Earnings Report

High Debt to Equity Ratio Hampering Zenith Price Despite Impressive Earnings

  • COY: Zenith Bank Plc    
  • Rating: Hold    
  • Current Market Price: N28.75
  • Fair Value: N41.35

 By: Jeariogbe Segun

Key Financial Tickers

  • The management of Zenith Bank Plc has reported a final cash dividend of N2.45k for the 2017 full year financial activities. This plus the previously paid interim cash dividend of N0.25k equates the total dividend paid for the year to N2.70.
  • Since the total amount earned per unit share is N5.67k, it implies that the payout ratio is 47.62%
  • Meanwhile, the said dividend is 8.71% of the current market price as at the released date.
  • Please note that the N5.67k earnings per share is 18.29% of the current market price, that is, earnings yield is 18.29%.
  • The qualification date for the dividend is Tuesday, 3rd April, 2018. This implies that shareholder register will be closed on 4th April, 2018.

Payment date for the dividend is 13th April, 2018 while the Annual General Meeting will be held at Sheu Musa Yar’Adua Centre, 1 Memorial Drive ( Opposite Sheraton Hotels & Towers), Abuja FCT on 13th April, 2018, take off time is 10 am.

Corporate Summary

Zenith Bank Plc (The Bank) is a Nigeria-based company, which is engaged in the provision of banking and other financial services to corporate and individual customers. The Bank’s segments include Corporate, Retail Banking and Pension Custodial services-Nigeria, which provides a range of banking and pension custodial services to a range of corporations, financial institutions, investment funds, governments and individuals, and Outside Nigeria Banking-Africa and Europe, which provide a range of banking services to a group of corporations, financial institutions, investment funds, governments and individuals outside Nigeria.

The segments cover banking operations in other parts of Africa (Ghana, Sierra Leone and The Gambia) and Europe (the United Kingdom). The Bank’s operations are primarily organized on the basis of its geographic areas, which are Nigeria, Rest of Africa and Europe. Its subsidiaries include Zenith Bank (Ghana) Limited and Zenith Bank (Sierra Leone) Limited.

Company’s Figures

Comparing the released statistics for the year ended 31st December, 2017 with the corresponding year-2016, the followings can be established;

  • Gross Earnings soared by 46.69% from N507.99 billion to N745.18 billion
  • Interest Income grew by 23.42% to N474.62 billion from 384.55 billion, while Interest Expense stood above comparable year by 50.05%
  • Profit before Tax and Profit after Tax respectively increased by 29.80% and 37.24% while Total Comprehensive income improved by marginal 8.40%.

Though, Zenith Bank’s beta value is below the industrial average, at 1.05, it means that its share price is theoretically more volatile than the market. Increasing investment risk in the shares of Zenith Bank is the very high Total Debt to Equity ratio. At 92.89%, the implication is that the bank’s debt had almost swallowed the equity holder’s position. This accounts for the huge difference between Zenith’s fair value and the current market price.

Profitability Ratios              

Compare to industrial pair’s profitability ratios; one can safely conclude that the bank ran a profitable business through 2017. Although some of the ratios reduces when compared to the previous year, when the harsh business environment within which it operate is put into consideration, the estimate should be commended.

Interest Expense to Gross Earnings inched above 2016’s by 2.29% from 28.42% to 29.07%. Both Profit before and after Tax Margin dropped against comparable year by 11.51% and 6.44% respectively. Return on Average Equity is acceptable at 21.66% from 18.40%.

Efficiency Ratios

Testing the management efficiency, we have tested five ratios all of which confirmed that the management of Zenith Bank has what it takes to move the business to the next level.

Gross Earnings for the year ended 31st December, 2017 is 13.32% of the Total Assets this is an improvement over the 10.72% of last year. Also, confirming the proper utilization of the equity, it was established that the Gross Earnings is 90.69% of the Equity (although this was supported by debt). The financial leverage is 6.81x, implying that the Total Assets can replicate the Equity in approximately seven (7) times. And finally, confirming the proper utilization of the Assets, Loan and Advances was compared to Total Assets, we rated this fair enough at 37.54%.

Investment Ratios/Dividend

Earnings per share (EPS) improved by 37.24% over corresponding year earnings from N4.13 to N5.67. The said earnings yielded 18.28% of the current market price while PE/ratio increased from 3.58x to 5.47x, as we speak, the Book Value per each units of Zenith Bank’s share is now N26.17. In summary, all investment ratios of the bank are attractive.

QoQ Comparison

Trying to establish the QoQ growth pattern of Zenith Bank performance, we have tested the growth in the released financials through 2017. Culled from the comparison, we can reliably concluded that the second quarter is always a bullish period for the bank, Meanwhile, the growth rate looks fairly stable through the remaining quarter of the year. See the below table for details.

