Zenith Bank’s H1 pretax profit hits N637bn, raises interim dividend 20 percent

ZENITH Bank Plc has reported a two per cent increase in profit before tax to ₦637 billion for the first half of 2026, while raising its interim dividend by 20 percent, as lower funding costs, stronger fee income and reduced loan-loss charges helped cushion the impact of weaker trading income and higher taxes.

The bank’s profit before tax rose from ₦625.6 billion in the corresponding period of 2025, while its board proposed an interim dividend of ₦1.50 per share, compared with ₦1.25 paid a year earlier.

However, profit after tax declined by 19 per cent to ₦430.7 billion, reflecting a sharp increase in the bank’s tax expenses following the implementation of the Nigeria Tax Act 2025.

The tax charge more than doubled to ₦206 billion, pushing the bank’s effective tax rate to approximately 32.3 per cent from 14.9 per cent in the previous year, according to analysis.

The divergence between pretax and post-tax earnings highlights the growing importance of tax expenses in determining shareholders’ returns, despite improvements in the bank’s underlying operating performance.

Zenith Bank’s net interest margin, a measure of the income generated from interest-earning assets relative to their cost, improved to 12.4 percent from 11.9 percent.

The improvement followed a 13 percent decline in interest expenses, as the bank reduced its cost of funds to 3.3 percent from four percent.

The lower funding costs helped cushion the impact of declining interest income amid changes in interest rates and the naira’s appreciation.

The bank also recorded strong growth in non-interest revenue, with net fee and commission income increasing by 40 percent to ₦178.77 billion.

The growth was supported by higher digital transaction volumes, underscoring the increasing contribution of electronic banking and other fee-generating services to lenders’ earnings.

Asset quality indicators also improved during the period. Zenith Bank’s cost of risk fell to 2.2 per cent from 14.3 per cent a year earlier, largely because the exceptional loan-loss provisions associated with the previous year’s clean-up of forbearance loans did not recur.

Gross loans increased by 14 per cent from December 2025 to ₦12.57 trillion, while customer deposits rose by eight per cent to ₦26.35 trillion.

The non-performing loan ratio improved to 3.78 per cent, indicating a lower proportion of troubled loans relative to the bank’s total loan portfolio.

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However, trading income remained a weak spot, as the naira’s appreciation contributed to foreign exchange revaluation losses. The bank recorded a realised loss of ₦284.90 billion associated with foreign currency trading gains, according to the report.

On the Nigerian Exchange, Zenith Bank shares closed at ₦134.10, placing the stock at approximately 6.4 times annualised earnings, based on MoneyCentral’s estimates.

The proposed interim dividend represents about 14 per cent of the bank’s first-half profit, leaving a substantial portion of earnings available to support capital, business expansion and a potential final dividend, subject to the bank’s full-year performance and board decisions.

For investors, the results present a mixed picture: improving margins, fee income and asset quality support the bank’s operating performance, but higher taxation has significantly reduced the earnings available to shareholders.

The extent to which Zenith Bank can sustain its profitability, manage tax costs and maintain dividend growth will remain important considerations for investors assessing the stock’s performance in the second half of 2026.