By OKEY ONYENWEAKU
Despite the current pressure imposed on businesses the world over by the COVID-19 pandemic, the Nigerian lender, Zenith Bank has bucked the trend and in remaining consistent in the payment of dividends to its teeming shareholders.
In the current half-year ended June 30, 2020, the bank has, in its character, already paid interim dividends of 30kobo on each share held by its subscribers. As the alert to this effect reached shareholders on their phones, swelling their bank accounts, the action elicited smiles on the faces of the bank’s owners.
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.
Every half year and final year, there is excitement as dividends are distributed to loyal investors of the bank.
Even amid the presently very challenging operating circumstances in which businesses are enmeshed, Zenith Bank, one of the biggest lenders in Nigeria and Africa has been able to weather the storms and maintain an upbeat trajectory. And the bank’s now established track record of consistently rewarding loyal investors’ has continued to trigger a surge of excitement in Marina and Broad streets.
In the last 10 years, the bank has paid out huge sums of money to its shareholders. For instance, it paid N0.85 per share in 2010 and a bonus of one for every four shares held, even as it paid N0.95 per share in 2011. Again, shareholders received N1.60 per share as a dividend in 2012, N1.75 per share in 2013, N1.75 per share in 2014, N1.80 per share in 2015, N2.02 per share in 2016, N2.02 per share in 2017, N.75 per share in 2018 and N2.80 per share in 2019. Now there is another N0.30 per share that has just been disbursed in the half-year 2020.
The research revealed that over this period, and N2 million investment in the shares of Zenith Bank has cumulatively now earned N3 million compounded.
While this dividend package may look moderate but is being insinuated that no other bank has paid higher than Zenith Bank in the banking industry. Not even its greatest rival, GT Bank.
The analysis showed 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.
Overall, most Nigerian stocks are valued lower than stocks in the developed economies, such that some of them are referred to as penny stocks.
Investopedia sees blue-chip companies as nationally recognized, well-established, and financially sound companies. Blue chips generally sell high-quality, widely accepted products and services. Blue-chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which paradoxically help to contribute to their long record of stable and reliable growth.
Zenith Bank deservedly qualifies as a blue-chip for possessing all the above qualities. Its share price closed on Friday, September 25, 2020, at N17.10 per share, representing an appreciation of 13 per cent year on year.
Zenith Bank, one of the biggest lenders in Nigeria and Africa has been able to weather the storms to grow its interest income and post double-figure profits in the first six months of 2020.
The audited half-year result of the bank showed Zenith Bank’s pretax profits expanding by two per cent to N114.12 just as its post-tax profit went up 17 per cent (exact sum: N103.82 billion), lifted by a significant drop in income tax expense, which was more than halved from N10.30 billion in H1 2019 to N20.94 billion in the first six months of this year.
Analysts surmise that this double-digit profit posting, which has indeed been a consistent streak in the lender’s business life over the years, makes it a clear leader in profitability in Nigeria. Coming behind Zenith Bank, in terms of their profit showing in the same field are GT Bank with N97.27billion, Access Bank withN61.03billion and First Bank with N49.46billion respectively.
Zenith Bank also posted 4 per cent growth in gross revenue to N346billion during this period, driven by a one per cent rise in interest income and non-interest income which in the latter case was up 6 per cent.
This marginal growth in interest income is traceable to revenue from loans and advances to customers which ticked up 11.58 per cent to N128.37 billion; as well as placement with banks and discount houses which increased 41.34 per cent to N16.65 billion. But this was conversely to be counteracted by earnings from treasury bills, which dipped -46.49 per cent to N28.38 billion in H1 2020.
This was also despite impairment charges on bad loans that had risen 74.2 per cent to N23.9 billion, propelled by a 478.95 per cent increase in provisions for losses in investment securities, as the bank’s non-performing loans were only 0.3 per cent less than the regulatory 5 per cent set by the Central Bank of Nigeria’s (CBN), and 10 per cent higher than the 4.30 per cent of its total which was bad in the same period last year.
