Zenith Bank Doubles Interim Dividend to N31.4 Billion After Profit Surge

Zenith Bank Doubles Interim Dividend to N31.4 Billion After Profit Surge

Zenith Bank has announced a proposed interim dividend of N31.4 billion for its shareholders, double the amount paid during the same period last year. This equates to N1 per share.

Emmynet24 reports that Zenith Bank recorded nearly twice the net profit in the first half of this year compared to the same period last year, as shown in its audited financial records. The increase in profit was largely driven by a sharp rise in the lending rate set by Nigeria’s central bank earlier in the year, aimed at curbing inflation.

Interest and similar income for Nigeria’s second-largest lender by market value surged by 176.7% to N1.1 trillion, making up more than half of the total revenue for the period. Even after deducting interest expenses, the net interest income stood at N715.1 billion, up from N261.9 billion a year earlier.

Monetary authorities in Nigeria have aggressively increased borrowing costs this year, raising rates by 800 basis points in one of the longest rounds of rate tightening in the country’s history to counter inflationary pressures.

Zenith Bank’s provision for the impairment of financial and non-financial instruments nearly doubled to N415.3 billion, reflecting a substantial increase in funds set aside to cover delinquent loans unlikely to be repaid. Impaired loans accounted for 8.4% of the bank’s total loans, up from 7.1% at the end of last year.

The bank’s growth was further bolstered by trading gains, which jumped to N795.6 billion from N103 billion, driven by a significant increase in the value of its financial instruments. However, foreign exchange revaluation gains, which had significantly boosted revenues last year, only increased by 3.3% this year.

A depreciation in the naira’s value by around 70% since last June led to a surge in the exchange rate for the dollar, creating lucrative opportunities for banks with foreign currency assets. This windfall has become contentious, prompting the government to introduce a tax on these revenues.

In July, President Bola Tinubu proposed a one-off 50% tax on banks’ foreign exchange revaluation gains. The Senate, seeking a larger share for the government, approved a 70% tax, a move that ratings agencies and financial experts warn could strain banks’ finances.

Zenith Bank’s pre-tax profit rose by 107.5%, while its profit after tax increased from N291.7 billion to N578 billion. The bank’s proposed interim dividend of N31.4 billion marks a significant increase, reflecting its robust performance in a challenging economic environment.