Zenith Bank achieves stable earnings in Q1 2026
Zenith Bank’s Q1 2026 results showed a broadly stable earnings performance, underpinned by resilient core income growth but tempered by elevated cost pressures and weaker non-interest income dynamics. Profit after tax increased marginally by 0.7% y/y to
N313.7bn, as modest topline growth was largely offset by higher operating and funding-related pressures. Net interest income grew by
7.3% y/y to N634.1bn, supported by a 3.8% increase in interest income and a decline in interest expense (-4.6% y/y), which helped
improve net interest margin to 10.8% (from 9.9% in Q1 2025).
This reflects better asset repricing and a slight easing in funding costs, as the cost of funds declined to 3.7% (-16bps y/y). However, non-interest income performance was mixed, with strong growth in fees and commissions (+44.6% y/y to N81.0bn) and other income (+353.7% y/y) buoyed by foreign currency revaluation gains and loan recoveries, offset by a sharp contraction in trading income, which fell significantly by over 200% y/y, highlighting volatility in market-related earnings.
Cost pressures were more pronounced during the period, with operating expenses rising by 14.9% y/y to N322.0bn, driven by
inflationary pressures and increased business expansion costs. This outpaced revenue growth and led to a deterioration in efficiency
metrics, with the cost-to-income ratio rising to 43.5% (from 41.2% in Q1 2025).
Nonetheless, pre-provision operating profit still increased modestly by 4.6% y/y to N418.5bn, reflecting the strength of core earnings. Below the line, loan impairment charges rose by 16.6% y/y to N57.6bn, pushing the cost of risk slightly higher to 2.0% (from 1.8%), indicating a more cautious provisioning stance amid prevailing macroeconomic uncertainties. Despite this, pre-tax profit grew by 2.9% y/y to N360.9bn, supported by core income resilience, although the higher tax charge (+20.3% y/y) constrained bottom-line expansion.
On the balance sheet, the bank maintained solid growth momentum, with total assets increasing by 1.8% year-to-date to N32.0trn. This was driven by strong growth in net loans (+8.9% year-to-date) and a significant increase in interbank placements (+45.0% year-to-date),
indicating improved liquidity positioning and asset reallocation. However, securities holdings declined by 14.5% year-to-date,
suggesting a shift away from investment securities towards other interest-earning assets.
On the funding side, customer deposits
remained broadly stable (+0.6% year-to-date at N24.5trn), while long-term funding declined significantly (-36.4%), pointing to a change
in the bank’s funding mix. Interest-bearing liabilities were largely flat (-1.1% year-to-date), helping to moderate funding cost pressures.
Shareholders’ equity grew by 4.9% year-to-date to N5.17trn, supported by retained earnings.
Profitability metrics softened slightly, with ROAE declining to 24.9% (from 29.4% in Q1 2025), reflecting the combined impact of higher costs and relatively flat earnings growth, while ROAA remained stable at 4.0%. Asset quality indicators showed improvement, with the NPL ratio declining sharply, suggesting stronger loan book performance, although the increase in provisioning indicates continued prudence.
