Zenith Bank second generation banks that stormed the Nigerian banking industry with verve and determination to revolutionise the way banking services were operated in the country. From inception the bank alongside a few others established a niche in the mid-upper class market segment and used differentiation and technology to climb the industry ladder within a relatively short period of time.
Today, in different measures of bank performance Zenith Bank has become a reference name and a trail blazer.. By most size metrics its either number one or two in the industry and this underscores the leadership role it plays after being in operation for just 24 years.
As at end 2014 total assets was N3.43 trillion having expanded by whopping N545 billion just in one financial year. It also operates in five countries including United Kingdom while international expansion is continuing.
Zenith Bank is one of the few financial institutions in Nigeria that have taken advantage of the Global Depository Receipt programme to achieve cross-boarder listing in the London Stock Exchange. It listed USD850 million worth of shares.
Deposit Liabilities and Liquidity Risk
As at 2014, customers held deposit accounts worth N2.27 trillion, adding approximately N280 billion that year. Only two other banks competed with Zenith on this industry measure of size. This is a mark of depositors’ confidence and loyalty. The bank has also demonstrated its readiness to meet obligations at all times.
In 2014 the bank invested N1.55 trillion in cash and near cash assets in readiness to meet any demand. This accounted for about 45% of entire assets, just as qualifying liquid asset to vulnerable deposit ratio was about 41%. Only two banks matched this level and relative measure of sound liquidity positioning the industry.
Managing Risk Asset and Asset Quality Issues
Following the trend already established Zenith Bank and two others are in the forefront of credit to the economy using several genres of facilities. By end 2014, Zenith Bank had about N1.61 trillion worth of loans outstanding with significant positions in the telecom sector as well as oil and gas. This meant an increase of about N458 billion in just one year.
But interestingly only 2% of the loans outstanding were classified as non-performing in line with the CBN prudential guideline. This impairment rate has been consistent with the preceding years. Only seven banks achieved this level of quality assets in 2014. This reflects disciplined approach to credit risk management, meaning that even as risk assets expanded massively with increasing complexity of management the bank did not compromise quality in pursuit of earnings.
In the competition for market leadership the level of capitalization has been recognized as very critical and of prime consideration. In 2014 Zenith Bank reported shareholders Fund of N513 billion, up from N473 billion in 2013. Figures available suggests that Zenith is the leader in the industry using absolute levels of capitalization. Analysts believe that the size of the Zenith Bank capitalization was a deliberate market leadership strategy which it had pursed for over a decade now, preparing it for challenges in the economy and the banking industry.
Relating the capital base to the risk adjusted asset portfolio reveals a relative Basel1 measure of 21% which came down from about 24% in 2013 following the growth in loan portfolio. This comes slightly lower at 20% under Basel11, ensuring that a sizeable 4% margin of safety existed on the regulatory minimum of 16% required for systemically important banks like Zenith.
The bank could afford to remain at current capital and grow risk assets substantially without compromising standards. But as we prepare to publish the 2015 analysis soon we are already seeing a strengthened position.