Zenith Bank Plc Q1’20 results – FX revaluation gains keep earnings afloat

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Zenith Bank Plc recorded relatively flat earnings (+0.6% YoY) in its unaudited Q1’20 result. The bank’s performance reflected a 42.8% YoY jump in non-interest income which offset weaker net interest income (-5.4% YoY), higher operating expenses (10.1% YoY), and loan loss charges (+88.5% YoY).
 
Highlights:
  • Interest income fell 6.7% YoY, reflecting the decline in returns on fixed-income investments (-27.1% YoY), which masked growth in interest on loans and advances (+15.9% YoY). Overall, net interest income slowed by 5.4% YoY to N81.5 billion, as NIM contracted by 1.2 ppts to 7.7% despite the 40 bps moderation in cost of funds to 2.6% during the quarter
  • Non-interest income surged 42.8% YoY, largely driven by the 4.4x increase in FX revaluation gains to N14.7 billion and the 98.0% YoY increase in trading income. The trading gain was supported by an improvement in derivative income (gain of N83 million vs. loss of N6.1 billion in Q1’19) and a 21.2% YoY increase in T-bill trading income. Elsewhere, net fees and commission income weakened 27.6% YoY largely due to the 37.7% slump in e-Business fees during the quarter
  • Operating expenses rose 10.1% YoY but cost to income ratio was relatively flat at 51.0% on sustained efficiency. Elsewhere, loan loss charges rose 88.5% YoY leading to a higher cost of risk at 0.6% (Q1’19: 0.4%)
  • Gross loans and advances to customers increased by 11.3% during the quarter and NPL ratio inched 30 bps to 4.6%. Return on average equity slowed to 21.6% versus 23.8% in December 2019. On the regulatory front, both capital adequacy (19.6%) and liquidity (41.8%) ratios remained above the required thresholds.
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Zenith Bank Plc Q1'20 results - FX revaluation gains keep earnings afloat - Brand Spur