Rating: Buy
Current Market Price: N16.95
Year High: N23.00
Year Low: N10.70
Fair Value: N35.68
Equity Analyst: Tunde Segun Jeariogbe

Introduction

• This report viewed the half-year financial performance of Zenith Bank Plc for the period ended 30^th June, 2020, compared same with similar results for 2019 to establish growth trend.
• As in the previous half-year, the management of Zenith Bank announced an interim cash dividend of 30 kobo per share, in line with several analysts’ expectation.
• Qualification date for the said cash dividend is 16^th September, 2020, while payment is slated for 22^nd September, 2020.
• In our attempt to match valuation with economic growth expectations, we have mildly re-valued Zenith Bank’s share price up from our previous valuation. This, in our opinion, is conservative enough and reveals the true stand of the economic reality.
• See below for further analysis.

ZENITH INT’L PLC
Bourse	Nigerian Stock Exchange
Code Name	ZENITH INT’L PLC
Sector	FINANCIAL SERVICES
Market Classification	Premium Board
Nature of Business	Commercial Banking
Date of Incorporation	May 30th 1990
Date Listed	October 21st 2004
End of Accounting Year	31st December
Website	www.zenithbank.com
Registrar	VERITAS REGISTRARS LIMITED
Auditor	PricewaterhouseCoopers
Share Price@Relsd (N)	16.95
Earnings per Share	3.31
Intrinsic Value(N)	35.68
Share Outstanding	31,396,493,786
Market Capitalisation	532,170,569,673

Company figures

• Gross Earnings posted for the period under review was N346.08 billion, same as a 4.37% improvement over the N331.58 billion achieved at the end of 2019 half–year.
• Interest Income inched north by 1.10% from the previously reported N214.60 billion to N216.95 billion.
• On the other hand, Interest Expense stood at 17.40% below the comparable period to N59.54 billion, versus N72.08 billion in the corresponding quarter.
• Net Interest Income was estimated at N157.40 billion, 10.45% above the N142.51 billion achieved at the end of the first six months of 2019.
• Operating Expenses marginally built up by 5.26% to N121.59 billion, as against the N115.52 billion in 2019 half-year.
• Profit before Tax was estimated at N114.12 billion, which is a 2.19% improvement over 2019 half-year estimate.
• Helped by lower income tax expense, Profit reported for the period stood above corresponding quarter’s profit by 16.81% at N103.82 billion, as against the previous N88.88 billion.

ZENITH INT’L PLC
Statement of Comprehensive Income
	2020	2019	%CHG
GROSS EARNINGS	346,088,000,000	331,586,000,000	4.37
INTEREST INCOME	216,954,000,000	214,601,000,000	1.10
INTEREST EXPENSES	59,545,000,000	72,086,000,000	17.40
NET INTEREST INCOME	157,409,000,000	142,515,000,000	10.45
OPEX	121,599,000,000	115,528,000,000	5.26
DEPRECIATION	12,471,000,000	9,791,000,000	27.37
AMORTISATION	1,778,000,000	1,514,000,000	17.44
PBT	114,124,000,000	111,677,000,000	2.19
TAX	10,298,000,000	22,795,000,000	54.82
PAT	103,826,000,000	88,882,000,000	16.81
TOTAL COMP INCOME	125,538,000,000	82,876,000,000	51.48
Statement of Financial Position
Total Assets	7,580,114,000,000	5,898,596,000,000	28.51
Total Liabilities	6,591,136,000,000	5,079,082,000,000	29.77
Net Assets	988,978,000,000	819,514,000,000	20.68
Property, Plant &Equipments	186,827,000,000	167,881,000,000	11.29
Retained Earnings	420,195,000,000	314,695,000,000	33.52
Total Deposits	4,904,998,000,000	3,810,025,000,000	28.74
Total Loans and Advances	2,624,367,000,000	1,801,833,000,000	45.65

• Total Assets grew by 28.51% over the 2019 half-year valuation, following which assets are currently valued at N7.58 trillion, up from the N5.89 trillion in the corresponding quarter of last year.
• Total Liabilities also grew by 29.77% to N6.59 trillion, as against N5.07 trillion in the similar period of 2019.
• Net Assets is currently valued at N988.97 billion, representing 20.68% above the previous N819.51 billion estimate.
• Retained Earnings improved by 33.52% from the previous estimate of N314.69 billion versus N420.19 billion.
• Total Deposits equally appreciated to N4.90 trillion, a 28.74% growth over the N3.81 trillion achieved at the end of 2019 full-year.
• Total Loan and Advances for the period grew by 45.65% to N2.62 trillion, versus N1.80 trillion.

