Coy: ZENITH BANK PLC. (ZENITHBANK)
Rating: Buy
Current Market Price: N26.05
Year High: N28.50
Year Low: N10.70
Fair Value: N35.86
By: Jeariogbe Tunde Segun (Equity Analyst)
Introduction
- This report viewed the nine months financial performance indices of Zenith Bank Plc for the period ended 30th September, 2020, compare same with similar result in 2019 to establish growth
- In our attempt to match valuation with economic growth expectations, we have mildly re-valued Zenith Bank share price up from our previous Valuation, this, in our opinion is conservative enough and revealed the true stand of the economic state.
- See below for further analysis
ZENITH INT’L PLC | |
Bourse | Nigerian Stock Exchange |
Code Name | ZENITHBANK |
Sector | FINANCIAL SERVICES |
Market Classification | PREMIUM BOARD |
Nature of Business | Commercial Banking |
Date of Incorporation | May 30th 1990 |
Date Listed | October 21st 2004 |
End of Accounting Year | 31st December |
Website | www.zenithbank.com |
Registrar | VERITAS REGISTRARS LIMITED |
Auditor | PRICEWATERHOUSECOOPERS |
Share Price@Relsd (N) | 26.05 |
Earnings per Share | 5.07 |
Intrinsic Value(N) | 35.86 |
Share Outstanding | 31,396,493,786 |
Market Capitalisation | 817,878,663,125 |
Company figures
- Gross Earnings posted for the third quarter business activities was N508.97 billion, same as 3.60% improvement above the N491.26 billion achieved at the end of 2019 third quarter
- Interest Income inched south by 0.97% from the previously reported N321.93 billion to N318.82 billion
- On the other hand, Interest Expense stood at 12.74% below the comparable period at the current N93.64 billion versus N107.31 billion in the corresponding quarter
- Net Interest Income was estimated at N225.17 billion, 4.92% above the N214.62 billion achieved at the end of the first nine months of 2019
- Operating Expenses marginally builds up by 9.65% to N175.18 billion against N159.47 billion in 2019 third quarter
- Profit before Tax was estimated at N177.28 billion, this is only 0.62% improvement over 2019 nine months estimate
- Having made allowance for Tax Expenses, the Profit reported for the period stood above corresponding quarter’s profit by 5.70% as it stood at N159.31 billion as against N150.72 billion
ZENITH INT’L PLC | |||
Statement of Comprehensive Income | |||
2020(Mill) | 2019(Mill) | %CHG | |
GROSS EARNINGS | 508,975 | 491,268 | 3.60 |
INTEREST INCOME | 318,820 | 321,938 | -0.97 |
INTEREST EXPENSES | 93,641 | 107,311 | -12.74 |
NET INTEREST INCOME | 225,179 | 214,627 | 4.92 |
OPEX | 175,168 | 159,747 | 9.65 |
DEPRECIATION | 18,733 | 14,907 | 25.67 |
AMORTISATION | 2,375 | 2,287 | 3.85 |
PBT | 177,283 | 176,183 | 0.62 |
TAX | 17,968 | 25,460 | -29.43 |
PAT | 159,315 | 150,723 | 5.70 |
TOTAL COMP INCOME | 180,365 | 144,682 | 24.66 |
Statement of Financial Position | |||
Total Assets | 7,973,265 | 5,978,444 | 33.37 |
Total Liabilities | 6,938,924 | 5,106,543 | 35.88 |
Net Assets | 1,034,341 | 871,901 | 18.63 |
Property Plan & Equipment | 186,680 | 176,182 | 5.96 |
Retained Earnings | 459,318 | 362,330 | 26.77 |
Total Deposits | 5,224,564 | 3,951,829 | 32.21 |
Total Loans and Advances | 3,521,667 | 2,043,012 | 72.38 |
- Total Assets grew by 33.37% over the 2019 nine months asset valuation. The financial institution assets is now valued at N7.97 trillion up from the N5.97 trillion in the corresponding quarter
- Total Liabilities also grew by 35.88% to stand at N6.93 trillion against N5.10 trillion in the similar period of 2019
- Net Assets is currently valued at N1.03 trillion same as 18.63% above the previous estimate of N871.90 billion
- Retained Earnings improved by 26.77% from the previous estimate of N362.33 billion to N459.31 billion
- Total Deposits equally appreciated to N5.22 trillion, a 32.21% growth over the N3.95 trillion achieved at the end of 2019 third quarter business session
- Total Loan and Advances for the period grew by 72.38% to stand at N3.52 trillion versus N2.04 trillion
Financial Strength/Solvency Ratios
- Debt Ratio was stable through the two compared periods inching from 85.42% to 87.03%, signifying a controlled assets ratio through the period
- Total Debt used through the period will replicate Equity 6.71 times, as against the 5.86 times replicate estimated last quarter
- Similarly Equity Ratio dipped by 11.05% to stand at the current estimate of 12.97% as against the previously estimate 14.58% in the corresponding quarter
- We have currently estimated a Beta value above the market Beta for Zenith Bank Plc shares. Please note that at 1.10 beta value, it’s only slightly below the industrial average of 1.11.
