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Zenith Bank gets asset management rating upgrade

By The Citizen
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HSBC Bank has upgraded Zenith Bank from 'N' to 'OW', as the bank is the least sensitive to rising cost of savings accounts in Nigeria in a new report on some banks in sub-Saharan Africa countries

According to the report by the global banking giant, Zenith Bank's cost of savings account is eight per cent of total deposits, compared to an average of 18 per cent for other banks in Nigeria.

The report reads, 'Zenith Bank is the least sensitive to rising cost of savings accounts as they are only eight per cent of total deposits, compared to an average of 18 per cent for other banks in Nigeria. The bank reduced headcounts to 7,879 in 2012, from 8,812 in 2011. We see more scope for a reduction in costs and forecast cost growth of only five per cent per annum in 2013 and 2014. This should reduce Zenith Bank's cost/asset ratio to 3.9 per cent in 2015 from 4.9 per cent in 2012.'

The report covered banks at the beginning of a multi-year returns on assets compression.

According to the report, tighter regulation of fees and cost savings accounts since the first quarter of 2013 and cynical increase in cost of risks sets the stage for multi-year compression of sector return on earnings.

It said pressure to improve operating costs to preserve returns was stronger than ever. The report envisaged more discipline loan pricing.

HSBC said better-than-expected yields on local currency treasury-bills, which were 26 per cent of Zenith's assets, mitigated fee income losses in 2013 and 2014.

The report added, 'The bank has added benefit of good asset quality, the adjusted non-performing-loan ratio is only 4.1 per cent, unadjusted three per cent, which together with good provision coverage, means lower upside risk to bad asset charges.'

HSBC said it increased its net income forecast in 2013 by 10 per cent in 2014.