Zenith Bank foreign currency loans soars to $3.79bn in 2023

Zenith Bank’s latest financials indicate that by the end of fiscal year 2023,  its foreign currency loans surged to $3.79 billion, up from $3.32 billion the previous year.

According to its full year 2023 financial report, oil and gas sector alone accounted for $1.91 billion, representing 50.3 per cent of the bank’s US dollar loans and 25.7 per cent of its gross loans.

For fiscal year 2023, oil and gas-related non-performing loans (NPLs) were N95.1 billion, a substantial figure that, while lower in percentage terms (30.65 per cent of total NPLs compared to 44.37 per cent in 2022), still signifies a considerable amount in absolute terms.

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Overall, total NPLs increased to N310.3 billion in 2023 from N177.3 billion in 2022, indicating broader issues within the bank’s loan book. Other sectors also show rising concerns.

General commerce NPLs rose sharply, constituting 27.89% of total NPLs (N86.5 billion), up from 14.71 per cent (N26.1 billion) the previous year.

Consumer credit NPLs, at 10.72 per cent of the total (N33.2 billion), though slightly down from 12.88 per cent in 2022, still reflect significant defaults. Overall Zenith Bank’s loan impairment for 2023 was N409.6 billion.

The bank’s restructured loans provide another layer of complexity. These loans almost doubled to N1.30 trillion in 2023 from N716.8 billion in 2022.

The oil and gas sector remains the dominant segment, accounting for 90.8 per cent of total restructured loans (N1.18 trillion). While restructuring offers temporary relief and the potential for recovery, it also signals underlying difficulties in the borrowers’ capacity to meet their obligations under normal terms.

Financially, Zenith Bank’s gross earnings for 2023 reached N2.13 trillion, a remarkable 125 per cent increase from the previous year. Net interest income also rose by 101 per cent to N736.2 billion.

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However, impairment charges soared by 232 per cent to N409.6 billion, significantly impacting net interest income after impairment, which stood at N326.6 billion, a modest 34 per cent increase.

Despite the impairment charge, Zenith Bank reports it still has a strong capital adequacy ratio of 21.7 per cent higher than the 19.8 per cent recorded in 2022. Regulatory limits for capital adequacy ratio is 15 per cent.

The bank’s profit before tax increased by 180 per cent to N795.9 billion, and profit after tax jumped 202 per cent to N676.9 billion, ironically thanks to its foreign currency holding.

Zenith Bank recently released its 2024 first quarter results indicating that it made a loan loss provision of N55.9 billion up from N7.7 billion a year earlier. While it did not provide a breakdown of the loans impaired, oil and gas will more than likely dominate the pile.