Banking

Stock Analysis: Zenith Bank Sets for Impressive FY-2017 Performance Amid Credit Loss Pressure

Published

8 years ago

25/08/2017

Zenith Bank recorded a 44.57 percent growth in interest income in H1-17. On our 12.98 percent estimated assets yield, we believe the run rate will be sustained for the rest of the year, equating to 36.38 percent y/y growth in interest income to N524.46 billion.

The bank’s portfolio of investment securities, treasury bills, and quality loan books will be catalysts of the growth in assets yield. We also forecast NIR to surge by 51.16 percent to N186.60 billion, buoyed by strong trading income, revaluation gains, and marginal write-back of previous provisions.

Overall, we forecast a 39.97 percent growth in gross earnings to N711.06 billion in 2017F.

That said, PBT and PAT growth will be muted, owing to the impact of the elevated cost of refinancing maturing FCY obligations, higher impairment provisioning on transportation (specifically the aviation sector), communication and general commerce exposure, and a surge in total operating expenses (opex).

In a bid to meet maturing FCY obligations during the year, Zenith Bank issued the second tranche of its $1 billion Global Medium-Term Note Programme established in 2014. The programme was completed in May and the bank successfully raised $500 million (at a coupon rate of 7.375 percent, a 113bps premium over the first tranche).

The bank’s balance sheet as at H1-17 ending reveals that FCY borrowings worth $593.80 million (KEXIM $16.44 million, ABSA Bank $151 million, JP Morgan $75.05 million, Standard Bank $273.83 million, First Rand Bank $6.52 million, Citi Global Markets $51.96 million, and BACA $18 million) are due for maturity between May and October 2017.

We believe both the Eurobond and the newly secured borrowings during the year (SMBCE $49.75 million and AFC $181.9 million) came at higher cost relative to the maturing loans (mostly concessional borrowings) having estimated weighted average rate of 5.15 percent.

Accordingly, and given the continued tight domestic interest rate environment, we expect cost of funds to expand 125 bps y/y to 5.40 percent in 2017F – translating to interest expense of N235.88 billion.

However, we expect the stronger expansion in asset yields will offset the growth in funding cost, thus, we forecast an uptick in net-interest margin by 25 bps to 7.65 percent.

In H1-17, Zenith Bank made a 30 percent provision on its exposure to 9 Mobile (formerly Etisalat Nigeria) which resulted in a surge in credit loss provision (COR rose to 3.6 percent, from 1.3 percent in Q1-17 and H1-16) to N42.40 billion. Though we acknowledge the fact that a haircut is eminent on the syndicated exposure to 9Mobile, it is our understanding that most of the provisions booked in H1-17 by Zenith Bank was on its bilateral loan to the telco and not entirely on its share as a part of the syndicate.

Despite the bank restructuring 11.8 percent of its gross loan in H1-17(with oil & gas exposure representing 10.1 percent of the restructured exposure) as well as declassified some power exposure (down to 1.0 percent from 43.0 percent in FY-16), NPL still rose to 4.3 percent (N99.19 billion) from 3.0 percent (N71.37 billion) in FY-16, as the bank classified 37.6 percent (vs. 1.5 percent in FY-16) and 27.4 percent (vs. 18.5 percent in FY-16) of its transportation and general commerce exposure as NPL.

Overall, for 2017F, we estimate Zenith Bank’s NPL to increase to 4.50 percent, from 3.00 percent in FY-16 and 4.30 percent in H1-17, and cost of risks to rise to 2.68 percent, translating to a credit loss provision of N77.13 billion in 2017F.

We estimate opex to rise 29.63 percent y/y to N226.24 billion in 2017F (driven largely by higher regulatory levies on operating expenses) – translating to a 415 bps y/y expansion in CIR to 56.84 percent and growth in operational leverage to 4.5x (from 4.0x in FY-16).

Accordingly, we expect the impact of the increase in opex to limit the trickling down effect of the rise in gross earnings – we estimate PBT and PAT to rise 9.61 percent and 8.28 percent to N171.81 billion and N140.38 billion, respectively.

While acknowledging the impressive performance across income lines in H1-17, which resulted in an upward revision in earnings for the year, we believe the revaluation-bloated growth in NIR will taper in 2018, and factoring in the impact of the adoption of IFRS 9 from 2018 (with management guiding to a 20 percent impact on credit loss provision and 1 percent drop in CAR), we now expect PAT to grow lower than previously estimated over 2018F-2019F.

Hence, we revise our target price on the stock downward to N27.18 (Previous: N30.63), translating to 13.26 percent upside from current price of 24.00 (as at 21/08/2017).

Zenith Bank is currently trading at 2017F P/BVPS of 1.0x (above peer average of 0.9x and below the 5-year average of 1.1x) and P/E of 5.6x (above peer average of 5.2x and below the 5-year average of 5.9x). HOLD.

Banking

Secure IT, StockMed, 18 Others Make Wema Bank Hackaholics 6.0 Top 20 List

Published

4 hours ago

18/12/2025

Modupe Gbadeyanka

By Modupe Gbadeyanka

The six edition of the Hackaholics of Wema Bank Plc has produced 20 top finalists shared equally between two streams, Ideathon and Hackathon.

The Hackathon finalists are Rapid DEV, Secure IT, Neurafeed, Trust Lock Babcock, Pulse Track, IlluminiTrust, Trust Lock FUTA, Fix Fraud AI, KASH Flow and VOC AI.

The Ideathon finalists include PLOY, Fertitude, VarsityScape, Mama ALERT, StockMed, Chao, All Arbitrate, FarmSlate, Sane AI and Cycle X.

