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Banking Sector

Zenith Bank Grows Gross Earnings by 189% in Q1, 2024

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Zenith Bank Plc has announced its unaudited results for the first quarter ended 31st March 2024, with an impressive triple-digit growth of 189% in Gross Earnings, from ₦270 billion reported in Q1 2023 to ₦781 billion in Q1 2024.

This is despite the challenging operating environment and tightening monetary policy stance.

From the unaudited statement of account submitted to the Nigerian Exchange (NGX) on Friday, 3rd May 2024, this impressive growth in the topline also enhanced the bottom line, as profit before tax (PBT) rose to ₦320 billion in Q1 2024, representing an increase of 270% from the ₦87 billion reported in Q1 2023. Profit after tax (PAT) equally grew significantly by 291% from the ₦66 billion reported in Q1 2023 to ₦258 billion in the current period.

Interest and non-interest income contributed significantly to the growth in gross earnings. Interest income grew by 155% from the ₦192 billion reported in the quarter ended March 2023 to ₦489 billion in the period to 31 March 2024.

The growth in interest income is due to the repricing of risk assets, owing to the increase in the central bank’s Monetary Policy Rate (MPR), which currently stands at 24.75%. The growth in net interest income is primarily due to the increase in fees and commissions as well as trading grains.

The Group reported an impairment charge of ₦56 billion for Q1 2024, up from ₦8 billion recorded in Q1 2023. This is attributable to significant growth in risk assets, primarily driven by the revaluation of its USD loans, which necessitated additional impairment on the bank’s foreign currency-denominated loans.

The cost of funds grew by 48% from 2.7% in Q1 2023 to 4% in Q1 2024 due to the high-interest rate environment, while interest expense increased by 157% from ₦71 billion reported in Q1 2023 to ₦182 billion in the period to March 2024. Notwithstanding the year-on-year (YoY) increase in interest expense, net interest margin (NIM) grew by 20% from 6.9% in the 3 months ended March 2023 to 8.3% in the current period ending 31 March 2024. Return on Average Equity (ROAE) and Return on Average Assets (ROAA) increased year-on-year (YoY) by 114% and 119%, respectively, due to improved profitability.

Gross loans, which are largely funded by customer deposits, grew by 30% from ₦7.1 trillion in December 2023 to ₦9.2 trillion in March 2024. Customer deposits also grew by 11% from ₦15.2 trillion in December 2023 to ₦16.8 trillion in March 2024, underpinning continued customer confidence in the Zenith brand. Total assets increased by 19% to ₦24 trillion within the same period.

The Group has consistently maintained all prudential ratios well above the minimum regulatory requirement. At the end of Q1 2024, Capital Adequacy Ratio (CAR) and Liquidity Ratio stood at 20% and 67%, respectively, demonstrating the Group’s ability to maintain a strong and liquid balance sheet.

The Group is making progress on the planned capital raise to support future growth and is very optimistic about meeting the new minimum capital requirements in line with the CBN’s recapitalisation directive. As the Group accelerates migration to its new technology architecture and also transitions into a holding company, it remains poised to maximise value for all stakeholders.

 

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

CBN Reports 136% Increase in Q1 Forex Inflows Over 2023 Total

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Dr. Olayemi Michael Cardoso

The Governor of the Central Bank of Nigeria (CBN), Dr. Olayemi Cardoso, announced that foreign exchange (forex) inflows in the first quarter of 2024 were 136% higher than the total inflows recorded in 2023.

This remarkable increase is attributed to recent economic reforms and market liberalization efforts.

Dr. Cardoso made this announcement at the Vanguard Economic Discourse in Lagos on Thursday, an event themed “Reforms in The Era of Global Economic Uncertainties: Whither Nigeria.”

Represented by Blaise Ijebor, Director of Risk at CBN, Cardoso highlighted the bank’s commitment to utilizing all orthodox monetary policy tools to address inflation and enhance market transparency.

“We remain committed to using all the orthodox monetary policy tools available to us to address inflation,” Cardoso stated.

“We have also embarked on major reforms to liberalize the foreign exchange market, which has enhanced transparency, reduced arbitrage opportunities, promoted stability, and improved liquidity.”

One of the pivotal reforms included the settlement of all valid FX forwards, which Cardoso identified as a crucial factor in boosting stakeholder confidence.

This settlement has been instrumental in increasing forex flows into the country. The governor emphasized that the substantial growth in Q1 2024 forex inflows is a direct result of these reforms.

The CBN has taken proactive steps to sanitize and stabilize the forex market. This includes issuing multiple circulars to streamline operations and recently licensing 14 new International Money Transfer Operators (IMTOs) to bolster remittance inflows.

These measures aim to double remittance flows within the year, a target set by the CBN Governor.

“Our target, of course, is to double remittance flows within the year,” Cardoso remarked. “We have started that process to ensure that it happens.”

Cardoso also addressed the broader economic challenges posed by global uncertainties. He noted that global financial tightening has led to increased risk aversion, impacting investment flows into developing economies like Nigeria.

These challenges, coupled with domestic issues such as food inflation driven by rising transport costs, infrastructure constraints, and security concerns, have compounded economic pressures.