Financial Strength/Solvency Ratio | |||
TICKERS | 2020 | 2019 | %CHG |
Debt Ratio | 87.03% | 85.42% | 1.89 |
Total Debt to Equity Ratio (MRQ) | 6.71 | 5.86 | 14.54 |
Equity Ratio | 12.97% | 14.58% | -11.05 |
Beta Value | 1.10 | 1.11 | -54.95 |
Profitability Ratios
- Pre-Tax Margin stood at 34.83% a marginal drop of 2.88% from the last estimate of 35.86% at the end of 2019 third quarter
- Interest Expense figure posted for the period is same as 18.40% of the Estimated Gross Earnings figure; this is a reduced position against the previously estimated 21.84%
- Return Achieved on Average Equity used through the period was estimated at 15.40% this is below the 17.29% return achieved in 2019
- See below table for detailed profitability ratios and comparison
PROFITABILITY RATIOS | |||
TICKERS | 2020 | 2019 | %CHG |
PRE-TAX MARGIN | 34.83% | 35.86% | -2.88 |
EFFECTIVE TAX RATE | 10.14% | 14.45% | -29.86 |
IE TO GE | 18.40% | 21.84% | -15.77 |
ROAE | 15.40% | 17.29% | -10.90 |
ROAA | 2.00% | 2.52% | -20.74 |
Efficiency Ratios
- Operating Expenses is estimated to be 34.42% of the Gross Earnings Value estimated for the period, this is a marginal growth from the 32.52% estimated from 2019 financial statistics
- Similarly, Gross Earnings was estimated to be 6.38% of Total Assets, this is 22.32% drop in efficiency when compared to estimate from the corresponding period
- Total Loan to Deposit Ratio achieved at the end of the quarter stood at 67.41% up from the 51.70% achieved in corresponding quarter
EFFICIENCY RATIOS | |||
TICKERS | 2020 | 2019 | |
OPEX TO GE | 34.42% | 32.52% | 5.84 |
GE TO TA | 6.38% | 8.22% | -22.32 |
LDR | 67.41% | 51.70% | 30.38 |
Investment/Valuation Ratios
- Profit made on each units of Zenith Bank shares at the end of the quarter had been estimated at N5.07 as against the previously estimated N4.80
- Total Comprehensive Income per unit shares is estimated for N5.74 versus N4.61 in the comparable period
- Our adjusted Price to Earnings Ratio adjusted for nine months stood at 1.71x as against 1.18x in 2019
- The said earnings per share is same as 19.48% of the current market price of Zenith Bank Plc shares on the floor of the exchange when the result was released; this is a better yield when compared to the previous third quarter estimate
- The current Book Value of Zenith Bank is N32.94, a 18.63% improvement from the N27.77 estimated last year
- Confirming a seemingly under-priced position is the Price to Book Value ratio that stood clearly below unity
ZENITH INT’L PLC | |||
Investment/Valuation Ratios | |||
Tickers | 2020 | 2019 | %Chg |
EPS | 5.07 | 4.80 | 5.70 |
TCIP/SHARE | 5.74 | 4.61 | 24.66 |
P/E-Ratio | 1.71 | 1.18 | 44.97 |
Earnings Yield | 19.48% | 28.24% | -31.02 |
BV/Share | 32.94 | 27.77 | 18.63 |
PBV | 0.79 | 0.61 | 29.17 |
LDR | 67.41% | 51.70% | 30.38 |
Valuation
As noted in our intro above, we fairly adjusted our fair value for each unit of Zenith Bank Plc’s shares to N35.86. Considering the distant between the current market price of the equity on the floor of the exchange and our achieved fair value, we rated it a Buy.
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