BY BAMIDELE FAMOOFO
Zenith Bank Plc, arguably Nigeria’s leading bank, improved its shareholders’ fortunes in the third quarter financial period ended September 30, 2022.
The bank grew its profit after tax by 8.6 percent to N174.33 billion, on account of a 46.8 percent year on year increase in income tax expense. Profit before tax advanced by 12.6 percent y/y to N202.55 billion.
Impressively, the bank reported a 26.5 percent y/y increase in interest income to N390.76 billion, supported by the higher income from investment securities (+30.0% y/y to N122.97 billion) and loan and advances to customers (+26.3% y/y to N261.25 billion). The increase in income from investment securities was driven by the (1) elevated rates in the environment and (2) increase in investment securities (+16.5% YTD to N3.57 trillion). In addition, the increase in income from investment securities is due to the bank’s increased appetite for risky assets, given as the loan to customers expanded by 15.6 percent YTD to N3.88 trillion.
Interest expense grew by 45.5 percent y/y to N107.85 billion as all the contributory lines increased during the period due to the bank increasing its total liabilities by 22.8 percent YTD to N10.03 trillion. Parsing through the breakdown, interest costs on borrowings rose by 42.9 percent y/y to N44.61 billion, while deposits from customers advanced by 42.2 percent y/y to N60.99 billion.
Financial experts disclosed that the higher cost incurred on customers’ deposits was due to the deteriorating funding mix – (CASA 9M-22: 86.4% vs FY-21: 93.0%), translating to higher term deposit accounts. Eventually, the net interest income settled higher by 20.5 percent y/y at N282.91 billion. Given the 28.8 percent y/y increase in credit impairment charges, the net interest income (ex-LLE) settled higher at N245.81 billion.
Similarly, non-interest income (NII) rose by 10.0 percent y/y to N211.97 billion, underpinned by the growth in the income generated from fees and commission (+27.8% y/y to N100.06 billion) and gains on investment securities (+0.9% y/y to NGN91.44 billion). This expansion in NII, alongside the growth in net interest income, led to a 14.8 percent y/y increase in operating income to N457.78 billion.
Further down, the bank reported a 16.6 percent y/y increase in operating expenses to N255.23 billion, with the most pressure stemming from other operating expenses (+30.0% y/y to N112.99 billion), deposit insurance premium (+21.2% y/y to N14.67 billion) and AMCON levy (+16.1% y/y to N44.01 billion). Accordingly, the cost-to-income ratio (ex-LLE) settled at 55.8% (9M-21: 54.9%).