By Babajide Komolafe
The Nigerian banking industry is intensely competitive with new banks entering the fray while existing ones continuously deploy strategies to increase market share and profitability.
But, in spite of this fierce competition worsened last year by the severe impact of the COVID-19 pandemic, Zenith Bank Plc posted impressive performance in its full-year 2020 and first quarter 2021 while ensuring the highest Tier-1 Capital of $2.64 billion.
This led to its ranking for the third consecutive year as the Number One Bank in Nigeria by Tier-1 Capital by The Banker Magazine.
The ranking, which was announced by The Banker Magazine in its 2021 Top 1000 World Banks Ranking, among other things demonstrates the leadership quality of Ebenezer Onyeagwu, as Managing Director/Chief Executive Officer of the bank.
Since his appointment two years ago, Onyeagwu has ensured that Zenith Bank remains committed to sustaining the legacy of its visionary Founder and Chairman, Mr. Jim Ovia, whose pioneering and foundational role in building the structures and laying the foundation ensured an enduring and very successful institution.
The leadership position of Zenith Bank is also confirmed by the latest banking report released by Coronation Merchant Bank. According to the report, Zenith Bank’s track record in the last five years has been impressive based on key parameters such as asset quality, profitability and return to investors.
“The bank is a clear market leader, growing its Total Assets and Net Income by an annual average of 15.7% and 15.5%, respectively, over the last five years. Over the last five years, ZENITHBANK is the only bank among its peers that has kept its NPL ratio below the statutory limit of 5.0% (FY20: 4.3%) consistently.”, the report stated.
This impressive growth is driven by sound corporate governance, which is a vital ingredient in ensuring the sustainability of any institution. The commitment of the Zenith Bank to sound corporate governance under Onyeagwu is reflected in the recent assessment by the Nigerian Exchange Limited (NGX) which led to its listing on the Premium Board of the Exchange.
In addition to sound corporate governance practices, Zenith Bank under Onyeagwu continues to place a premium on its core business strategy anchored on people, technology and service, to create value for its numerous clientele. With a team of dedicated professionals, the bank leverages its robust Information and Communication Technology (ICT) infrastructure to provide cutting-edge solutions and products through its network of branches and electronic/digital channels.
Thus it was not surprising that Zenith Bank retained its ranking as the number one tier-1 bank in Nigeria for the third consecutive year and the only Nigerian bank in the top 500 global banks.
The ranking which was published in the July 2021 edition of the magazine was based on the 2020 year-end tier-1 capital of banks globally.
Speaking on the ranking, Onyeagwu, said it was a demonstration of the bank’s resilience and doggedness as an institution given the very challenging macroeconomic environment brought about by the COVID-19 pandemic, which had a significant deleterious impact on businesses globally.
He said it was also an affirmation of Zenith Bank’s commitment to delighting and creating value for our customers through a broad range of superior product offerings, best-in-class service and top-of-the-range technology.
He thanked the bank’s customers for making Zenith Bank their choice.
This award was the latest amongst many awards and recognitions that the bank has received in recent times for its track record of excellent performance and commitment to global best practices.
For instance, Zenith Bank under Onyeagwu’s leadership had also been voted as Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards 2020; Best Bank in Nigeria in the Global Finance World’s Best Banks Awards 2020 and 2021; and Best Corporate Governance ‘Financial Services’ Africa 2020 and 2021 by the Ethical Boardroom.
Zenith Bank’s resilience is further reflected in its recently announced unaudited results for the first quarter ended 31st March 2021. The result among other things showed that profit after tax (PAT) rose to N53.1 billion, from N50.5 billion recorded in March 2020.
According to the bank’s unaudited statement of account for the first quarter of 2021, the Group’s profit before tax also grew from N58.8 billion to N61 billion in the same period.
The profitability was driven by the optimisation of the cost of funds and improvement in non-interest income.
In addition, the bank’s cost of funds reduced significantly from 2.6 per cent in March 2020, to 1.1 per cent in March 2021. This also reflected in interest expense which dropped by 45 per cent from N32.8 billion to N18 billion over the same period.
Also, in its audited results for the full year ended December 31, 2020, it recorded significant earnings’ growth. For instance, the bank’s net interest stood at N299.682 billion, up from N267.031 billion in 2019, while net fee and commission income was N79.332 billion as against N100.106 billion in 2019. Its profit before tax grew from N243.294 billion to N255.861 billion, just as profit after tax (PAT) rose by 10.4 per cent to N230.565 billion from N208.843 billion in 2019.
Loans and advances improved from N2.306 trillion to N2.779 trillion, while customers’ deposits rose from N4.262 trillion to N5.339 trillion. Total assets rose from N6.347 trillion to N8.481 trillion in 2020.
In this regard, Onyeagwu assured investors and stakeholders that the Zenith Bank will continue to accelerate its retail and digital banking initiatives in order to sustain its positive performance.
He also stressed that even though the tier-1 bank has over the years grown organically, it might go into a business combination deal whenever it sees value.
Providing insights into the bank’s 2020 financial results, he explained that Zenith is the biggest bank in the country and given its size, it is important to maintain a certain optimal level of cash balances to meet the transactions and the needs of its customers.
“Again, you need to understand that the cash balance you see today is not what you will see tomorrow. You may end with N55 billion at the reporting time and you move in the next day, that balance may come down to N20 billion or even N10 billion, depending on the transaction flow.
“So, essentially, as a big bank, with our asset size and huge liquidity position, we need to keep a level of cash holding to meet our daily needs.”
Responding to a question on the likely drivers of the bank’s operating expenses, Onyeagwu said it was a combination of so many things.
Onyeagwu explained that a combination of many factors were behind the increase in the bank’s operating expenses, including regulatory cost and increased spending on its digital banking programme.
He said: “Of course, we are scaling up in terms of our cyber-security initiative because as we continue to grow in our digital expansion programme.
“It is also important that we make adequate provision to deal with the downside effect of implementing a digital banking regime, which has also seen a rising case of cybercrime.
“So, we are also scaling our investment in terms of what we have, to contend with the ever-increasing risks we see in the environment. That in a nutshell explains the rise in our digital banking initiative.
“When you are looking at the cost of doing business, you also need to look at it in total, how businesses are being conducted. If I set up a branch today, I would need to provide my infrastructure, I need to provide power, water and in some cases we even construct roads to provide access to the branch location.
“We also have things like regulatory costs. A bank like Zenith, given our size, the burden of regulatory cost on us is heavy. By regulatory cost here, I am referring to the NDIC premium and AMCON charge.
“So, because of our size, if you look at the numbers, you will see that this regulatory cost accounts for a whopping 28 per cent of our overhead. So, all of them come together to add to the cost of doing business for us as a banking institution in the country,” he added.
Responding to a question on the bank’s acquisition plan, Onyeagwu said: “First is to say that Zenith Bank has grown organically, we are disciplined, we are focused and we look for where to extract value.
“However, we would not do a deal or a corporate action just for the sake of doing it. If we find a deal that fits into our profile, of course we would do a deal. It has to be something that fits into our profile.
“Until we find such, we will continue to grow organically. We are already in Ghana, we are in Sierra Leone, Gambia, UK and by no means is not to say that we cannot expand beyond this location. It depends on what we see as events continue to unfold.”