Zenith Bank Plc has reported a record net profit of N676.9 billion for last year, more than triple the preceding year’s bottom line.
This was driven by the Central Bank of Nigeria’s (CBN) monetary policy rate hike to 18.75%, which allowed lenders to charge more for loans. Interest and similar income contributed over half of the revenue, which rose to N2.1 trillion from N945.6 billion.
The CBN has raised the rate by 600 basis points in the first quarter, with more hikes expected as long as inflation remains high.
The bank provisioned N409.6 billion to cover sticky loans and advances that are unlikely to be repaid by borrowers. Net income on fees and commission was 17.7% lower due to a bulge in fees and commission expense, which rose 179.3% to N68.2 billion.
Zenith Bank is in the process of becoming a holding company, following its peers, such as Access Holdings, FBN Holdings, Guaranty Trust Holding Company, Stanbic IBTC Holdings, FCMB Group, and Sterling Financial Holdings Company, to branch out into other sectors within the financial industry and diversify risk.
The bank recorded a 166.5% increase in trading gains, which helped boost profits. Other operating income also accelerated to N242.6 billion from N35.5 billion, thanks to a higher foreign currency revaluation gain.
The weaker naira, following two rounds of devaluation that led to a 70% slide in 2023, was another significant win for lenders.
It means that income from foreign currency assets increased significantly after conversion to local currency, with Zenith Bank earning more than nine times the cash generated in foreign currency revaluation gain in 2022.
Profit before tax rose to N796 billion from N284.7 billion, while post-tax profit climbed to N676.9 billion from N223.9 billion a year earlier.
The bank earned N162.9 billion from currency translation differences for foreign operations compared to a loss of N28.8 billion a year ago. It generated other extraordinary incomes that took its total comprehensive income for the year to N1.1 trillion compared to the N196.7 billion recorded one year prior.
Lenders in Nigeria are not allowed to pay dividends from windfall income from foreign exchange gains. Zenith Bank and other rivals operating internationally are working to raise their minimum capital to N500 billion in the next 24 months, ten times higher than the current capital base, after the apex bank gave them the directive last month.
