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ZENITHBANK Q3'20: Lower impairment charge buoys Q3 earnings
#1
ZENITHBANK: Lower Impairment Charge Buoys Q3 Earnings

By CardinalStone

Zenith Bank Plc (ZENITHBANK: TP – N26.72) reported a 5.7% YoY growth in 9M’20 earnings due to a lower effective tax rate (10.1% vs 14.5% in 9M’19). On a before tax basis, earnings came in relatively flat (+0.6% YoY) during the period. In Q3’20, earnings grew 4.1% QoQ driven by lower impairment charges (-94.1% QoQ) and operating expenses (-14.2% QoQ), respectively.
 
Q3’20 Highlights:
  • Net interest income shrank 10.7% QoQ on the back of a surprise 27.6% QoQ jump in interest expenses
  • Non-interest income weakened 18.4% QoQ, as lower net trading gains (-28.5% QoQ) and FX revaluation loss of N1.5 billion (vs gain of N7.3 billion in Q2’20) offset the impact of a 41.8% QoQ jump in net fee income
  • Operating expenses eased 14.2% QoQ; albeit, cost to income ratio was flat (48.4%) vs Q2’20 due to weaker operating income (-14.4% QoQ)
  • Impairment charges crashed 94.1% QoQ to ease cost of risk pressure (1.3% vs 1.8% in H1’20)
  • Gross loans rose 3.1% funded by a 6.5% increase in customer deposits during the review quarter
  • Annualised ROE and ROA were 21.5% (FY’19: 23.8%) and 3.0% (FY’19: 3.4%), respectively. CAR remains robust 21.5%, above the 15.0% regulatory limit.

[Image: 5b41fe03-bff3-4e80-a81a-b4d3e0dc6721.png]
[Image: 45bf04ce-a023-4523-8db7-646fedc7ffa9.png]

Lagos Office:
5 Okotie Eboh Street
South-West Ikoyi, Lagos Nigeria

Abuja Office:
12 Dar Es Salaam Street
Wuse II, Abuja, Nigeria

Website: www.cardinalstone.com
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