Zenith Bank’s shareholders in mixed reaction to good financial results

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Last week shareholders of Zenith Bank Plc endorsed the annual account and dividend proposals of the directors amidst fanfare. But stock market feelers indicated that the investors were both impressed with the 2016 results and at same time have mixed feelings over the aborted capital raise earlier proposed by the directors.

In spite of the challenging domestic macroeconomic environment, the bank had doled out N63.4 billion as dividend to its 31.4 million shareholders, translating into 202 kobo per share, compared to N56.5 billion last year for 2015 financial results.

The shareholders were expected to be happy considering the tough times companies operated in 2016. But a closer watch indicated that though the results beat recessionary economy, the dividend returns to shareholders which increased by 12.2 per cent was behind in inflation rate benchmarking significantly.

Coupled with the low year-to-date (YtD) secondary market returns, at 3.8 per cent last weekend, average returns to investors appeared muted over the year.

Impressive top-line and bottom-line figures

Financial Vanguard feelers in the past one month which came to a head last week indicated that the impressive top-line and bottom-line figures may have been further dampened by capital raise controversy.

While some investors were looking forward to a Zenith primary market offer as an opportunity to take position in a company that holds so much promises in its consistency as an outperformer, some also wondered if the capital raise was designed as a counterpoise to a capital erosion arising from significant rise in non-performing loan (NPL). But the bank had already explained that the present economic situation may undermine the success of the capital raise, targeted at pulling in N100 billion into the bank’s capital base.

Nevertheless, the share price had to suffer investor apathy despite the hurray that followed the 2016 full year results. The share price which had recovered from a mark down for dividend payment later received a bear run up till last weekend.

However, most analysts believe that Zenith Bank’s fundamentals were still strong enough to withstand present instabilities in the financial markets including equities. The bank delivered a solid growth in gross earnings, supported by interest income and foreign exchange (FX) gains. Also, a combination of robust gross earnings and improvement in operating efficiency translated into a remarkable growth in bottom-line.

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