ANALYSTS SEE ZENITH BANK LOANS, DEPOSITS RISE IN 2016

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Within twenty-two years, Zenith Bank plc has demonstrated rare resilience and has witnessed exponential growth in virtually all areas. Today, the bank is undoubtedly one of Nigeria’s strongest financial services institutions and one of the country’s largest banks by market capitalization, shareholders fund and profitability.

The bank’s growth momentum has increased over time and impacted positively on its standing as a market leader. In essence, Zenith Bank continues to make remarkable success on the sustainability agenda which is at the heart of its strategic and business models. As a result, it is better positioned to continue on its growth trajectory and its desire to be a vital part of people’s lives and businesses.

Zenith Bank Plc published its audited full year (FY) 2015 result on March 15, 2016 on the floor of the Nigerian Stock Exchange (NSE).

In spite of the hostile environment, the bank recorded moderate growth in both top and bottom lines as seen in its gross earnings which came in higher at N432.5 billion in full year2015 relative to N403.3 billion in full year2014 to record a 7.2 percent Year-on-Year rise, largely in line with N448.5billion full year 2015 projected by Afrinvest Securities limited, reflecting -3.6 percent variance.

Zenith bank’s profit before tax (PBT)and profit after tax (PAT) improved 4.9 percent and 6.2 percent Year-on-Year to N125.6 billion and N105.7 billion in FY:2015 from N119.8 billion and N99.5 billion in FY:2014 respectively. The moderation in Y-o-Y PBT and PAT growth relative to its 5-year compound annual growth rate (CAGR) of 27.3 percent (2010 – 2014) was on the back of higher impairment charges in 2015 (20.0% Y-o-Y).

However, analysts at Afrinvest project a conservative 7.0 percent and 2.0 percent Y-o-Y increase in loans and deposits in FY:2016 respectively anticipating much of the growth in second half of 2016.

On the back of the FY:2015 result, the Bank currently trades at a trailing price earning ( P/E) and price-to-book value (P/BV) multiple of 3.7x and 0.9x compared to GTBank’s  FY:2015 4.8x and 1.2x respectively.

Subsequently, the analysts uphold their 12-month target price of N16.86 presenting an upside of 36.3 percent based on market price of N12.35 as at March 16, 2016. “Therefore, we maintain our “BUY” recommendation on the counter”, Ayodeji Ebo, head, investment research, Afrinvest, said in a report.

“Based on FY:2015 actual, we maintain our 8.4 percent Y-o-Y growth in gross earnings to N469.3 billion in FY:2016 but lower PAT Y-o-Y growth to 1.4 percent from 6.5 percent in FY:2016. Projected PAT figure improved marginally to N107.1 billion from initial forecast of N106.6 billion due to a lower expected Cost of Risk (CoR) of 1.0 percent from 1.3 percent”, Ebo said.

According to the bank, excellent service delivery and development of superior asset quality, strong capital base, professionalism and corporate governance have provided the grounds for consistent high returns to stakeholders. The bank maintains sound risk management and corporate governance culture in line with global best practices.

“Going forward, our challenges will include, though not limited to, further elevating our standing as a reputable financial institution by establishing a corporate structure that can stay imperturbable. However, I am glad that we are well positioned and adequately equipped to remain at the forefront of Nigeria’s financial services sector”, Peter Amangbo, group managing director/CEO said.

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