The bank improved upon its total loans by 14 per cent to N2.80 trillion, while customer deposits grew by 15 per cent to N4.9 trillion, with total liabilities growing at a faster pace of 21.9 per cent to N6.59 trillion; much more than total assets which went up by 19 per cent to N7.58 trillion. Shareholders’ funds also strengthened 5 per cent to N988.98 billion between December 2019 and June this year.
Additionally, Zenith Bank is currently still quite liquid, with a liquidity ratio standing at 50.8per cent compared to 57.3 per cent as of December 2019; given that the threshold set by the CBN is 30 per cent. The bank’s loan to deposit ratio was also slightly above the 65 per cent regulatory benchmark at 66.1 per cent, while capital adequacy ratio (CAR) was 20 per cent, a marginal dip from the 22 per cent it had in December last year.
The dividend expectation had indeed lifted the interest of shareholders as the stock price closed at N17.20 per share as at Friday 11th September 2020.
This sterling performance was achieved in a market that had been demonstrating a bearish outlook hinged on lower global oil prices, devaluation of the local currency amidst foreign exchange scarcity and the need for loans restructuring.
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 increased rate of 8%, Zenith’s group profit after tax also hit N208.8 billion in the audited financial statement for 2019 as against N193.4 billion in the corresponding year in 2018
Group Managing Director of Zenith Bank, Ebenezer Onyeagwu, who was picked to fill a position he had long merited may have through this showing now proved to the lender’s board and shareholders that they did not make any mistake in leaving their huge investments in his hands.
From 2019 when he assumed office as the bank’s helmsman, he has always pulled unusual surprise which is reflected in the highly impressive scorecards posted by the bank within the period under reference.
In just a year from June 2019 to June 2020, the bank’s profit after tax came in double-digit numbers of 17 per cent; even as total assets also rose 19.4 per cent.
Indeed, analysts wager that Onyeagwu’s scorecard leaves no one in doubt of where he is taking the lender in the next few years.
This is even as, in the last five years – from June 2016 to June 2020 – Zenith Bank has grown its total asset by 60 per cent; profit after tax has jumped by 176.6 per cent and shareholders’ funds by 31.2 per cent.
And in what may come as a supporting testimonial to the giant strides it has continued to record, Zenith Bank has once again emerged as the Number One Bank in Nigeria by Tier-1 Capital in the 2020 Top 1000 World Banks Ranking published by The Banker Magazine.
Climbing a whopping 29 spots from 415 in 2019 to 386 in the 2020 global ranking of banks, Zenith Bank retained its position as the number one Tier-1 bank in Nigeria with Tier-1 Capital of $2.79 billion, an increase of 16.1% on the $2.40 billion recorded in the 2019 rankings.
The ranking which was published in the July 2020 edition of The Banker Magazine of the Financial Times Group, United Kingdom, was based on the 2019 year-end Tier-1 capital of banks globally.
Also seemingly upbeat about the performance is the firm of analysts, Vetiva Capital:
“As expected, income from investments, specifically currency revaluation gains of 180% quarter on quarter drove a 46% quarter on quarter growth in non-Interest income.
“Going forward, whilst we do not anticipate further devaluation of the local currency, we foresee more support from this line item in H2, driving our improved forecast of ₦258.5 billion to offset the decline in Interest Income”, Vetiva Capital’s note on the bank encouraged.
It is also to be noted here that the bank also reported impressive earnings in the first quarter of 2020 following an 8% year on year growth in its top line. The uptick came despite a 7% year on year decline in interest income to ₦114.3 billion.
Analysts said the earnings improvement was driven by a 61% year on year income in non-interest income to ₦52.5 billion. This was however as a result of a 339% spike in revaluation gains to ₦14.7 billion.
Overall, however, what has powered this year’s stability was the solid foundation of its 2019 annual performance when profit margins slimmed due to headwinds. And going forward, the expectations of its many stakeholders would yet be that the bank would continue to find new spots upon which to anchor fresh bursts of growth and progress.