Zenith Bank Plc · NSENG:ZENITHBANK
Zenith Bank — H1 2017 Earnings Presentation
33 slides from Zenith Bank's earnings presentation, June 2017
Slide 1: H1 2017 Group Results
H1 2017 Group Results Presentation to Investors & Analysts June 2017 ZENITH BANK PLC 1
Slide 2: Disclaimer
Disclaimer This presentation is based on the consolidated financial statements of Zenith Bank Plc, a company incorporated in Nigeria on 30 May 1990, and its subsidiaries (hereinafter collectively referred to as "the Group"). The financial statements are prepared in accordance with the International
Slide 3: Agenda
Agenda Overview & Operating Environment Slides 4 – 7 Group Results Slides 8 – 21 Risk Management Slides 22 – 28 Strategy & Outlook Slides 29 – 31 Q&A 3
Slide 4: 1. Overview & Operating Environment
1. Overview & Operating Environment
Slide 5: Nigerian Economy and Key Developments in the Banking Sector
Nigerian Economy and Key Developments in the Banking Sector Despite a challenging macroeconomic environment and short-to-medium term complications, Nigeria remains Africa’s largest economy with strong sectors and significant opportunities. Real GDP Growth (Rebase): GDP Growth Rate GDP growth rate
Slide 6: Our Investment Proposition
Our Investment Proposition Strong earnings capacity and growth, solid and liquid capital base, strengthened ERM practices, Key good returns on investment and excellent customer service Theme A dominant player in the Nigerian Banking Industry: Controls a significant share of the high end corporat
Slide 7: 2. Group Results
Z Zz ZENITH BANK® 2. Group Results
Slide 8: Financial Highlights – H1 2017
Financial Highlights – H1 2017 Creativity for Market Dominance and Risk Management for Superior Performance Key Themes Building A Shock-Proof Balance Sheet Gross Earnings: N380.44bn +77.1%YoY Net Interest Income: N138.96bn +9.4%YoY Non-Interest Income: N118.18bn +253.8% YoY P or L Profit Before Tax:
Slide 9: Profit or Loss Statement
Profit or Loss Statement • Strong bottom-line profitability, driven by robust core earnings generation and continued cost control to deliver improved operating leverage and sustainable stakeholder value. Group Group YOY (N’million) 6M 17 6M 16 Change Gross earnings 380,440 214,812 77.10% Interest in
Slide 10: Consolidating Earnings and Profitability
Consolidating Earnings and Profitability • In spite of the macroeconomic backdrops, Zenith Bank has delivered an attractive earnings profile, supported by increasing revenue and improving operating efficiency. Comments Net Interest Margin Net Interest Margins (NIMs) decreased by 5% YoY 8.0% 7.6% 7
Slide 11: Revenue Base: Interest Income Diversification
Revenue Base: Interest Income Diversification • Attractive YoY growth in interest income (+45%) to support the Bank’s net interest margin • Growth in interest income can be attributed to the current high yield environment. • The Group has maintained a consistent mix of interest income across the var
Slide 12: Revenue Base: Non-Interest Income Diversification
Revenue Base: Non-Interest Income Diversification • The increase in most lines of non-interest income resulted in a YoY growth of +254%. • Trading and derivative activities led to the increase in trading income H1 2017 H1 2016 Other fees & N'million H1 2017 H1 2016 YoY commissions 1.9% Credit relate
Slide 13: Continuous Efforts in Cost-Reduction Strategies
Continuous Efforts in Cost-Reduction Strategies • Interest expense increased by 127% due to the tight monetary environment, resulting in elevated cost of funding. Interest Expenses Current Savings H1 2017 accounts accounts 3.1% 6.4% N'million H1 2017 H1 2016 YoY Time Borrowed deposits funds 15.3% Cu
Slide 14: Continuous Efforts in Cost-Reduction Strategies
Continuous Efforts in Cost-Reduction Strategies • High inflation rate, Naira devaluation and Information Technology cost contributed significantly to the 33% increase in total operating expenses. • The one-off charge of AMCON fee to P or L (as against amortization over the full year) increased the g
Slide 15: Balance Sheet – Assets
Balance Sheet – Assets Strong, liquid balance sheet with continued growth led by loans and securities portfolio. Group Group YTD Group (N'm) Jun-17 Dec-16 Change Jun-16 Cash and balances with central banks 679,915 669,058 1.62% 627,156 Treasury bills 691,514 557,359 24.07% 379,990 Assets pledged as
Slide 16: Balance Sheet – Liabilities & Equity
Balance Sheet – Liabilities & Equity Assets are well funded by a significant deposit base and the balance sheet remains robustly capitalised, providing a buffer for further growth. Group Group YTD Group (N'm) Jun-17 Dec-16 Change Jun-16 Customers’ deposits 2,974,938 2,983,621 -0.29% 2,685,477 Deriva
Slide 17: Balance Sheet – FX Exposures