Financial Strength/Solvency Ratios

• Debt Ratio was stable through the two compared periods inching from 86.95% to 86.11%, signifying a controlled assets ratio through the period.
• Total Debt to Equity was estimated at 666.46%, same as 7.53% above the 619.77% in the 2019 half-year, which implies that Total Debt (Deposit inclusive) can replicate equity 6.66 times.
• Similarly Equity Ratio was stable within the two periods compared at 13.05% from 13.89% in the corresponding quarter.
• We have, therefore, estimated a Beta value above the market Beta for Zenith Bank Plc shares. Please note that at 1.10 beta value, it’s still below the industrial average of 1.15.

Financial Strength/Solvency Ratio
TICKERS	2020	2019	%CHG
Debt Ratio	86.95%	86.11%	0.98
Total Debt to Equity Ratio (MRQ)	666.46%	619.77%	7.53
Equity Ratio	13.05%	13.89%	6.09
TICKERS	ZENITH INT’L PLC	Industrial Average	%CHG
Beta Value	1.10	1.15	4.35

Profitability Ratios

• Pre-Tax Margin stood at 32.98%, a marginal growth of 2.09% from the last estimate of 33.68% at the end of 2019 half year business.
• Interest Expense for the period is same as 17.21% of the Estimated Gross Earnings figure; which is a reduced position when compared with the previously estimated 21.74%.
• Return Achieved on Average Equity used through the period was estimated at 10.50%, which is below the 10.85% return achieved in the 2019 half-year.
• See the table below for detailed profitability ratios and comparisons.

PROFITABILITY RATIOS
TICKERS	2020	2019	%CHG
PRE-TAX MARGIN	32.98%	33.68%	2.09
EFFECTIVE TAX RATE	9.02%	20.41%	55.79
IE TO GE	17.21%	21.74%	20.86
ROAE	10.50%	10.85%	3.20
ROAA	1.37%	1.51%	9.10

Efficiency Ratios

• Operating Expenses is an estimated 35.14% of the Gross Earnings Value for the period, representing a marginal growth over the 34.84% estimated from the 2019 half-year numbers.
• Similarly, Gross Earnings was an estimated 4.57% of Total Assets, which is a 18.78% drop in efficiency when compared to estimate from the corresponding period.
• Total Loan to Deposit Ratio achieved at the end of the quarter stood at 53.50% up from the 47.29% achieved in 2019 half year.

EFFICIENCY RATIOS
	2020	2019
OPEX TO GE	35.14%	34.84%	0.84
GE TO TA	4.57%	5.62%	18.78
LDR	53.50%	47.29%	13.14
Capex/Share	1.06	1.24	14.45

Investment/Valuation Ratios

• Profit made per unit of Zenith Bank at the end of the quarter is estimated at N3.31, as against the previously estimated N2.83 each.
• Total Comprehensive Income per share is estimated at N4.00, versus N2.64 in the comparable period of last year.
• Price to Earnings Ratio adjusted for the half-year stood at 1.28x, as against 1.50x in 2019.
• The said earnings per share is same as 19.51% of the current market price of Zenith Bank Plc shares on the exchange when the result was released; a better yield when compared to the previous half-year estimate.
• The current Book Value of Zenith Bank is N31.50, a 20.68% improvement over the N26.10 estimated last year.
• Confirming a seemingly under-priced position is the Price to Book Value ratio that stood clearly below unity.

ZENITH INT’L PLC
Investment/Valuation Ratios
Tickers	2020	2019	%Chg
EPS	3.31	2.83	16.81
TCIP/SHARE	4.00	2.64	51.48
P/E-Ratio	1.28	1.50	14.65
Earnings Yield	19.51%	16.65%	17.16
BV/Share	31.50	26.10	20.68
PBV	0.54	0.65	17.38
LDR	53.50%	47.29%	13.14

Valuation

As noted in our intro above, we fairly adjusted our fair value for each unit of Zenith Bank Plc shares to N35.68. Considering the difference between the current market price of the equity on the exchange and our achieved fair value, we have rated it a Buy.