Zenith Bank tops up balance sheet to N18trn in Q3

Zenith Bank Plc grew the balance sheet by N2.1 trillion in the third quarter (Q3) to close at N18.1 trillion at the end of the nine months of operations.

This is a sustaining rapid growth in assets for three quarters running from N1.1 trillion in the first quarter (Q1) to N2.6 trillion increase recorded in the second quarter (Q2) and further to N2.1 trillion expansion in Q3.

Over the nine months of operations so far, the bank has expanded the size of the balance sheet by nearly N6 trillion from the closing figure of N12.3 trillion in 2022.

Bad loans are experiencing the same galloping speed growth with assets at N210 billion at the end of September, more than five and half times the loan loss expenses of N37 billion the bank recorded in the same period in 2022.

The Q3 financial report of the bank at the end of September 2023, shows that the asset volume drivers are loans and advances, which grew by N1.8 trillion to N5.8 trillion, lending to other banks, which rose by N1.2 trillion to N2.5 trillion and cash and bank balances, which expanded by N940 billion to N3.1 trillion over the respective closing numbers in 2022.

Other top growing assets over the same period include treasury bills which grew by N598 billion to N2.8 trillion, investment securities, which swelled by N566 billion to N2.3 trillion, derivative assets, which rose by N433.8 billion to N483.7 billion and other assets that advanced by N218 billion to close at N431.5 billion.

Asset expansion was financed by a huge increase of N4.4 trillion in customer deposits in nine months to stand at N13.4 trillion at the end of Q3, an expansion of N901 billion in borrowings to N1.9 trillion and a boost of N523 billion in shareholders’ funds to over N1.9 trillion.

The high growth in assets translated into an outstanding increase in revenue with gross earnings jumping by 114 percent year-on-year to close at N1.3 trillion at the end of Q3. The nine-month revenue figure has already beaten the 2022 full-year gross earnings figure by N383.5 billion.

Leading revenue growth is foreign currency revaluation gain of over N378 billion – which multiplied more than 34 times from N11 billion in the same period last year.

The bank’s main income line – interest earnings– grew by 71.7 percent year-on-year to hit N670.9 billion at the end of Q3, already ahead of the 2022 full-year figure of N540 billion.

The cost of funds keeps growing far ahead of interest earnings, which continues to impinge on margins. At N255.7 billion, interest expenses rose by 137 percent compared to the 71.7 percent improvement in interest income.

Net interest income, therefore, grew at a slower pace than interest income at 46.8 percent to N415.2 billion over the period.

The bank was pressured further by the upsurge in loan losses, which consumed all the increase in net interest earnings, leading to a drop in net interest earnings after loan impairment charges from N245.8 billion to N205.2 billion over the review period.

The drop in net income was, however, remedied by a huge increase in other income from N20.5 billion to N400.4 billion over the period– which was driven by the windfall from foreign exchange revaluation.

A moderated increase in operating expenses supported the strong growth in other income, powering an elevated bottom line.

Zenith Bank posted an after-tax profit of N434.2 billion at the end of Q3, which towers a clear 149 percent above the corresponding third quarter profit figure of N174.3 billion in 2022.

The Q3 profit figure also stands at 94 percent above the full-year figure of N223.9 billion in 2022.

Rapid increases in the cost of funds and credit loss charges remain the two critical challenges facing the bank’s management so far this year, though their combined claim on interest income went down from 87 percent at half-year to 69.4 percent at the end of Q3.

Net profit margin is further up from 30.2 percent at half-year to 32.7 percent at the end of September 2023, and from 28.1 percent in the same period last year.