains well-positioned to navigate through these challenges and capitalize on opportunities for growth in the Nigerian banking sector. The bank announced gross earnings of a staggering N2.13 trillion for the full year 2023.
This outstanding figure represents a remarkable growth of 125.4% year-on-year and stands as the highest gross earnings ever reported in the company’s storied history. In 2023, Zenith Bank’s capital adequacy ratio surged to 22%, up from 20% in the previous year, further cementing its financial strength and stability in the market.