Zenith Bank Plc reported a mixed performance in Q2 2022. Backed by loan book growth and digital banking operations, the Group reported a 13% YoY gross earnings growth to N213.24bn in Q2 2022. Operating income grew by 16% YoY to N157.59bn while operating expenses increased by 19% YoY to N95.58bn. By implication, the Group’s cost-to-income ratio in Q2 2022 rose by 200 basis points to 61%.

Nonetheless, profit before tax grew by 11% YoY to N62.01bn. However, profit after tax was flat due to a higher effective tax rate in Q2 2022. This was a consequence of the new tax regulations that removed exemption status on some financial assets.

Loan Book Growth Continue to Drive Earnings

Average loan book expanded by 22% YoY to N3.423trn, a reflection of the Group’s strategy to drive earnings growth amid a low-yield environment. The growth in loan books offset the impact of lower average yields on loan book. The situation (of volume offsetting pricing) also played out across the Group’s other interest-earning assets (i.e., investment securities).


We marginally raised our EPS projection for FY 2022 to N8.55 (previous: N8.42) to reflect our expectation of asset yield repricing, in view of the rising interest-rate environment. However, we also factored in sustained cost pressures due to the rising inflationary pressures.

In the near term, we continue to see banking sector earnings under pressure due to weak macroeconomic conditions. In the past months, the industry was characterised by low yields and players in the banking industry had to aggressively grow asset volumes to make up for the yield decline. The trend of low yields appears to have reversed, and we expect the rising trend of yields to remain in the near term. However, we see pressures come from other sources, particularly cost pressures. Staff attrition and severe inflationary pressure are the two pain points we identified as profit compressors.

Please follow the link “Zenith Bank Q2 2022 – Earnings Capacity Restrained by High-Cost Operating Environment”  to view the whole report.


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