) published its Q4 2017 results which showed that PBT and PAT both grew by 27% y/y and 24% y/y to N 51bn and N54bn respectively.
The stellar growth in PBT was driven by a 99% y/y growth in pre-provision profit. Although provision for loan losses and opex spiked by 388% y/y and 95% y/y respectively, the growth in pre-prevision profits completely offset the negative trends on both lines.
Moving up the P&L, although both revenue lines contributed to pre-provision profit growth, non-interest income which was up by a 251% y/y was the major driver. The remarkable performance of the non-interest income line was mainly due to a 934% y/y increase income from derivatives (fx swaps most likely) and a 242% y/y growth in trading income in 2017. Funding income grew by 12% y/y.
Sequentially, PBT and PAT declined by 16% q/q and 4% q/q respectively. Compared with our forecast, PBT was silghtly ahead (+4.7%). However, PAT beat by 51% because we had modelled a higher effective tax rate of 26.5% in Q4 2017 compared with the 4.3% tax rate reported by the company.
On a full year basis, PBT and PAT grew by 30% y/y and 8% y/y respectively. The management of ZENITHBANK
has proposed a final dividend of N2.45 per share which is higher than our N1.77 forecast and implies a yield of 7.9%.
Despite the marked rise in provisions, analysts at FBN Quest in Ikoyi expect the broad positives in the results to be paid some attention, mainly the better-than expected non-interest income line.
In addition, a N35bn specific impairment taken on a gross loan portfolio of N95bn for the Communications category appears sufficient to us as far as Zenith’s 9mobile exposure is concerned. Going forward, the key themes for the banks in 2018 will be the implementation of IFRS 9 and the potential implications for cost-of-risk and CAR.
Although analysts's at FBN Quest in Ikoyi expect a slight uptick in cost-of-risk, they believe that the impact will be modest for tier 1 banks like Zenith. Following the tightening of yields on government securities, we would like to see banks guiding to stronger loan growth for 2018 to compensate.
Given the strength of these results, analysts at FBN Quest in Ikoyi expect to see upward revisions to consensus estimates and a positive reaction from the market.
reporting for easykobo.com on Monday, March 12 2018 from Lagos, Nigeria
Source - analysts at FBN Quest in Ikoyi through their publication "FIRST REACTION".
Note - All opinions, targets, forecasts and views expressed in the above article are of analysts at FBN Quest in Ikoyi. Easykobo does not endorse or oppose any views/targets expressed in this article