Zenith Bank shareholders reap bountifully

By OKEY ONYENWEAKU

As many businesses struggle to survive the challenging times, the paradox is that Zenith Bank is not only cruising, but the lender is also stuffing shareholders pockets with money and good returns. Despite the ravaging effect of Covid-19, which has caused disruptions in supply chains, shutdowns, weakened economies all over the world and pushed firms into posting losses, Zenith Bank is set to post a dividend of 300 kobo per share to its teeming shareholders for the year ended 2020.
Indeed, this has also not come as a surprise to analysts given that Zenith bank has remained faithful to its investors, ensuring that they reap substantial yields or returns from their investment, year on year.
While this dividend package may however look moderate, analysts say that it is also notable to situate this within the context that no other bank has probably paid higher dividends than Zenith Bank in the banking industry. Not even its greatest rival, GT Bank.
The analysis shows that the bank’s dividend yield in 2011 was 6.83 per cent of its share price, while it was 8.1 per cent in 13. Going further, it stood at 9.51 per cent in 2014, 14.23 per cent in 2015, 12.20 per cent in 2016, 7.88 per cent in 2017, 11.93 per cent in 2018 and 16.72 per cent in 2019.
The bank which displayed resilience and doggedness has announced an impressive result for the year ended December 31, 2020, with a year-on-year growth of 10% in profit after tax (PAT) from N208.8 billion recorded in 2019 to N230.7 billion. This is in spite of a challenging macroeconomic environment exacerbated by the COVID 19 pandemic. According to the bank’s audited financial results for the 2020 financial year presented to the Nigerian Stock Exchange (NSE) on Tuesday, February 23 2021, the Group recorded a growth in gross earnings of 5% from N662.3 billion in the previous year to N696.5 billion. The Group also recorded 8% growth in non-interest income from NGN232.1 billion in 2019 to NGN251.7 billion in 2020 and a 1% increase in interest income from NGN415.6 billion in 2019 to NGN420.8 billion in 2020.
Profit before tax (PBT) also increased by 5%, growing from N243.3 billion in 2019 to N255.9 billion in the current year. The increase arose from a combination of growth in the topline and a significant reduction in interest expense. Interest expense reduced 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.
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% 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% to 2.1% and also reduced interest expense. However, the low-interest environment also affected the net interest margin, which declined from 8.2% to 7.9% in the current year due to the re-pricing of interest-bearing assets. Operating costs grew by 10% YoY but are still tracking well below inflation which at the end of the year stood at 15.75%. Although returns on equity and assets also reduced from 23.8% to 22.4% and from 3.4% to 3.1%, respectively, the Group still delivered improved Earnings per Share (EPS), which grew 10% 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%, to close at N5.34 trillion, driving growth in market share. Total assets also increased significantly by 34%, from N6.35 trillion to N8.48 trillion. Despite the COVID-19 pandemic and its associated challenges, the Group created new viable risk assets as gross loans grew by 19%, from N2.46 trillion to N2.92 trillion. This was achieved while maintaining a stable and low overall NPL ratio of 4.29% (2019: 4.3%) across the entire portfolio and an increase in the cost of risk from 1.1% to 1.5%, reflecting the elevated risk environment in 2020. The Group recorded impressive liquidity and capital adequacy ratios of 66.2% and 23.0% and remained above regulatory thresholds of 30% and 15%, respectively.
In a demonstration of its commitment to its shareholders, the bank has announced a proposed final dividend payout of N2.70 per share, bringing the total dividend to N3.00 per share.
Commenting on the banks’ impressive results, Managing Director of High Cap Securities Limited, Mr David Adonri, told Business Hallmark that the management of Zenith Bank has not only continued to be focused but that it has also utilized the advantages of technology and digital incursions to push its operations, especially in this Covid-19 period.
At the stock price of N25.45 per share as at Friday February 27, 2021, a P/E Ratio of 3.47 and earnings per share of 7.34, the bank has gained 66.87 per cent Year on Year.
As a testament to this superlative performance and in recognition of its track record of excellent performance, Zenith Bank was voted as Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards 2020, Best Bank in Nigeria in the Global Finance World’s Best Banks Awards 2020 and Best Corporate Governance ‘Financial Services’ Africa 2020 by the Ethical Boardroom. Also, the bank emerged as the Most Valuable Banking Brand in Nigeria, for the fourth consecutive year, in the Banker Magazine “Top 500 Banking Brands 2021” and Number One Bank in Nigeria by Tier-1 Capital in the “2020 Top 1000 World Banks” Ranking published by The Banker Magazine. Similarly, the bank was recognised as Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Retail Bank of the year at the 2020 BusinessDay Banks and Other Financial Institutions (BOFI) Awards, and Best Company in Promotion of Good Health and Well-Being as well as Best Company in Promotion of Gender Equality and Women Empowerment at the Sustainability, Enterprise and Responsibility (SERAS) Awards 2020.
Getting to and remaining at the zenith is good. And that indeed is the challenge before the board and management of Zenith Bank, going forward.