Interest income boosts Zenith Bank to N578bn profit in H1’24

Business a.m.

Zenith Bank, Nigeria’s second largest lender by market value, has recorded a  100 percent surge in net profit for the first half of 2024, hitting N578 billion compared to the same period last year.

The bank’s outstanding performance was propelled by the aggressive interest rate hikes introduced by the CBN to quell inflationary pressures, which consequently led to increased lending rates and higher revenues for the bank.

Zenith Bank’s impressive earnings growth in the first half of the year,was largely driven by its growth in interest income. This is as the bank’s interest income saw a 176.7 percent increase, reaching a total of N1.1 trillion. This large growth made interest income the primary source of revenue for the bank, contributing more than half of the total revenue generated during this period.

As indicated in its financials, Zenith Bank’s net interest income of N715.1 billion represents a 275 percent increase from N261.9 billion in the corresponding period last year, reflecting the bank’s exceptional adaptability and resilience in a high-interest-rate environment.

Despite facing rising borrowing costs, the bank’s ability to achieve such growth in net interest income speaks volumes about its solid financial management practices, effective lending policies, and capacity to adapt to changing market conditions.

The success of  the bank’s revenue generation strategy, even in the face of higher borrowing costs, underscored its sound financial management practices and the effectiveness of its lending policies.

Zenith Bank’s provision for impairment of financial and non-financial instruments expanded by almost 100 percent, reaching N415.3 billion during the period under review. The primary catalyst for this substantial jump was the sharp rise in provisions for non-performing loans, which is a reflection of the mounting financial strain on borrowers caused by various macroeconomic pressures.

Meanwhile, the bank’s non-performing loan (NPL) ratio experienced a significant uptick, rising from 7.1 percent at the end of last year to 8.4 percent during the period under review. This increase reflects the bank’s mounting credit risk, as more borrowers struggle to meet their loan obligations due to various economic factors such as inflation, declining consumer confidence, and overall business uncertainty.

Zenith Bank’s trading gains emerged as a substantial growth driver, witnessing a surge of over 660 percent, from N103 billion to N795.6 billion.The increase in trading gains was largely fueled by the escalating value of the bank’s financial instruments, which led to impressive capital gains as they were traded on the financial markets.

While foreign exchange revaluation gains served as a robust source of revenue for Zenith Bank and other players in the Nigerian banking industry in the past, this time around, the growth in these gains was relatively subdued, only recording a modest increase of 3.3 percent.

In a separate but equally remarkable development,the Tier-1 bank revealed a 100 percent increase in its interim dividend payout. The proposed total interim dividend of N31.4 billion represents a significant leap from the N15.7 billion paid out to shareholders in the corresponding period the previous year.

The proposed dividend of N1 per share, as indicated by the bank, reflects confidence in its performance and financial stability, and is set to be welcomed by shareholders as a tangible sign of the bank’s commitment to creating value and distributing profits to its investors.