Zenith Bank's pre-tax profit rose 2%. Its bad-loan charge fell by ₦621bn.
Before that charge, profit fell 44%. Trading swung from a ₦467.8bn gain to a ₦92.2bn loss, interest income fell 9%, and the tax bill more than doubled, so profit after tax fell 19%. The board still raised its interim dividend to ₦1.50.
| Gross earnings | ₦1.90trn |
| Profit after tax | ₦430.8bn |
| Impairment charge | ₦141.1bn |
Five things you need to know
- Pre-tax profit rose 2% to ₦637.6bn, but profit after tax fell 19% to ₦430.8bn.
- The charge for loans that may not be repaid fell 81%, from ₦762.1bn to ₦141.1bn. Before that charge, pre-tax profit fell 44%.
- Trading swung from a ₦467.8bn gain to a ₦92.2bn loss, a turn of ₦560.0bn.
- The tax bill more than doubled to ₦206.8bn, an effective rate of 32.4% against 14.9%.
- The board proposed an interim dividend of ₦1.50 a share, up from ₦1.25, which comes to about ₦61.6bn.
What moved pre-tax profit between the two half years
Add the six bars and you get the ₦12.0bn by which pre-tax profit rose, from ₦625.6bn to ₦637.6bn. Two items did almost all of the moving, and they almost cancelled.
Derived from the statement of profit or loss, page 31 of the filing. Gains are gold; reductions are blue. Bars are scaled to the largest.
So did Zenith do well?
In the parts that make a bank a bank, yes. Customers' deposits rose 8.3% in six months to ₦26.35trn. Loans rose 15.3% to ₦12.05trn, and total assets reached ₦32.65trn. Fee income grew 39.6% to ₦178.8bn.
The weaker part is what the bank earns from lending. Interest income fell 8.9% to ₦1.68trn. Interest paid out fell faster, down 12.9% to ₦421.8bn, but not by enough: still fell 7.4% to ₦1.25trn.
If profit was nearly flat, where did the hole in income go?
Two places. Trading was a ₦92.2bn loss, against a ₦467.8bn gain a year earlier. And the bank set aside far less for bad loans. That second one saved it.
Banks set aside money today for loans they expect some borrowers will not repay. This is called an . Zenith's fell from ₦762.1bn to ₦141.1bn, a drop of ₦620.9bn. That is 7.4% of the bank's gross earnings, against 30.2% a year earlier.
Pre-tax profit went from ₦625.6bn to ₦637.6bn, up 2%.
Add the bad-loan charge back to each year and the figures are ₦778.7bn and ₦1.39trn. That is down 44%.
The bank's profit before it provides for bad loans fell 44%. The smaller charge filled the gap. Had the charge stayed at last year's level, other things equal, pre-tax profit would have been about ₦0.6trn lower.
That does not mean the charge is wrong. A bank that provided heavily last year may need to provide less this year. But a smaller charge cannot be repeated forever, and the pages of the filing we could read give no reason for the fall. The ratio of bad loans to total loans, which would show whether the loan book is getting safer, is in the notes.
Rainingmoney's reading. The filing publishes the charge but, in the pages we could read, gives no explanation for its fall.
Where did every ₦100 of income actually go?
Derived from the statement of profit or loss, page 31. "Income" here means interest income, net fees, trading and other operating income, which came to ₦1.83trn, with the trading loss netted off. It is not the ₦1.90trn "gross earnings" the bank headlines, whose make-up the face statements don't show. Bars are scaled to ₦25. ₦0.01 is lost to rounding.
What changed since last year?
The tax bill more than doubled
Tax went from ₦93.4bn to ₦206.8bn, up 121%, on pre-tax profit that rose 2%. The effective rate went from 14.9% to 32.4%. In the pages we could read the filing gives no explanation, and the tax note is not among them.
