Zenith Bank Plc grew its top-line and bottom-line in the third quarter with a 16.6 per cent to N121.3 billion appreciation in pre-tax within the nine-month period. Zenith Bank’s share price jumped by 25 kobo to N15.
Key extracts of the nine-month results for the period ended September 30, 2016 released on Monday, October 24, at the Nigerian Stock Exchange,NSE, showed that gross earnings rose by about 13 per cent while pre and post tax profits rose by 16.6 per cent and 20.4 per cent respectively. The balance sheet of the bank also appeared stronger with total assets rising to N4.65 trillion.
Gross earnings rose by 12.9 per cent from N337.9 billion in third quarter 2015 to N380.4 billion in third quarter 2016. Net interest income had grown by 17.6 per cent from N161.4 billion in 2015 to N189.8 billion in 2016. Profit before tax rose from N104 billion in September 2015 to N121.2 billion in September 2016. After taxes, net profit grew by 20.4 per cent to N100 billion as against N83 billion recorded in comparable period of 2015. Earnings per share rose from N2.64 to N3.18.
Against the audited position by the 2015 year-end, the bank’s balance sheet has grown over the past nine months. Total assets rose to N4.654 trillion by September 2016 as against N4.0 trillion recorded by the year ended December 31, 2015. Deposits rose from N2.557 trillion in December 2015 to N2.692 trillion by September 2016. Loans and advances grew from N1.841 trillion to N2.425 trillion.
Market analysts generally commended the performance of the bank, noting that the results were above market estimates. Analysts at FBN Capital said the nine-month profit before tax of N121 billion indicates possibility that the bank will surpass the N123 billion projection made by the management for the full year ending December 31, 2016.
“On the back of these results, we would expect consensus profit before tax for 2016 to move up strongly, from N123 billion currently, given that the nine months result is N121 billion,” FBN Capital stated.
Analysts however noted that operating expenses and interest expense figures were disappointing and could draw some scrutiny from the market.
Analysts at Exotix Partners said they would retain their buy recommendation with a target price of N27 on the bank given the performance in the third quarter. This indicates that the bank’s share price could still rise by about 80 per cent on its opening price today.
“The bank’s headline earnings per share and profitability are trending significantly ahead of our estimates. However, that is being driven by the significant revaluation gains, the source and sustainability of which remains unclear to us. We are also disappointed by the bank’s shrinking deposit base in real terms and declining margins – we think many investors will start questioning the bank’s traditional investment profile of being able to generate significant returns in a high interest rate environment by virtue of its ability to mobilise low-cost deposits. The bank’s unwillingness to build non-performing loans cover ahead of potential asset quality deterioration also disappoints,” Exotix stated.
Exotix stated that it remains buyer of Zenith Bank’s shares, although the investment profile is not as strong as it used to be.
