By Edu Abade
Zenith Bank Plc’s profit before tax (PBT) rose by 107.5 percent, while profit after tax (PAT) grew from N291.7 billion to N578 billion in the first half of 2024.
The First Tier financial institution proposed N31.4 billion in total interim dividend to shareholders, amounting to double of the cash it paid to shareholders in the corresponding period of last year, which translates to N1 per share.
Its audited financial records show that Zenith Bank also reported roughly twice the net profit it earned in the first half of 2023 in the same period this year, helped by sharp increases in lending rate introduced by the Central Bank of Nigeria (CBN) earlier in the year in its push to reduce inflation.
Interest and similar income of Nigeria’s second-largest lender by market value raced by 176.7 per cent to N1.1 trillion, and alone accounted for above half of the revenue generated within the period.
It was learnt that even after interest expense was deducted from the total sum, what remained was a great deal for the bank as net interest income stood at N715.1billion, compared to N261.9billion last year.
Nigeria’s monetary authorities have aggressively raised borrowing costs so far this year, increasing them by 800 basis points in one of its longest rounds of rate tightening on record in the hope of tempering the inflationary pressures that have fuelled a cost-of-living crisis in Africa’s most populous country.
Zenith Bank’s provision for impairment of financial and non-financial instruments for the period rose almost twofold to N415.3 billion, driven by a surge in the cash it set aside to clear delinquent loans that are not likely to be written off.
The overall impaired loans of the bank constituted 8.4 per cent of its total loans compared to 7.1 per cent at the end of last year. One major driver of growth was trading gains, which grew to N795.6 billion from N103 billion on the back of increase in the value of its financial instruments.
Foreign exchange revaluation gain, which boosted the bank’s revenue and that other banks in the country by a great measure last year only saw a tepid increase, as it rose marginally by 3.3 per cent.
Depreciation of the Naira by about 70 per cent between June 2023 and the beginning of 2024 triggered a spike in the exchange rate of the Dollar and Naira, consequently creating opportunities for banks with investments in foreign currency assets to earn big after converting such securities into naira.
The heavy income banks are reaping from that stroke of luck has become a subject of contention between them and the government, causing the latter to introduce a windfall tax on such revenues.
In July, President Bola Ahmed Tinubu sent a bill to the Senate, asking legislators to approve a one-off tax of 50 percent on banks’ foreign exchange revaluation gains.
The parliament, which wanted the government to take the bigger slice of the pie, endorsed a 70 percent cut interest, a move ratings agencies and financial consultancies say could strain banks’ finances.
