…Board has exceeded shareholders’ expectations – Okezie
Correspondent COMFORT EKELEME in this report highlights the amazing success story of Zenith Bank Plc from foundation including its teething challenges, steady growth to becoming a global brand and the reactions of some shareholders.
Despite the tough and sometimes volatile operating environment witnessed by several sectors of the economy, including financial services sector, shareholders of Zenith have expressed satisfaction with the performances of the management and board of the bank in the last twenty seven years of its existence.
Established in May 1990 and with a shareholders fund of N20million, the bank started operations in July of the same year as a commercial bank, became a public limited company on June 17, 2004 and was listed on the floor of Nigeria Stock Exchange, NSE also on October 21, 2004 following a highly successful Initial Public Offering (IPO).
Its consistent payment of dividends, effective Corporate Social Responsibility (CSR) and strong corporate governance some shareholders in separate interviews with Daily Champion recently were among the reasons they handed down the healthy verdict.
With headquarters in Lagos, Nigeria, Zenith Bank currently has over 500 branches and business offices nationwide, with strong presence in all the 36 states, Federal Capital Territory (FCT), including major towns and metropolitan centers in the country as well as in some other countries.
The respondents said given the economic recession they are happy with total dividend of N63.422 billion for the year ended December 31, 2016 which was approved by the bank’s shareholders at its Annual General Meeting (AGM). This represents a final dividend per share of N2.02 from N1.77 per share declared in the corresponding period of 2015.
Going down memory lane, Zenith Bank’s success story could be traced back to the deregulation of the banking sector by administration of former military president Gen Ibrahim Babangida in the late 1980s, that motivated a team of entrepreneurs led by Jim Ovia who was the bank’s founder and pioneer managing director to apply for a banking license.
And in a bid to strengthen the brand and meet the N25 billion capital requirements stipulated by the Central Bank of Nigeria (CBN), Zenith International Bank Ltd went public and subsequently changed its name to Zenith Bank PLC in 2004.
Apparently due to investors’ confidence, its shares were over-subscribed during the IPO at N10.90 per share about N48 billion was raised, an amount regarded then as the highest to have been realised in the Nigerian capital market during the period under consideration. But due to regulatory provisions at the time, it could not absorb all the money raised but retained about N36 billion.
Its shares were listed on the Nigerian Stock Exchange in October 2004. However in a record growth, Zenith Bank’s total assets by the end of June 2005 plus contingents had shot up to N370.72 billion with a profit before tax of N9.1 billion.
The institution made history on April 27th 2007 when it became the first Nigerian bank in 25 years to be licensed by the UK Financial Services Authority (FSA), giving rise to Zenith Bank (UK) Limited while Zenith Bank had also established subsidiaries in Ghana, Sierra Leone and Gambia.
Therefore given its grass to grace story of the bank and its brilliant performances in the last twenty seven years under the management of such iconic bankers as Mr. Ovia, his immediate successor and the incumbent Governor, Central Bank of Nigeria, CBN, Mr. Godwin Emefiele and the current Group Managing Director, Mr. Peter Amangbo the shareholders maintained that the institution has transformed to leading bank in the country despite being one of the new generation banks.
They further urged other Nigerian banks to follow the footsteps of Zenith Bank by ensuring regular payment of dividends to shareholders.
Speaking with Daily Champion, National Coordinator, Progressive Shareholders Association of Nigeria, Boniface Okezie insisted that the bank in the last twenty seven years has exceeded shareholders’ expectations , in terms of dividend payout, which the bank has not been found wanting but had been improving year in year out.
“Basically for me, the bank has been doing excellently well in terms of dividend payout so far and it is commendable. They have strong balance sheet, strong shareholders fund, in every parameter, the bank is doing very well and that includes branch network, service delivery. Notwithstanding the challenges in the banking industry and regulatory failures, they have been able to surmount these problems in the midst of many penalties which banks have been contravening. In the midst of all these things, Zenith Bank has kept its head above the waters”, he said.
According to him, even if the bank gives all its profit as dividends, shareholders will always demand for more, because shareholders are of the opinion that when they do well, more dividends would be paid.
“I know they have a listening board; if the economy is not doing well, companies operating within that economy will also not do well. I wish the bank well and hope that things will turn around so they can do more than they have been doing. We urge them to do more, notwithstanding what they have been doing in terms of dividend payout. If they pay N2 people will applaud them, but the N1 paid is good for me,” he said.
Speaking further, Okezie maintained that the regulatory policies are also discouraging depositors going to patronize the banks, “for me the cashless policy is a disaster, policy summersault does not help the banking industry to thrive because 5 per cent of their profit is kept aside. To me the banks have been over tasked and the Assets Management Corporation of Nigeria (AMCON) is living at the expense of shareholders.
On Small and Medium Scale Enterprises (SME) funding, he noted that the bank is doing well but should not be over stressed beyond their strength.
To him, Zenith Bank’s Corporate Social Responsibility (CSR) is second to none and affirmed that shareholders are satisfied with the bank’s strides in funding educational institutions.
On his part, National President, Constance Shareholders Association of Nigeria, Alhaji Shehu Mikail, said that as a shareholder of the bank, “I would say that the bank has done well in the last 27 years. Zenith Bank was the first to commence the universal banking structure in Nigeria, with their activities so far shareholders are satisfied”.
Speaking further, he said, one of the areas “I would like the bank to concentrate more is creating more branches and Automated Teller Machines (ATMs) that would protect the interest of people in the rural areas. I would also like the bank to introduce the three major languages in the ATMs in addition to English Language, this is not only Zenith Bank but other banks should do that to encourage all customers to use the ATMs”.
