Loan Losses Surge But Zenith Bank Multiplies Profit To N258bn In Q1

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Maintaining the earnings track of the preceding financial year, Zenith Bank Plc galloped over an upsurge in credit losses in the first quarter to multiply after-tax profit about four times to over N258 billion.

Loan impairment charges gained more speed upwardly in the first quarter after swelling by over 232 per cent to almost N410 billion in the 2023 full year.

The interim financial report of the bank for the first quarter ended March 2024 shows that the exceptional growth in earnings that paled the loan losses last year into insignificance is again going for it this year.

Unlike last year, however, the key revenue propelling force has changed from net foreign exchange gains to trading income.

Credit losses multiplied more than seven times from N7.7 billion in the same quarter of last year to roughly N56 billion at the end of the first quarter of 2024.

This is followed by the cost of funds, which jumped more than two and half times to stand at N182 billion at the end of the first quarter.

Between interest expenses and credit loss charges, as much as 54 per cent of the N296 billion net increase in interest earnings was consumed.

The good news for the bank is that interest income was robust enough, having expanded by two and a half times to N488.5 billion.

This has beaten the top record growth of 112 per cent that launched the bank to the N1-trillion mark in interest earnings last year.

Interest earnings provided more than sufficient room to absorb the rising cost of funds and loan loss expenses and still permitted an outstanding growth of 121.5 per cent in net interest income after loan impairment charges.

There is also good news in moderating the cost of funds and achieving a fair balance with growth in interest earnings.

The margin of increase in interest income and the cost is fairly at a balance of 155 per cent and 157 per cent respectively. This detracts from last year when the cost of funds grew well ahead of interest earnings at over 135 per cent against 112 per cent.

Trading income on financial assets – the bank’s revenue growth locomotive in the first quarter, multiplied more than six times from less than N34 billion to N210.7 billion over the review period.

Trading gains are upward for the second year after an outstanding increase of 167 per cent to N567 billion in the income line in 2023.

Added to that is the net fee and commission income, which grew by 69 per cent year-on-year to N57.7 billion.

With all-round high growth in income lines, Zenith Bank jerked up gross earnings two and half times to N780.6 billion at the end of the first quarter. This is accelerating growth in gross earnings from the unprecedented jump of 125.4 per cent to N2.1 trillion at the end of 2023.

Rising personnel and other operating expenses limited the cost savings from operating expenses – which grew by 104.5 per cent to N201.9 billion at the end of the first quarter. This is way off the moderated growth of 32 per cent in total operating cost to N449.5 billion for the 2023 full year.

However, with the much stronger growth in gross earnings, the operating cost margin dropped from 36.7 per cent in the same quarter last year to 25.9 per cent at the end of March 2024.

With more rapid revenue gains than cost increases, the net profit margin improved from 24.4 per cent in the same period in 2023 to 33.1 per cent at the end of the first quarter of the 2024 financial year.

Accelerated revenue with gains in profit margin elevated after-tax profit of Zenith Bank from N66 billion in the first quarter of last year to over N258 billion at the end of March 2024.

Zenith Bank earned N8.22 per share at the end of the first quarter operations, rising from N2.10 per share it earned in the same quarter last year.