Company Analysis

ZENITH BANK: Strong Intrinsic Value Proposition, Dividend Growth Despite Lockdown

By Investata Research

Rating: Aggressive Buy
Current Market Price: N21.4
Year High: N27.50
Year Low: N21.10
Fair Value: N40.19


  • This report observes the full-year numbers of Zenith Bank Plc for the year-ended 31st December, 2020, compares same with similar financials released in the corresponding period of 2019.
  • Thus, we established growth for comparison and projections, where required, to arrive at a valuation of the financial powerhouse.
  • Note that our recommendation for an aggressive ‘buy’ is premised on the large gap or inherent value proposition, between our valuation and the current market price of Zenith Bank. Also note that the said valuation has been stretched for five years, hence our belief that based on its consistency, the stock is attractive for long-term investment, while traders are advised to play within the technical range of the stock.
  • Generally, the growth for the period under review was mild, a clear reflection of the impact of the lockdown imposed as part of measures to curtail the spread of t he novel Coronavirus pandemic outbreak during the period.
  • In our opinion, the performance is commendable, nonetheless, in view of the economic challenges faced through the financial year.
  • See below for further details of the released numbers and our opinions:
Sources: Company Report, NSE filing, Investdata Research

Dividend Information

  • At the end of the financial year, a final dividend of N2.70 was announced, 8.00% improvement on the N2.50 paid in the preceding year (2019).
  • Note that the management already paid an interim dividend of N0.30 for the half-year, bringing total dividend paid to N3.00 per share, from the N7.34 earned during the year.
  • Nevertheless, the pay-out ratio of the final dividend is 36.77%, which s is slightly below the 37.58% recorded in the corresponding year.
  • Also note that, as at the time the result was made available to investors, the said final dividend was 10.89% of the share price on the Nigerian Stock Exchange, representing a lower yield, when compared to the 12.59% achieved in the corresponding full-year.
  • Note that the closure date for the final dividend was 9th March, 2021, following which the qualification date was 8th March, 2021, while payment is slated for 16th March, 2021, same date as the Annual General Meeting.
Sources: Company Report, NSE filing, Investdata Research

Company figures

  • Full year Gross Earnings was N696.45 billion, 5.16% better than the N662.25 billion achieved at the end of 2019.
  • Interest Income inched by a marginal 1.26% from the previously reported N415.56 billion to N420.81 billion.
  • On the other hand, Interest Expense fell to N121.13 billion versus N148.53 billion in the corresponding year, representing an 18.45% decline.
  • Net Interest Income was however estimated at N299.68 billion, 12.23% above the N267.03 billion achieved at the end of 2019 financial year.
  • Operating Expenses marginally built up by 9.68% to N227.37 billion against N207.31 billion in the 2019 financial year.
  • Profit before Tax was estimated at N255.86 billion, which is just 5.17% improvement over 2019 number.
  • Having made allowance for Tax Expenses, the Profit reported for the period stood above corresponding year profit by 10.40%, at N230.56 billion as against N208.84 billion.
Sources: Company Report, NSE filing, Investdata Research
  • Total Assets grew by a strong 33.63% over the 2019 full-year asset valuation at N8.48 trillion, up from the N6.34 trillion in the corresponding year.
  • Total Liabilities also grew by 36.24% to N7.36 trillion, as against N5.40 trillion in the comparable period.
  • Net Assets is currently valued at N1.11 trillion same as 18.64% above the previous estimate of N941.88 billion.
  • Retained Earnings improved by 26.24% from the previous estimate of N412.94 billion to N521.29 billion.
  • Total Deposits equally appreciated to N5.33 trillion, a 25.28% growth over the N4.26 trillion achieved at the end of 2019 business session.
  • Total Loan and Advances for the period grew by 55.69% to N3.58 trillion, versus N2.30 trillion in the prior year.

Financial Strength/Solvency Ratios

  • Debt Ratio was stable through the two compared periods inching from 85.16% to 86.82%, signifying a controlled assets ratio.
  • Total Debt used through the period will replicate Equity 6.59 times, as against the 5.74 times replicate estimated in the preceding year.
  • Similarly, Equity Ratio dipped by 11.02% to 13.18%, as against the previously estimated 14.84%.
  • We have currently estimated a Beta value above the market Beta for Zenith Bank Plc shares. Note that at 1.10 beta value, it’s only slightly below the industry average of 1.11.
Sources: Company Report, NSE filing, Investdata Research

Profitability Ratios

  • Pre-Tax Margin stood at 36.74% same as the estimate in the corresponding year.
  • Interest Expense posted for the year is same as 17.39% of the Estimated Gross Earnings; a reduced position against the previously estimated 22.43%.
  • Return Achieved on Average Equity used through the period was estimated at 20.64% this is below the 22.17% return achieved in 2019.
  • See the table below for detailed profitability ratios and comparisons.
Sources: Company Report, NSE filing, Investdata Research

Efficiency Ratios

  • Operating Expenses is estimated at 32.65% of the Gross Earnings Value estimated for the year, this is a marginal growth from the 31.30% estimated from 2019 financial statistics.
  • On the other hand, Gross Earnings was estimated at 8.21% of Total Assets, this is 21.30% drop in efficiency when compared to estimate from the corresponding year.
  • Total Loan to Deposit Ratio achieved at the end of the year stood at 67.22%, up from the 54.09% achieved in the corresponding year.
Sources: Company Report, NSE filing, Investdata Research

Investment/Valuation Ratios

  • Profit made on each unit of Zenith Bank at the end of the year had been estimated at N7.34, as against the previously estimated N6.65.
  • Total Comprehensive Income per unit is estimated at N8.39 versus N6.84 in the comparable period.
  • Price to Earnings Ratio for the full-year stood at 3.38x, as against 2.98x in 2019.
  • The said earnings per share is same as 29.61% of the current market price of Zenith Bank Plc shares on the exchange when the result was released; a lower yield when compared to the previous year estimate.
  • The current Book Value of Zenith Bank is N35.59, an 18.64% improvement over the N30.00 estimated last year.
  • Confirming a seemingly under-priced position is the Price to Book Value ratio that stood clearly below unity.
Sources: Company Report, NSE filing, Investdata Research


Considering its long-term investment proposition, we conservatively valued each unit of Zenith Bank Plc’s shares at N40.19. Considering the distant between the current market price of the equity on the floor of the exchange and our achieved fair value, we rated it an Aggressive Buy.

Five Year Financial History

Sources: Company Report, NSE filing, Investdata Research

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