Zenith Bank: When the going gets tough


By Andy Nssien


Zenith International Bank  Plc had to roll up its sleeves  to contend with the untoward macroeconomic, regulatory and market specific challenges that faced the banking industry in Nigeria last year. The tumbling oil prices, cascading exchange rates, the regulator’s policy on dividend payment  coupled with the uncertainty  in the economy, amongst others are enough to unnerve a well capitalized and structured company.

Zenith International Bank showed strength and resilience as the group  posted gross revenue of N403 billion and profit before tax (PBT) of N 120 billion for the year ended December 2014.

The  38 per cent growth to N482 billion in risk assets has resulted in a 15.9 per cent growth in interest income with improved non-performing loan (NPL) ratio of 1.8 per cent. The group achieved a loan-to-deposit ratio of 60.3 per cent, capital adequacy ratio of 20.0 per cent and liquidity ratio of 60.9 per cent, all of which predisposed  the Zenith group to exploit business opportunities in strategic sectors of the economy.

The group’s competitive loan-deposit- ratio, high capital adequacy ratio coupled with strong capital base, equips it with the necessary tools to explore rewarding opportunities in the country and in all other locations where it operates.

However, gross profit margin shrank from 27.1 per cent in 2013 to 24.6 per cent in 2014. This was majorly accounted for by high cost of interest and similar expense which shot up by 51 per cent from N70.7 billion to N106.9 billion in 2014.. This affected items such as savings accounts, time deposits and borrowed funds.  The group  also had to contend with personnel expenses which rose by 20 per cent from N59.9 billion to N72.3 billion in 2014.  Affected in this category are some items such as salaries and wages, and other staff costs, all of which impacted negatively on the bottom line.

At a time many banks are caught in the web of Central Bank of Nigeria (CBN) regulation on payment of dividends, Zenith group has sustained its  payout figure of  175k per share, the same as the previous year’s payment. This  accords with the CBN directive last year which stated that any bank that does not meet the minimum capital adequacy ratio ( CAR) would not be allowed to pay a dividend, while banks that have a Composite Risk Rating (CRR) of “High” or an NPL (non-performing loan) ratio of above 10 per cent would not be allowed to pay a dividend.

The CBN added that banks that meet the minimum Capital Adequacy Ratio (CAR), but have a CRR of “Above Average” or an NPL ratio of more than five per cent but less than 10 per cent would have a dividend payout ratio of not more than 30 per cent.

Further analysis of the Zenith Bank showed that even though the capital adequate ratio fell from 26 per cent  in 2013 to 20 per cent last year, it was still within the dividend payment threshold.  Also within the same period, the non-per forming loan ratio (NPL) of the bank dropped from 2.91 per cent from 2013 to 1.8 per cent last year which is consistent with the regulator’s stipulation.  This development puts the bank at advantage over many other money deposit banks which may not be able to meet this requirement as customers gravitate to, not only banks that pay dividends, but enhanced dividends as determined by the  CBN policy.

The group’s unaudited results for the first quarter ended March 31, 2015 was also re-assuring. Gross revenue rose by 20 per cent to N113 billion for the three months ended March 31, 2015 from N94.3billion recorded in the corresponding period in 2014, while interest income at N81.4billion reflected a 14 per cent growth during the same period.

Gross loans and advances shot up by 9.9 per cent to N1,932 billion, while customers’ deposit rose by 5.7 per cent to N2,682 billion during the same period.

Further analysis indicated that  that even though CAR fell from 26.50 to 18.8 per cent it was still within the acceptable minimum level. Non-performing loan ratio dropped further down from 2.80 per cent in the first quarter of  2014 to 1.7 per cent in the correspondent period this year.

These not withstanding, the Zenith group needs to pay more attention to some aspects of the banking regulations, violations of which cost the group huge sums of money during its operations in 2014.

Last year, the bank paid a total of N48,000,000 as fines and penalties for failure to comply with the followings;

* Non-disclosure of date of last lodgement on credit print out (N2 million), appointment of a DGM acting chief compliance officer (N2 million), incomplete reporting of all transactions of politically exposed persons (N2 million).

* Incomplete reporting of International Funds transfer in excess of USD 10,000 (N2 million), incomplete reporting of some currency transactions reports (N2 million), late rendition of suspicious transaction report (N4 million).

* Inability to fully implement some external auditors recommendation (N2 million), misclassification of some public sector deposit (N32 million).

Zenith Bank Plc offers its clients a wide range of corporate, investment, business and personal banking products and solutions. It is one of the biggest and most profitable banks in Nigeria. The bank was established in May 1990 and started operations in July same year as a commercial bank. It became a public limited company on June 17, 2004 and was listed on the Nigerian Stock Exchange on October 21, 2004 following a highly successful Initial Public Offering (IPO). The Bank presently has a shareholder base of over one million, an indication of the strength of the Zenith brand. Zenith Bank listed $850.00 million worth of non-capital raising GDR on the London Stock Exchange on March 21, 2013.

Source : Independent

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