Robust liquidity methods
It is on record that Zenith Bank’s liquidity profile remains very strong, being a consistent net placer of funds in the interbank market and its risk management practices give assurance that this profile will be maintained. The bank has a sound and robust liquidity risk management framework that ensures it maintains sufficient liquidity, including a cushion of unencumbered, high-quality liquid assets at all times.
The bank’s compliance with liquidity and funding requirements includes the following processes: projecting cash flows and considering the level of liquid assets necessary in relation to needs; monitoring balance sheet liquidity ratios against internal and regulatory requirements; maintaining a diverse range of funding sources with adequate back-up facilities; managing the concentration and profile of debt maturities; monitoring depositor concentration in order to avoid undue reliance on large individual depositors; and ensuring a satisfactory overall funding mix, while maintaining liquidity and funding contingency plans.
It was not surprising therefore that in 2009, when the Central Bank of Nigeria (CBN) conducted a special audit to ascertain the stability of the banking sector in the country, Zenith Bank was one of the 14 banks that passed the test. The result of the audit had led to the quasi-nationalization of 10 banks representing about 50 percent of system assets.
Corporate social responsibility
“Corporate Social Responsibility (CSR) remains a key component of Zenith Bank’s strategic drive for the overall development of the society in which it operates. The bank’s commitment and efforts in CSR have not only won several awards and accolades within Nigeria, but it has also done so internationally while the bank’s efforts cover a broad range of human needs and have impacted positively on the quality of life of a large number of individuals, interest groups and communities.
“These efforts cover areas such as education, health, community development, sports, youth and women empowerment, arts and culture, disaster relief, security, government agencies and non-governmental organizations’ activities among others. As a responsible corporate citizen, the bank strives to make contributions that make a meaningful impact on the well-being of the beneficiaries and the society at large”.
Ratings and corporate governance
Zenith Bank has consistently recorded good ratings from both the international rating agencies, (Fitch Ratings, Standard & Poor’s) and local agencies (Agusto & Co) which financial analysts have argued were supported by its leading market position in all key performance indices.
Also, Zenith Bank has consistently put in place a “robust system of corporate governance, bearing in mind the key elements of honesty, trust, integrity, openness and accountability as well as commitment to the organization’s goals. To uphold strong corporate governance and transparency, the bank adopts a robust public disclosure policy. This is to forestall incidences of abuse, such as insider trading.
“All financial information, as well as exceptional and extraordinary events capable of influencing the public decision concerning the bank, are approved for dissemination by the board and then related through authorized means to the public at the same time. The release of such information is done speedily and as often as stipulated by the regulatory bodies”.
Speaking at the bank’s AGM, Group Managing Director/Chief Executive Officer of Zenith Bank Plc, Mr. Peter Amangbo, said as an institution of well-primed people, the bank relied on its pool of exceptional staff to make sound and timely decisions and addressed issues in manners that anticipated developments and demonstrated excellent understanding of the dynamics of the market and economy in 2016.
According to report, Zenith Bank’s revenue After tax stood at 129,652,000,000 million in 2016, while its total assets was 4,739,825,000,000 million in the same year, with shareholders’ equity of 616,353 billion. Year on Year (YoY) growth of 10 per cent to N385 billion was impressive during the period.
Also, non-interest income, driven primarily by (realized and unrealized) FX gains of N45.7billion grew by 46 per cent to N123.4billion. Interest expense, however, increased by 17 per cent to N144billion, as a result of the elevated yield environment of the money market and the impact of currency devaluation on foreign currency borrowings.
The increase in cost of funds to 4.15 per cent suppressed the growth in net interest income. Net interest income increased by just 7.0 per cent to N240billion, resulting in a decline in net interest margin to 7.4 per cent as against full year 2015 level of 8.1 per cent.
A huge imprint of the economic difficulties on the bank’s books could however be gleened in the sizable impairment charge of N32.4billion on loan losses as against full year15 figure of N15.7billion as Non Performing Loans (NPL) spiraled massively by harsh economic operating environment.
The impairment provision was mainly contributed by Power, Oil & Gas and General Commerce. However, the bank improved on operating efficiency as operating expense grew by just 3.1 per cent to N96.4billion as against FY‘15 figure of N89.9billion, impacting positively on cost to income ratio, which declined to 52.7 per cent compared to 57.2 per cent recorded in 2015.
Its subsidiaries include, Zenith Insurance, Zenith Pension Custodian, Zenith Securities, Zenith Bank Ghana, Zenith Bank UK, Zenith Trust Company, CyberSpace Networks. Zenith Bank also maintains subsidiaries in the United Kingdom, United Arab Emirates, Ghana, Sierra Leone and The Gambia. The Bank also has representative offices in South Africa and China.
According to analysts at WSTC, “Barring a recurrence of significant depreciation in the value of the naira, we expect a modest growth in gross earnings in full year 2017, and our view is premised upon expectation of moderate growth in interest income, higher interest expense and weaker non- interest income.
“Growth in interest income is expected to be primarily supported by elevated yields on fixed income securities, as we expect a conservative loan book growth due to high credit risk. We expect a risk asset growth of 7per cent (full year 2016: 15per cent), which should be driven mainly by domestic currency loans.
“At the current market price of N13.60, Zenith presents a 58per cent upside potential to our fair value estimate; hence, we rate Zenith a ‘BUY,” the analysts said.
However, Mr. Amangbo’s assurance at the AGM that though 2017 will come with its challenges, and opportunities “but I am confident that our determination, resolve and rare commitment to customer s well as our adaptive ability will ensure resounding results,” has not left any one in doubt about the capacity of the bank to soar to greater heights.
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