By Peter Egwuatu
Zenith Bank Plc, yesterday, broke the silence in banks’ full year 2017 (FY’17) financial results announcing a jumbo profit, while ending a three-week waiting game in the sub-sector and apprehension in the stock market. Zenith’s results also beat some analysts’ forecast significantly in key performance parameters.
Analysts at Cardinal Stone Partners, a Lagos based investment house stated: “Gross earnings rose by 46.7% YoY (year-on-year) to N745.2 billion, beating our estimate of N689.6 billion (+8.1% deviation). “Surprisingly, after tax earnings rose by 37.2% to N177.9 billion, outperforming our estimate and consensus estimate of N157.9 billion (+9.3% deviation) and N159.52 billion (+11.5% deviation) respectively.
“Fourth quarter, Q4’17 revenue came in surprisingly stronger than anticipated as non-interest revenue doubled, rising by 97 percent, quarter-on-quarter, QoQ, to N101.1 billion.” Interest income also advanced by 13.4 percent QoQ despite the moderation in interest rate levels during the period.
Cardinal Stone analysts said the surge in non-interest income was predominantly driven by huge trading gains (+445.2% YoY and +345.4% QoQ) from the bank’s derivative (+243.7% YoY) and Treasury bill portfolios (+928% YoY). Overall, the bank reported a total of N158.04 billion in trading gains in FY’17 (+21.2% of total revenue) compared to N28.4 billion (+5.8% of total revenue) in FY’16. Further commenting on the result, the analysts stated: “We believe the huge trading gains reported in Q4’17 is most likely as a result of mark-to-market gains on its Treasury bill portfolio which reflects the capital gains impact of the declining interest rate environment.”
“Impairment charges however surprised us negatively as the bank reported a jump of 998.4% QoQ in provisions in Q4’17. While we await further clarity on what drove impairments from management, we suspect that the bank made full provisions for its Etisalat exposure, an estimated balance of N50 billion.” However, analysts at Cordros Capital, another Lagos based investment house, said the result overshot of its estimates, on the negative perspectives. They stated: “The Operating expenses was 29.99 percent higher than the previous year at N226.86 billion, and 3.50% higher than Cordros Capital estimate of N219.20 billion.
Other highlights of the result showed that Interest income up by 23.42 percent to N474.63 billion fromv 240.2 billion, thus lagging Cordros Capital analysts’ estimates marginally by 1.59 percent.”