Zenith Bank to Transition Into Holdco, Announces Plan to Meet N500bn New Capital

• Zenith Bank realised massive profit as its year-on-year profit before tax rose by 180% to N796 billion
• Analysis showed that the year 2023 was a good one for the company that increased its interest income
• The bank also said it is working on transitioning into a holding company structure

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

Zenith Bank declared a massive profit after tax to the tune of N676 billion in 2023, according to its latest financial report.

The amount is a triple-fold jump from the N224 billion it declared the previous year.

Its profit before tax also rose by 180% to N796 billion from N284.7 billion in 2022.

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An analysis of the company's statement indicates that the bank enjoyed a good year as its interest and similar income doubled from N540 billion to N1.14 trillion owing to improvements in loans and customer advances, placement with banks and discount houses.

In addition, the company witnessed a massive gain from Treasury bills, commercial papers and promissory notes.

It, therefore, announced a final dividend of N3.50k for every share of 50k subject to approval withholding tax.

Samuel Oyekanmi, a research and insight associate with Norrenberger Financial Group said that Zenith Bank's performance, like many other banks that have released their audited result, saw significant growth in their top and bottom line, largely as a result of FX revaluation gains following the devaluation of the naira from around N460/$1 to around N900/$ last year.

He stated,

"Looking at Zenith Banks's financials, we see a net revaluation gain of about N229 billion in 2023. Deducting that line item from the effective profit after tax brings the net profit to around a 90 to 100% year-on-year increase.

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"Meanwhile, it is worth noting that there was also a significant increase in interest income, which may be attributable to high-interest rate environment as well as some FX related interest-bearing loans."

The big plan

In a recent report, it disclosed that it is taking urgent steps to meet the new N500 billion capitalisation requirement of the Central Bank of Nigeria.

The banking group, which is in the middle of transitioning to a holding company structure, said:

“In 2024, the group will complete the transition to a holding company structure, which is anticipated to position it advantageously for exploring emerging opportunities in the fintech space while bolstering its digital and retail banking initiatives.

“Furthermore, the group is undertaking urgent necessary actions to meet the new minimum N500bn equity capital requirement to maintain its international authorisation within the timeframe stipulated by the Central Bank of Nigeria.

This will strengthen its presence in key markets to continue positioning for sustainable growth and value addition for stakeholders.”

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CBN gives fresh orders to banks

Legit.ng reported that the use of foreign currency as collateral for naira loans has been banned by the CBN.

Dr Adetona Adedeji, the acting director of the CBN's Banking Supervision Department, stated this in a directive to Nigerian banks.

However, the CBN excluded any Eurobonds that the Federal Government of Nigeria issued or foreign bank guarantees, such as standby letters of credit, from the prohibition.

Source: Legit.ng