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Zenith Bank records single-digit growth in Q3 profit

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IMAGE: Nigeria Zenith Bank plc »


Nigeria Zenith Bank plc has recorded a single-digit growth in its third quarter (Q3) profits as the industry grapples with multiple regulations by the Central Bank of Nigeria (CBN) that is the slowing bottom-line performance of most lenders.

For the first nine months through September 2014, Zenith Bank recorded a growth of 1.81 percent in PAT to N71.04 billion from N69.75 billion in the same period of the corresponding year (Q3) 2013.

It is overt that the Nigerian banking sector is growing at snail pace as a result of the tightening policy of the CBN and regulatory induced costs imposed by the sinking fund called Asset Management Corporation of Nigeria (AMCON).

In spite of the aforementioned blockage, the bank was able to grow interest income by 11.47 percent to N213.01 billion from N190.96 billion the preceding year, while interest expense increased by 34.55 percent to N69.64 billion.

Some analysts are calling for the relaxation of the tightening policy by the CBN and other regulatory induced costs as Nigerian lenders growth potentials are under threat.

Additionally, the blockage in growth of the lenders earnings could stop them from granting loans to small and medium scale businesses at low interest rates. Also, the financial institution contribution to the country’s GDP could also be affected by the multiplicity of regulatory charges.

Zenith Bank’s net margin, a measure of efficiency and profitability, dropped to 25.95 percent in 2014, from 27.32 percent last year, while cost to income ratio (CIR) remained flattish at 56 percent.

Despite a 29 percent increase in personal costs that eroded cost savings, analysts are upbeat about the bank’s CIR.

“We see headroom for improvement in the CIR of Zenith Bank, especially as its corporate market focus,” said Abiola Rasaq of the research and strategy unit of Associated Discount House Limited, in an email response to BusinessDay’s questions.

“The leverage on technology as well as scale economies should drive home cost efficiency and higher branch/staff productivity for the bank,” said Rasaq. The bank is aggressive about lending as loan to deposit ratio spiked to 65.80 percent in 2014, from 54.58 percent last year.

Loans and advances to customers increased by 38.18 percent to N1.52 trillion in Q3 2014, as against N1.10 trillion the preceding year.

Deposits from customers were up by 13.79 percent to N2.31 trillion from 2.03 trillion the last year.

Total assets expanded by 19.30 percent to N3.40 trillion compared with N2.85 trillion the preceding year.

Return on average equity (ROaE) was 19.19 percent in the review period, while return on average assets stood at 3.09 percent, based on data compiled by BusinessDay.

Zenith Bank share price closed at N22.63 on the floor of the NSE, while market capitalisation was N711.13 billion.

Article Credit: Businessdayonline

Updated 5 Years ago

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Tags:     Nigeria Zenith Bank plc     Central Bank of Nigeria     AMCON     CIR     Abiola Rasaq