Zenith Bank posts 5% increase in profit to N255.9bn in 2020

Zenith Bank Plc has reported an increase in its Profit Before Tax (PBT) by 5 per cent to N255.9 billion for the year ended December 31, 2020, as against N243.3 billion reported in the previous year.

The bank’s audited financial results for the 2020 financial year presented to the Nigeria Stock Exchange (NSE) on Tuesday, showed that the increase arose from a combination of growth in the topline and a significant reduction in interest expense from N148.5 billion in 2019 to N121.1 billion in 2020, significantly increasing the net interest income from NGN267.0 billion in 2019 to NGN299.7 billion in 2020.

According to the lender, the Group recorded a growth in gross earnings of 5 per cent from N662.3 billion in the previous year to N696.5 billion. The Group recorded 8 per cent growth in non-interest income from NGN232.1 billion in 2019 to NGN251.7 billion in 2020 and a one per cent increase in interest income from NGN415.6 billion in 2019 to NGN420.8 billion in 2020.

The Group’s increased retail activities translated to a corresponding increase in retail deposits and loans. Thus, retail deposits grew by NGN612.7 billion from NGN1.11 trillion to NGN1.72 trillion year-on-year (YoY), while savings balances significantly grew by 88 per cent YoY and closed at NGN1.16 trillion.

This retail drive, coupled with the low-interest yield environment, helped reduce the cost of funding from 3.0 per cent to 2.1 per cent and also reduced interest expense.

However, the low-interest environment also affected the net interest margin, which declined from 8.2 per cent to 7.9 per cent in the current year due to the re-pricing of interest-bearing assets. Operating costs grew by 10 per cent YoY but are still tracking well below inflation which at the end of the year stood at 15.75 per cent.

Although returns on equity and assets also reduced from 23.8 per cent to 22.4 per cent and from 3.4 per cent to 3.1 per cent, respectively, the Group still delivered improved Earnings per Share (EPS), which grew 10 per cent from NGN6.65 to NGN7.34 in the current year.

The Group also increased corporate customer deposits, which alongside the growth in retail deposits, delivered total deposit growth of 25 per cent, to close at N5.34 trillion, driving growth in market share. Total assets also increased significantly by 34 per cent, from N6.35 trillion to N8.48 trillion.

Despite the COVID-19 pandemic and its associated challenges, the Group managed to create new viable risk assets as gross loans grew by 19 per cent, from N2.46 trillion to N2.92 trillion. This was achieved while maintaining a stable and low overall NPL ratio of 4.29 per cent (2019: 4.3%) across the entire portfolio and an increase in the cost of risk from 1.1 per cent to 1.5 per cent, reflecting the elevated risk environment in 2020.

The Group recorded impressive liquidity and capital adequacy ratios of 66.2 per cent and 23.0 per cent and remained above regulatory thresholds of 30 per cent and 15 per cent, respectively.