Balance Sheet (Financial Assets & Liabilities)– FX Exposures A diverse funding base supports our effort to match our FX exposures. (N’million) Naira Dollar GBP Euro Others Total Loans and Advances (Gross) H1 2017 Cash and balances with central banks 627,440 41,012 6,293 2,744 2425 679,914 Euro Other
Slide 18: Sustained Assets & Liabilities Match
Sustained Assets & Liabilities Match The group’s approach to Loans and Advances is largely cautious, reflective of the realities of the operating environment. Our focus remains on advances to large corporates supported predominantly by demand deposit funds. Loan Growth Loans & Advances H1 2017 FY 20
Slide 19: Continued Market Dominance through Strong Liquid Asset Base and Funding Mix
Continued Market Dominance through Strong Liquid Asset Base and Funding Mix High quality and liquid balance sheet, with diversified sources of funding. Liquid Assets FY 2016 H1 2017 N'million H1 2017 FY 2016 YTD Assets Assets pledged as Due from pledged as Due from collateral Cash 82,888 36,953 124%
Slide 20: P or L by Geography
P or L by Geography Nigeria continues to be the main driver of profitability, providing about 90% of gross revenue. H1 2017 Gross Revenue (N’million) 6M17 Nigeria Rest of Africa Europe Eliminations Consolidated Nigeria 91.5% Total Revenue 349,634 24,720 7,605 (1,519) 380,440 Total expense (265,477)
Slide 21: P or L – By Sector
P or L – By Sector Continuous diversification and improved profitability across core business sectors H1 2017 Gross Revenue (N’million) 6M17 Large Small and Medium Public Consolidated Corporates Corporates / Retail Large Corporates Total revenue 241,046 46,848 92,545 380,440 63.4% Total expenses (18
Slide 22: Loans & Deposits – By Sector
Loans & Deposits – By Sector Corporate-oriented franchise, with improving retail component. Gross Loans Total Deposits H1 2017 Gross Loans – N2.30 Trillion H1 2017 Total Deposits – N2.97 Trillion Small and Small and Medium Medium Corporates / Corporates / Retail Retail 19.9% 40.0% Large Corporates L
Slide 23: 3. Risk Management
Z Zz ZENITH BANK® 3. Risk Management
Slide 24: Healthy Risk Assets Portfolio
Healthy Risk Assets Portfolio Historically strong risk controls have resulted in a largely stable NPL ratio, with robust coverage levels that compare favourably with peers and the sector. NPL Coverage Ratio Our Risk Management Strategy The Group adopts a complete and integrated approach to risk ma
Slide 25: Focused Risk Management via Portfolio Diversification
Focused Risk Management via Portfolio Diversification Well diversified loan portfolio across sectors supports asset quality. Loans by Sector – H1 2017 Loans by Sector – FYE 2016 Communication Flour Mills 4.9% 5.3% Real Estate and Real Estate and Communication Construction Transportation Construction
Slide 26: Foreign Currency Loans & Restructured Loans
Foreign Currency Loans & Restructured Loans Well diversified loan portfolio across sectors support asset quality. Foreign Currency Loans – H1 2017 Restructured Loans – H1 2017 % to USD loans by % to US$ % to Gross % to Gross US$' m N'm Restructured Loans by sector N'm Restructured sector loans loans
Slide 27: NPLs by Sectors
NPLs by Sectors Zenith Bank continues to develop its risk management strategy and improve on the quality of its loan portfolio. The NPL ratio of 4.3% is currently one of the lowest in the industry. H1 2017 FYE 2016 Financial and Real Estate Oil and Gas Insurance and General 15.2% 5.2% Construction C
Slide 28: Strong Capitalisation and Liquidity
Strong Capitalisation and Liquidity Liquidity buffer well in excess of regulatory requirements. Solid and high-quality capital position provides room for further growth and has supported Zenith Bank’s historically strong dividend payout profile. Liquidity and Capital Adequacy 66.0% 59.6% 61.1% 55.2%
Slide 29: 4. Strategy
Z Zz ZENITH BANK® 4. Strategy
Slide 30: Strategies for driving our vision
Strategies for driving our vision 1 The Bank focuses on cost 2 The Bank accomplishes this Compete effective deposits from the strategy by: aggressively for retail end of the market to Consistent focus and market share, but Delivering superior lend to the corporate end investment in attracting
Slide 31: Our Key Growth Target Sectors
Our Key Growth Target Sectors Driving profitability with our competitive advantages Identified Growth Sectors Competitive Advantage • Agriculture • Strong capital and liquidity • Infrastructure • Strong brand • Manufacturing • Strong international rating • Petrochemicals • Extensive branch network •
Slide 32: Outlook and Prospects for FY2017
Outlook and Prospects for FY2017 Retail Banking: The bank will continue to grow its retail Customer Services: At the center of the Group’s pursuit of business especially in liability generation. This will be excellent customer service, we would continue to focus on achieved through the deploymen
Slide 33: Thank you
Z Zz ZENITH BANK® Thank you