Fee, Trading Incomes Lift Zenith Bank’s Q3 Net Profit Up 35.5% To N129.24bn

Zenith Bank Plc, on Thursday released what may be the biggest top and bottomline numbers among its peers on the Nigerian Stock Exchange (NSE), with robust boost from the robust N65.399bn or 398.53% growth in trading income, complemented by fee and commission income growth, which more than made up for the N16.34bn or 46.96% drop in other income and the equally significant rise in loan impairments.
On the balance sheet, the loan book rose 11.11%, while customer deposit was slightly faster at 13.75%; just as shareholders’ funds notched N76.78bn or 11.11%.
Specifically, gross earnings rose to N531.266bn, up by N150.91bn from N380.352bn; helped by the N76.115bn or 26.64% increase in interest and similar income from N285.674bn to N361.789bn. Also, N477.959bn or 91.41% of the gross earnings came from the bank’s Nigerian business; while N36.968bn was from African subsidiaries, and N10.176bn from Europe. Interest and similar expense climbed to N160.297bn from N95.857bn, leaving net interest income at N201.492bn, up from N189.815bn.
A breakdown of the interest and similar income also showed that N240.999bn came from customer loans and advances, up from N208.449bn; interest from treasury bills added up to N84.332bn, a significant rise from the preceding N37.349bn; while government and other bonds yielded N32.245bn, down from N38.442bn.
Impairment charges for credit loss climbed to N47.053bn from N21.858bn, with N39.673bn or 84.31% also from Nigeria; following which net interest income after impairment charge for credit losses stood at N154.439bn, lower than the previous third quarter’s N167.959bn. The lion’s share of the impairment charges came from term loans for which N41.902bn was provided, compared to the prior N10.526bn.
Commenting on this, Chiazor Victor, equity analyst at Capital Bancorp Plc, believes Zenith Bank “needs to keep a close eye on rising impairment as its Non-performing loan ratio increased for the period to 4.2% from 2.2% reported in 9M’16.”
“This significant rise in impairment charge if not managed properly,” he cautioned on Thursday, “has the ability to erode the company profits as experienced in a few other banks operations.”
More help however came from fee and commission income, which contributed N71.021bn from N46.282bn, lifted by the N28.584bn from current account maintenance income, up from N13.651bn; and N13.861bn from credit related fees, up from N10.193bn. Trading income climbed from N16.41bn to N81.809bn, with N52.881bn being Treasury bills trading income, as against N4.925bn; and foreign exchange trading income of N28.788bn, which could have been much more, but for the loss N17.634bn suffered in the final quarter of the reporting period. Other income fell from N31.986bn to N16.647bn, after foreign currency revaluation gain dropped from N31.015bn in 2016 to N6.999bn. Provision no longer required for the period boosted the books by N8.404bn, which did not occur in the prior nine-month period.
Personnel expenses dropped slightly from N54.911bn to N53.74bn, the bulk of which was the N21.419bn paid to the Asset Management Corporation of Nigeria, up from N18.752bn, ahead of the N14.432bn spent on fuel and maintenance, up from N10.002bn; while operating expenses stood at N107.801bn from N82.979bn; bringing profit before tax to N152.552bn, as against N116.587bn in the corresponding period of 2016. With income tax expense at N23.317bn, from N21.201bn, profit attributed to shareholders therefore rose by 35.48% to N129.235bn, N53.918bn of which came in the three months between July and September. Also, N121.296bn of the net profit was recorded in Nigeria, followed by N8.149bn from Africa; while recording a loss of N304m from its operations in Europe, as against the previous N510m loss.
The net profit translated to Earnings Per Share of 411 kobo, as against 303 kobo in the first nine months of 2016.
Total assets for the period stood at N5.131tr, up by N482.133bn or 10.36% from N4.649tr in 2016; boosted by the N2.155tr loans and advances, which however dropped from N2.425tr. Term loans contributed N1.31tr of the group’s total loan book, followed by N587.089bn overdrafts and N370.973bn on-lending facilities.
Total liabilities rose to N4.364tr, 10.23% more than the N3.958tr of prior year’s Q3; as deposit base soared by N370.229bn or 13.75% from N2.691tr, to N3.062tr. Shareholders’ fund increased by N76.782bn or 11.11% from N690.908bn to N767.69bn.

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