They emerged after a two-day pre-pitch held on December 16 and 17, 2025, for the grand finale slated for Friday, December 19, 2025.

They grand finale of Hackaholics 6.0 will convene the top players in Africa’s tech and innovation ecosystem, creating an avenue for these finalists to not only put their creativity to the ultimate test but also give their solutions visibility to potential investors for additional funding opportunities beyond the prizes to be won.

The prizes to be won for the Ideathon include N25 million for the winner, N20 million for the first runner-up, N15 million for the second runner-up and N5 million each for two women-led teams.

In the Hackathon category, the first to fourth-place winners will receive N20 million, N15 million, N10 million and N5 million, respectively.

The pre-pitch saw the top 43 contenders battle in a game of innovation and problem solving, presenting compelling pitches for a chance to make it to top 10 in their respective streams.

After a rigorous stretch of pitches and presentations, the top 20 emerged, securing their spot in the grand finale of Hackaholics 6.0.

“Hackaholics started off as a hackathon and morphed into an ideation. For Hackaholics 6.0, the sixth edition, we decided to give both the builders of new solutions and the refiners of existing ones, an opportunity to make meaningful impact.

“For us at Wema Bank, we understand that innovation isn’t just building from scratch. Sometimes, it’s looking at what exists and developing new ways to optimise that and create more efficiency. This is the idea behind our two-stream Ideathon-Hackathon structure.

“Every year, Hackaholics shows us just how eager and motivated Nigerian youth are when it comes to exploring creativity and innovation, and we are honoured to be the institution that provides them with the platform and resources to put this drive to good use.

“We toured seven cities, indulged 1,460 participants and discovered hundreds of remarkable ideas; some of which needed some refining and some of which deserved to move to the next stage.

“For those who needed to go back to the drawing board, we provided useful guidance and for the top contenders, we were able to shortlist to the top 43, who proceeded to the pre-pitch. To every participant, Wema Bank is proud of you. This is just the beginning,” the chief executive of Wema Bank, Mr Moruf Oseni, said.

Banking

Customs to Penalise Banks for Delayed Revenue Remittance

Published

9 hours ago

18/12/2025

Adedapo Adesanya

By Adedapo Adesanya

The Nigeria Customs Service (NCS) says it will enforce penalties against designated banks that delay the remittance of customs revenue, in a move aimed at strengthening transparency and safeguarding government earnings.

This was disclosed in a statement on the NCS official account on X, formerly known as Twitter and signed by its spokesman, Mr Abdullahi Maiwada, who said the delays undermine the efficiency, transparency, and integrity of government revenue administration.

“The Nigeria Customs Service has noted instances of delayed remittance of customs revenue by some designated banks following reconciliation of collections processed through the B’odogwu platform,” the statement read.

“Such delays constitute a breach of remittance obligations and negatively impact the efficiency, transparency, and integrity of government revenue administration.

“In line with the provisions of the Service Level Agreement executed between the Nigeria Customs Service and designated banks, the Service hereby notifies stakeholders of the commencement of enforcement actions against banks found to be in default of agreed remittance timelines.”

Mr Maiwada disclosed that any bank that fails to remit collected Customs revenue within the prescribed timeline will be liable to penalty interest calculated at three per cent above the prevailing Nigerian Interbank Offered Rate for the period of the delay.

He added that affected banks would be formally notified of the delayed amounts, the applicable penalty, and the deadline for settlement.

“Accordingly, any designated bank that fails to remit collected Customs revenue within the prescribed period shall be liable to penalty interest calculated at three per cent above the prevailing Nigerian Interbank Offered Rate for the duration of the delay.

“Affected banks will receive formal notifications indicating the delayed amount, applicable penalty, and the timeline for settlement,” the statement read.

Banking

First Bank Deputy MD Sells Off 11.8m First Holdco Shares Worth N366.9m

Published

9 hours ago

18/12/2025

Aduragbemi Omiyale

By Aduragbemi Omiyale

The deputy managing director of First Bank of Nigeria (FBN) Limited, Mr Ini Ebong, has offloaded some shares of FBN Holdings Plc, the parent firm of the banking institution.

A regulatory notice from the Nigerian Exchange (NGX) Limited confirmed the development on Thursday.

It was disclosed that the transaction occurred on Friday, December 12, 2025, on the floor of the stock exchange.

The sale involved about 11.8 million shares, precisely 11,783,333 units traded at N31.14 per share, amounting to about N366.9 million.

Mr Ebong, who studied Architecture from University of Ife and obtained Bachelor and Master of Science degrees, became the DMD of First Bank in June 2024. Prior to this appointment, he was Executive Director, Treasury and International Banking since January 2022.

He was previously the Group Executive, Treasury and International Banking, a position he held since 2016 after serving as the bank’s Treasurer from 2011 to 2016.

Before joining First Bank, he was the Head of African Fixed Income and Local Markets Trading, Renaissance Securities Nigeria Limited, the Nigerian registered subsidiary of Renaissance Capital. He also worked with Citigroup for 14 years as Country Treasurer and Sales and Trading Business Head.

He has a passion for market development and has worked actively to drive change and internationalisation of the Nigerian financial markets: foreign exchange, fixed income and securities.

He has worked closely with regulatory bodies such as the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) in assisting with the development of fresh monetary and foreign exchange policies, to broaden and deepen markets and open them up to international practices.

At various times he has facilitated and delivered courses and seminars on a wide variety of subjects covering Money Markets, Securities and Foreign exchange trading and market risk management subjects to regulators, corporate customers, banks and market participants.