BusinessHow Zenith Bank Plc Built N20.36trn Balance Sheet in 2023 - Set...

How Zenith Bank Plc Built N20.36trn Balance Sheet in 2023 – Set For Holding Structure

April 14, (THEWILL)- Zenith Bank Plc, Nigeria’s most capitalised financial services institution (N1.3 trillion), took a huge advantage of its industry leadership to build a historic balance sheet of N20.36 trillion in 2023. The quantum leap in the group’s balance sheet expansion constitutes a 65.8 percent rise against the N12.28 trillion in the preceding year.

According to its audited financial report for the FY ended December 2023 filed with the Nigerian Exchange (NGX) last week, the group grew asset base by N8.08 trillion – the highest growth rate (65.8 percent) in a space of one year, based on data from its previous annual reports.

The impressive performance underscores the group’s transition to a holding structure which is work-in-progress and could be actualised in the coming days, according to analysts and documents seen by THEWILL.

Glo

“Zenith Bank is at the verge of emerging a holdco organisation in the nearest future. Its impressive 2023 performance offers a strong ground to actualise this goal and, also, enables the group to meet the new N500 billion recapitalisation requirements of the Central Bank of Nigeria (CBN) for banks with international spread like Zenith Bank,” said Sunday Buraimoh, a finance expert.

The strong asset base recorded by the group in 2023 accrued from various earnings channels that recorded significant growth, thus boosting the group’s profits during the period.

Leading the massive growth in revenue is gross earnings of N2.13 trillion. This represents a growth of 125.4 percent year-on-year and is the highest gross earnings ever reported in the group’s history.

The bank also reported a net interest income of N736.18 billion, more than double what was reported in the previous year. Profit before tax rose to N795.96 billion, against N284.65 billion in 2022, constituting a 179.6 percent increase, while profit after tax rose by 202 percent to N679.9 billion against N223.91 billion, setting another significant record for the group.

Data from the financial report further revealed that the group accrued an FX revaluation gain of N228.98 billion, marking a substantial appreciation of 808.6 percent from the N25.2 billion gain that accrued in 2022.

The bank has not seen special interest income grow anything close to that record in its many years of trading. THEWILL reports that the CBN had directed banks not to pay dividends from the windfall but to ‘quarantine’ the forex revaluation gains for the rainy day.

Additionally, the group grossed handsome revenues from net income on fees and commission which yielded N109.31 billion; while trading gains pooled N566.97 billion, representing a 166.6 percent increase – all year-on-year.

A significant contributor to fees and commission income for Zenith Bank during the fiscal year was electronic product fees, which amounted to N51.8 billion, marking a 13.3 percent increase from the N45.7 billion posted in 2022.

Interest on loans and advanes reflected the expansion in loan book as the bank earned a whopping N671.72 billion compared to N320.48 billion harnessed from interest on the facilities during the preceding period.

On the same growth trajectory, fees from electronic products rose from N45.73 billion in 2022 to N51,81 billion.

However, the bank paid more on (human capital) outsourcing which climbed to N24.87 billion during the review period, from N14.75 billion in the previous year, a significant increase of 68.6 percent.

The pangs of high cost of operation impacted on fuel and maintenance cost during the year as the bank paid N41.7 billion compared to N27.64 billion in the previous year on this expenditure head, representing an increase of 50.8 percent.

In 2023, the group’s capital adequacy ratio climbed to 22 percent, up from 20 percent in 2022.

The buoyant group recorded earnings per share of N21.55 compared to N7.14 in the previous year, a 201.8 percent growth; while it expanded its loan book (Loans and Advances to customers) to N6.57 trillion against N4.01 trillion, or a 63.4 percent growth.

During the review period, total shareholders’ equity climbed by a 68.5 percent to N2.32 trillion as against N1.37 trillion, while retained earnings: hit N1.17 trillion against N625 billion in the preceding year representing a growth of 8.7 percent.

The company has proposed final dividend of N3.50 per share bringing the total for the year to N4 per share.

To make adequate accommodation for the regulatory threshold of 65 percent loan-to-deposit ratio, the bank allocated a substantial provision of about N409.6 billion which led to a significant reduction in its net interest income.

This could be to play safe in accommodating the stringent CBN regulations that forbid the banks from utilising their huge retained earnings for dividend payments. This came on the heels of the regulator’s recent directive to banks to exclude retained earnings from the calculation of their share capital.

THEWILL reports that Zenith Bank Plc recently emerged as the Best Bank in Nigeria in the Global Finance Best Banks Awards 2024, winning the award for the fourth time since 2019. The Bank was among other banks from 36 countries in Africa recognised as the prestigious Global Finance announced its 31st Annual Best Bank Awards Winners.

According to the bank, the editors of Global Finance made the selections after extensive consultations with corporate financial executives, bankers and banking consultants, and analysts worldwide. Factors considered in selecting the top banks ranged from the quantitative objective to the informed subjective. Objective criteria considered included: growth in assets, profitability, geographic reach, strategic relationships, new business development and innovation in products. Subjective criteria included the opinions of equity analysts, credit rating analysts, banking consultants and others involved in the industry.

Commenting on the award, the outgoing Group Managing Director/Chief Executive of Zenith Bank, Dr. Ebenezer Onyeagwu said: “This award serves as a powerful affirmation of our resilience and tenacity despite headwinds and a very challenging macroeconomic environment. Indeed, it is a testament to our status as the leading financial institution in Nigeria, dedicated unwaveringly to delivering exceptional value to our stakeholders”.

He expressed profound gratitude to the founder and chairman, Jim Ovia, CFR, for his exceptional vision and foundational role in establishing a resilient and enduring financial institution. He also lauded the board for their astute insights and exemplary leadership, the staff for their steadfast commitment and unwavering dedication, and the customers for their staunch loyalty to the Zenith brand.

About the Author

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Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.

Sam Diala, THEWILLhttps://thewillnews.com
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.

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