The costs of running the bank grew while income fell
Staff costs rose 2.9% to ₦138.5bn. Operating expenses rose 9.7% to ₦451.3bn. Depreciation and amortisation rose 23.6% to ₦44.0bn. Together, costs rose 9.0% to ₦633.8bn. Of every ₦100 left after paying interest, costs took ₦44.87, against ₦29.55 a year earlier. This is derived, and it leaves out the bad-loan charge.
The borrowing nearly vanished
Borrowings were ₦651.2bn in December. At 30 June they were ₦11.1bn. Interest paid on long-term borrowing fell from ₦231.0bn to ₦42.0bn. The cash flow statement also shows ₦6.25trn borrowed and ₦6.84trn repaid inside the half, so the facilities were rolled many times over. The filing's pages we could read do not say what they were.
What caught our attention
Trading: a ₦92.2bn loss, against a ₦467.8bn gain a year earlier.
That turn of ₦560.0bn is almost as large as the whole fall in the bad-loan charge, in the other direction.
The cash flow statement adds back ₦95.0bn as an unrealised change in the value of trading bonds, bills and derivatives. That is about the size of the entire trading loss. It suggests most of the loss is a fall in the paper value of holdings the bank still has, not money that left. A year earlier the same line ran the other way, at ₦177.7bn.
Separately, the same statement removes ₦404.5bn as a "foreign exchange revaluation gain", against ₦167.1bn a year earlier. That is equal to 63% of pre-tax profit. Because the statement starts from pre-tax profit and takes it out, that implies the gain sits inside reported profit, though possibly net of currency losses elsewhere. The face of the income statement does not show which line holds it. The note that would is not among the pages we could read.
Rainingmoney's reading. The filing discloses the trading loss and the reconciling items but gives no commentary on either.
Two other things are worth knowing. First, equity barely moved: down 0.8% to ₦4.89trn. The bank made ₦430.8bn, but other comprehensive income was a loss of ₦109.2bn, including a ₦92.8bn fall from translating its foreign subsidiaries, and the bank paid ₦359.4bn in dividends in the half, or ₦8.75 a share (derived).
Second, the new dividend. The board proposed ₦1.50 a share for the half, up 20% from ₦1.25. On 41.07bn shares that is about ₦61.6bn, or about 14% of the half's profit attributable to shareholders (derived). It is subject to ratification at the next annual general meeting, and the filing text we could read does not give the qualification or payment dates. The bank also completed the purchase of 100% of Paramount Bank (Kenya) Limited and started operations in Côte d'Ivoire. The Kenya deal produced a ₦2.29bn gain on bargain purchase, which sits in profit.
The Scorecard
Each label comes from a fixed rule applied the same way to every company we cover. Strong means the measure improved materially against the same period last year. Steady means it held. Watch means it moved against shareholders, or moved without explanation. We publish no single score out of 100, because these categories don't trade off against each other in any honest way.
Did you follow all that?
Pre-tax profit rose 2%. Why did profit after tax fall 19%?
Because the tax charge more than doubled, from ₦93.4bn to ₦206.8bn. Tax took 32.4% of pre-tax profit, against 14.9% a year earlier, so far less was left for shareholders even though profit before tax was slightly higher.
Why does a smaller bad-loan charge make such a difference to profit?
Because the charge is an expense, and it is deducted from profit straight away. It fell by ₦620.9bn. Without that fall, pre-tax profit would have been about ₦0.6trn lower. Before the charge, profit fell 44%.
The cash flow statement shows ₦1.55trn used in operations. Is that a bad sign?
Not by itself. For a bank, lending counts as an operating use of cash. Loans grew by ₦1.64trn and the bank bought ₦1.32trn net of treasury bills. That is money put to work, not money lost. The same statement shows customers' deposits growing by ₦1.92trn.
The Bottom Line
Zenith did not have a bad half. Deposits grew, lending grew, the bank cleared nearly all its borrowings, and the board raised the dividend.
But the profit held up because the bank set aside ₦621bn less for bad loans. Before that charge, profit fell 44%, as trading flipped to a loss and the tax bill doubled. The next filings will show whether the bad-loan charge stays low, and whether the tax rate settles.
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