Hike in interest, operating expenses slow down Zenith Bank’s PBT to N202.55bn

Zenith bank Plc reported N202.55billion profit before tax in the third quarter (Q3) ended September 30, 2022 from N179.8 billion reported in nine months of 2021, amid hike in its operating and interest expenses.

Due to inflationary pressure and the rising cost of doing business, operating costs grew at 17 per cent to N255.23billion in Q3 2022 from N218.91billion in Q3 2021. However, this was below growth in gross earnings (20per cent), thereby facilitating the double growth in the bottom line.

Interest expenses also grew by 46 per cent to N107.85billion in Q3 2022 from N74.1billion in Q3 2021 with the hike in Monetary Policy Rate (MPR) that led to hike in interest banks were paying on customers deposits and borrowings.

The continuing elevated yield environment affected the cost of funding which increased from 1.4per cent to 1.7per cent in the current period.

“This has affected net interest margin (NIM) which dropped due to the immediate implementation of higher yields on our interest-bearing liabilities.

“However, the NIM will see a correction in subsequent quarters as the assets side is repriced correspondingly,” the bank said.

The Zenith Bank Group achieved a year on year (YoY) growth in gross earnings of 20 per cent from  N518.7 billion reported in Q3 2021 to N620.6 billion in Q3 2022.

The bank said: “This double-digit growth in the topline also aided bottom line as the Group also recorded Profit  after tax that  grew by Q3 2021 from N160.6 billion to N174.3 billion in the same period.

“The growth in the topline was driven by growth in both interest income and non-interest income. Interest income grew by 27per cent from N308.8 billion to N390.8 billion driven majorly by growth in our risk assets and an improvement in pricing. This also strengthened Earnings Per Share (EPS) by nine per cent to N5.55.

“Growth in non-interest income was enabled by the Group’s retail strategy, with continued strong customer acquisition driving transactions, deposit growth and growth in electronic banking income.

“Total assets grew by 20per cent from N9.45 trillion to N11.34 trillion in 2022, mainly driven by growth in customers’ deposits. Customer deposits grew by 24% from N6.47 trillion in December 2021 to N8.04 trillion in September 2022 due to the confidence the market has in the brand.

“Loans and advances also grew by 16per cent from N3.5 trillion in December 2021 to N4.06 trillion in September 2022 boosting the Group’s interest income and displaying the Group’s appetite for high-yielding risk assets creation.

“As a result of this growth the capital adequacy ratio reduced from 21 per cent to 19.1 per cent while the liquidity ratio also reduced from 71.6per cent to 68.9 per cent. Both prudential ratios remain very strong are still well above regulatory thresholds.

“In the final quarter of the year, management is determined to sustain the strong performance trajectory while adapting to changes in the regulatory environment and focusing on creative initiatives to mitigate the inflationary trends, foreign exchange pressures and the growing competitive environment.”