Zenith Bank’s quantum leap boosts confidence in Amangbo

The subtle fear that enveloped stakeholders of Zenith Bank when Emefiele was head hunted and moved to work as CBN governor, may have disappeared.

 Peter Amangbo, the new helmsman at Zenith Bank has released a confident score card, signalling a good understanding of the Zenith culture after understudying the founder of the bank, Jim Ovia and Emefiele for years. Nerves seem to have definitely been calmed.

Despite the troubling times in the Nigerian economy, the bank’s results which were made public a week ago has been a testimonial to Amangbo’s growing managerial capacity.

It is increasingly being canvassed in the investment community that the relatively young Amangbo appears to know where he is headed and has kept a clever eye on the banking ball.

At the time of his appointment the bank’s public relations machine had said that Amangbo’s rise was consistent with the bank’s tradition and strategy of grooming leaders from within.

The bank’s Board and shareholders have not been disappointed in the internal headhunt given the vigour and passion with which the new bank boss has navigated past economic obstacles that have characterised a very uncertain and tenuous business environment.

Zenith Bank Plc reported a growth of 24 per cent in gross earnings for the half year ended June 30, 2015. The audited half-year results released on the floor of the Nigerian Stock Exchange (NSE) showed that gross earnings rose from N184.4 billion in June 2014 to N229.08 billion.

Similarly, the result showed net interest income rising by 14 per cent from N98.6 billion in 2004 to N112.6 billion. The group’s profit before tax increasing by 24 per cent from N58 billion to N72 billion while profit after tax rose to N53 billion, up from N47 billion in 2014.

Customers’ confidence in the Zenith Bank increased during the period under review as deposits rose from N2.5 trillion to N2.6 trillion, just as total assets stood at N3.8 trillion in 2015 as against N3.7trillion in 2014.

Gross loans and advances grew by 10.4 per cent without compromising the asset quality as evidenced by a best-in-class low cost rate of 0.8 percent, which is below industry average non-performing loan (npl) ratio of 1.44 percent.

Based on the result, the board of directors of Zenith Bank Plc. recommended an interim dividend of 25 kobo per share, the first in the history of the bank. The qualifying date for the dividend is August 21, 2015while the register will close on August 24, 2015 to enable the Bank’s registrar prepare for payment of the interim dividend.

Zenith bank, the biggest in Nigeria by Tier-1 capital, recently adopted a new financial reporting policy of publishing audited half-yearly results, a development hailed by market analysts as representing a major boost for the financial brand.

Analysis of the bank’s balance sheet showed a rise in gross loans and advances to N1.9 trillion implying 9.9 per cent appreciation when compared with N1.7 trillion posted in the similar period of 2014.

Similarly, customers’ deposit and total assets increased by 5.7 per cent and 4.9 per cent to N2.6 trillion and N3.9 trillion respectively during the period.

Consistent with the bank’s strong earnings showing in the past ten years, the Directors of the bank have proposed a dividend per share of N1.75 as against N1.70 paid in 2013, translating to a dividend yield of 9.2% on a recent share price of N19.00. In comparison to other rival banks, Zenith’s dividend yield is the highest ranking in the banking industry.

A review of the banks performance in 2014 shows major improvements in key operating indices with a marginal rise in post- tax profit, which rose from N99.5b in 2013 to N99.92b in 2014.

It should be recalled that over the last quarter of 2014 analysts and investors were in agreement that the Central Bank of Nigeria’s monetary policies were having adverse effects on bank liquidity and their operating revenues. The public sector deposit reserve ratio of 75 per cent had constrained banks to lower their short term credit volumes while also raising their short term lending rates.

A combination of higher rates and lower volumes have had mixed impact on bank bottom lines.  Some banks have seen their lending volumes drop only marginally as their rates rise and therefore their profits have grown a notch higher.

Other banks have been less favourably treated by the financial market as they have seen their lending volumes drop significantly as interest rates rise steadily.

For the turbulent year 2014, Zenith bank recorded an impressive growth of 14.8% year- on- year in gross earnings to N403.3 billion from N351.5billion in 2013. Also, its profit after tax (PAT) went up by 4.3% year –on- year.

Against analysts’ expectation the bank was able to turn in results that scrapped past early profit and gross earnings warning. Much of the effort at beating the streets forecast seems to have come from the banks effort at turning a tight tourniquet over operating costs and growing risk assets to generate greater revenue despite relatively flat net interest margins.