 

Comment here

Earnings Report

High Debt to Equity Ratio Hampering Zenith Price Despite Impressive Earnings

  • COY: Zenith Bank Plc    
  • Rating: Hold    
  • Current Market Price: N28.75
  • Fair Value: N41.35

 By: Jeariogbe Segun

Key Financial Tickers

  • The management of Zenith Bank Plc has reported a final cash dividend of N2.45k for the 2017 full year financial activities. This plus the previously paid interim cash dividend of N0.25k equates the total dividend paid for the year to N2.70.
  • Since the total amount earned per unit share is N5.67k, it implies that the payout ratio is 47.62%
  • Meanwhile, the said dividend is 8.71% of the current market price as at the released date.
  • Please note that the N5.67k earnings per share is 18.29% of the current market price, that is, earnings yield is 18.29%.
  • The qualification date for the dividend is Tuesday, 3rd April, 2018. This implies that shareholder register will be closed on 4th April, 2018.

Payment date for the dividend is 13th April, 2018 while the Annual General Meeting will be held at Sheu Musa Yar’Adua Centre, 1 Memorial Drive ( Opposite Sheraton Hotels & Towers), Abuja FCT on 13th April, 2018, take off time is 10 am.

Corporate Summary

Zenith Bank Plc (The Bank) is a Nigeria-based company, which is engaged in the provision of banking and other financial services to corporate and individual customers. The Bank’s segments include Corporate, Retail Banking and Pension Custodial services-Nigeria, which provides a range of banking and pension custodial services to a range of corporations, financial institutions, investment funds, governments and individuals, and Outside Nigeria Banking-Africa and Europe, which provide a range of banking services to a group of corporations, financial institutions, investment funds, governments and individuals outside Nigeria.

The segments cover banking operations in other parts of Africa (Ghana, Sierra Leone and The Gambia) and Europe (the United Kingdom). The Bank’s operations are primarily organized on the basis of its geographic areas, which are Nigeria, Rest of Africa and Europe. Its subsidiaries include Zenith Bank (Ghana) Limited and Zenith Bank (Sierra Leone) Limited.

Company’s Figures

Comparing the released statistics for the year ended 31st December, 2017 with the corresponding year-2016, the followings can be established;

  • Gross Earnings soared by 46.69% from N507.99 billion to N745.18 billion
  • Interest Income grew by 23.42% to N474.62 billion from 384.55 billion, while Interest Expense stood above comparable year by 50.05%
  • Profit before Tax and Profit after Tax respectively increased by 29.80% and 37.24% while Total Comprehensive income improved by marginal 8.40%.

Though, Zenith Bank’s beta value is below the industrial average, at 1.05, it means that its share price is theoretically more volatile than the market. Increasing investment risk in the shares of Zenith Bank is the very high Total Debt to Equity ratio. At 92.89%, the implication is that the bank’s debt had almost swallowed the equity holder’s position. This accounts for the huge difference between Zenith’s fair value and the current market price.

Profitability Ratios              

Compare to industrial pair’s profitability ratios; one can safely conclude that the bank ran a profitable business through 2017. Although some of the ratios reduces when compared to the previous year, when the harsh business environment within which it operate is put into consideration, the estimate should be commended.

Interest Expense to Gross Earnings inched above 2016’s by 2.29% from 28.42% to 29.07%. Both Profit before and after Tax Margin dropped against comparable year by 11.51% and 6.44% respectively. Return on Average Equity is acceptable at 21.66% from 18.40%.

Efficiency Ratios

Testing the management efficiency, we have tested five ratios all of which confirmed that the management of Zenith Bank has what it takes to move the business to the next level.

Gross Earnings for the year ended 31st December, 2017 is 13.32% of the Total Assets this is an improvement over the 10.72% of last year. Also, confirming the proper utilization of the equity, it was established that the Gross Earnings is 90.69% of the Equity (although this was supported by debt). The financial leverage is 6.81x, implying that the Total Assets can replicate the Equity in approximately seven (7) times. And finally, confirming the proper utilization of the Assets, Loan and Advances was compared to Total Assets, we rated this fair enough at 37.54%.

Investment Ratios/Dividend

Earnings per share (EPS) improved by 37.24% over corresponding year earnings from N4.13 to N5.67. The said earnings yielded 18.28% of the current market price while PE/ratio increased from 3.58x to 5.47x, as we speak, the Book Value per each units of Zenith Bank’s share is now N26.17. In summary, all investment ratios of the bank are attractive.

QoQ Comparison

Trying to establish the QoQ growth pattern of Zenith Bank performance, we have tested the growth in the released financials through 2017. Culled from the comparison, we can reliably concluded that the second quarter is always a bullish period for the bank, Meanwhile, the growth rate looks fairly stable through the remaining quarter of the year. See the below table for details.

 

Comment here