“The financial tightening that we have seen globally has been a result of monetary authorities taking steps to rein in inflation,” Cardoso explained. “This has had an impact on developing economies as investments shift to safer markets amidst uncertainties.”

The CBN Governor reaffirmed his commitment to repositioning the bank to deliver sustainable, data-driven solutions aimed at stabilizing the Nigerian economy. He emphasized the importance of collaboration between monetary and fiscal authorities to address the nation’s economic challenges.

“We have embarked on tightening the bank’s monetary policy to address inflationary pressure on the economy,” Cardoso noted. “I believe that the results will become evident in the near term, as we are already seeing a deceleration in inflation.”

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Banking Sector

Fidelity Bank Sets N60m Compensation for Chairman, N40m for Non-Executive Directors

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fidelity bank - Investors King

Fidelity Bank’s shareholders have approved a substantial compensation package for its chairman and non-executive directors.

The decision, disclosed in a document filed with the Nigeria Exchange Group titled ‘Resolutions from the 36th annual general meeting on Monday,’ outlines the bank’s plans for remuneration for the fiscal year 2024.

According to the resolution, Fidelity Bank’s chairman is set to receive a compensation package of N60 million annually.

Also, each non-executive director is slated to earn N40 million per annum.

The resolution further stipulates that these compensation figures will remain in effect for succeeding years until reviewed by the company during its annual general meeting.

This provision underscores the bank’s commitment to regular evaluation and adjustment of its compensation policies to align with evolving market dynamics and shareholder expectations.

The decision comes amidst Fidelity Bank’s proposal for a final dividend payout of 60 kobo per share to shareholders for the 2023 financial year.

This announcement reflects the bank’s robust financial performance and its commitment to delivering value to shareholders.

Fidelity Bank’s financial report for the year 2023 reveals impressive growth, with profit before income tax soaring by 131.49% to N124.26 billion from N53.68 billion in 2022.

This remarkable performance underscores the bank’s resilience and agility in navigating challenging economic conditions while capitalizing on emerging opportunities in the financial sector.

While the decision to allocate such substantial compensation packages to its leadership team may raise eyebrows among some stakeholders, proponents argue that it is essential to attract and retain top talent in a competitive industry landscape.

They contend that adequately remunerating key personnel is crucial for driving sustainable growth, fostering innovation, and maintaining stakeholder confidence.

However, critics may question the optics of such generous compensation packages, particularly in light of the broader socioeconomic challenges facing the country. With concerns over income inequality and calls for greater corporate accountability, Fidelity Bank may face scrutiny over its executive compensation practices and their alignment with broader societal interests.

As Fidelity Bank forges ahead with its ambitious growth agenda, navigating the delicate balance between rewarding leadership and addressing stakeholder concerns will remain a key priority for the institution.

As the banking industry continues to evolve, ensuring transparency, accountability, and fairness in compensation practices will be essential for maintaining trust and credibility in the eyes of shareholders and the public alike.

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Banking Sector

Financial Institutions Racked Up N678m in Fines Last Year

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Retail banking

Financial institutions in Nigeria paid a total of N678 million in fines in the 2023 financial year, according to analysis of their various financial statements.

The analysis examined the annual reports of nine prominent financial groups, including FBN Holdings, Access Holdings, Guaranty Trust Holding Company, Zenith Bank Plc, United Bank for Africa Plc, Fidelity Bank, Wema Bank, Stanbic IBTC Holdings, and FCMB Group.

These reports provided insights into the fines imposed by various regulatory authorities, including the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), the National Insurance Commission, and others.

Compared to the previous year, the total amount of fines paid by these institutions decreased significantly by 89.25% from N6.31 billion in 2022 to N678 million in 2023.

This decline reflects improved regulatory compliance among financial institutions and signals a positive trend toward greater adherence to established guidelines and standards.

Among the financial groups analyzed, Zenith Bank stood out for its increase in penalties compared to the previous year. While the bank had incurred no fines in 2022, it paid N21 million in penalties in 2023.

The penalties levied against Zenith Bank included fines for late rendition of CBN returns, unauthorized employment practices, outstanding auditor recommendations, and compliance checks on politically exposed persons.

Similarly, FBN Holdings reported a decrease in fines paid during the period, totaling N17.26 million compared to N26 million in the previous year.

The fines imposed on FBN Holdings were related to late submission of audited financial statements and non-compliance with regulatory reporting requirements.

Access Holdings also experienced a significant reduction in penalties, with fines decreasing from approximately N604 million in 2022 to N81.60 million in 2023.

Despite the decrease, Access Holdings incurred fines from various regulatory bodies, including the CBN, PenCom, and NGX RegCo, for infractions such as unauthorized advertising, data recapture sanctions, and late filing of financial statements.

Other financial institutions, such as GTCO, UBA Group, Fidelity Bank, Wema Bank, Stanbic IBTC Holdings, and FCMB Group, also reported fines for various regulatory violations, including breaches of transaction rules, late submission of reports, and non-compliance with industry regulations.

The significant decrease in fines paid by financial institutions in 2023 reflects the industry’s commitment to improving regulatory compliance and upholding best practices.

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