Chairman of the Bank, Jim Ovia has acknowledged that the result, “translates into another excellent performance that further attests to the durability and resilience of the Board. The results, once again is an eloquent testimony to the sound financial health of our bank and the group”.

There is the belief that Amangbo’s academic qualifications that straddle both disciplines of engineering and accounting have given him an analytical, and perhaps intellectual, advantage over industry competitors.

The banks third Managing Director holds an MBA from the Warwick Business School and a B.Eng in Electrical and Electronics Engineering from the University of Benin. He is also an alumnus of INSEAD and a fellow of the Institute of Chartered Accountants of Nigeria.

His academic background gives him a huge advantage over rivals, having had over two decades of banking experience with Zenith Bank in corporate finance and investment banking, business development, credit and marketing, treasury, financial control and strategic planning and operations.

Having been appointed to the Board of the bank and its subsidiary companies in 2005, and being a pioneer Non-Executive Director of Zenith Bank UK, it is believed that Amangbo learnt the ropes adequately.

As an Executive Director of Zenith Bank for the last nine (9) years, Amangbo was responsible for the supervision of corporate and commercial banking, corporate finance, trade services and all the subsidiaries of the bank. This prepared Amangbo to motivate, mentor and lead talented senior professionals and to direct cross-functional teams.

He was part of the team that drove the strategic planning and successful execution of positioning the bank as one of the best in the country. His leadership skills continue to make significant contributions to the bank’s growth.

Before joining the banking industry, he was a senior consultant with PriceWaterhouseCoopers where he covered assignments in financial services, manufacturing and general commerce.

He, analysts believe is already bringing his wide experience and expertise to bear on his new position as chief executive, especially in the current competitive banking landscape that requires constant innovation through proven leadership and team-building skills, exceptional ability to drive product, process and customer service improvements, and a knack for building partnerships with key business decision-makers.

 He is a member of the board of directors of Zenith Bank, Zenith Insurance Ltd, Zenith Pensions Ltd, Zenith Capital Ltd, and Zenith Bank, UK, and was a member of the board of Interswitch Nigeria Ltd from 2005 to 2007.

The Chief Executive Officer of Financial Derivatives Company, Mr. Bismarck Rewane, has expressed confidence in Amangbo’s capabilities, “since he is from within”.

“The appointment in the main is a safe bet. I think he could capitalise on the fact that he has a Zenith veteran at the CBN,” adding, “Like in tennis, it is advantage Zenith.”

The Head of Research at investment banking firm, Dunn Loren Merrifield Limited, Mr. Tola Odukoya, has said,

‘’ I expect Amangbo to continue with the tradition of Zenith Bank being a strong player in the corporate segment of the market and also being among the most liquid banks in the domestic banking space.’’

The bank believes that Zenith has not only enjoyed good leadership under Amangbo but also contributed to give the institution vigour which helped it to achieve the no mean financial performance in 2014.

” In relative and absolute terms, the 2014 results is an eloquent testament to sustained growth, the strength of our resilience and efficiency of our strategic management of resources and business cycles”, the bank said in its annual report.

The President of the Nigerian Shareholders Solidarities Association, Mr. Timothy Adeshina who commended the bank for the dividend pay-out said the shareholders were appreciative of the efforts which the staff and management put in to drive the bank for increased return on equity.

In the same vein, the President of the Association for Advancement of the Rights of Nigerian Shareholders (AARNS), Mr. Faruk Umar also applauded the account performance of the bank said the current leadership has proved that they are capable of driving the bank to great height.

However, more critically, Proshare noted that while the bank’s operating expenses climbed up to 6.59% (YoY), which could be reasonably traced to the aggressive initiatives to ease the effect of stiff monetary control from CBN and increased cost of funds.

However, we consider this a better outlook when compared with 37.08% growth recorded in Q4’13, the operating efficiency of the bank appeared to be under pressure, considering the moderate growth in cost-to-income ratio to close at 57.74% (YoY) against 57.10% (YoY) recorded in Q4’13.

”Also, the decline in net interest margin and PAT margin further reflects weakness in the operating efficiency of the bank.

The significant surge in interest expenses by 51.02% (YoY) from 9.66% growth (YoY) recorded in Q4’13, with a corresponding sharp decline in income from T-Bill gives us concerns, which may continue to increase pressure on bottom-line of the bank”, it also said.