Zenith Bank Plc, in a significant move to meet the Central Bank of Nigeria’s (CBN) new minimum capital requirement of N500bn, is offering its ongoing hybrid Offer (a combined Rights Issue and Public Offer (IPO)) at the bank’s lowest price range, locking in about 32% gain in potential immediate return for existing shareholders and new investors.
This Hybrid Rights Issue and Public Offer, aimed at raising approximately N290bn, will enable the bank to meet the CBN’s requirement and provide additional working capital to support its expanding operations and investments in information technology infrastructure.
Zenith Bank’s issued and fully paid share capital currently stands at N15.698 billion, complemented by a share premium of N255.047bn. To meet the CBN’s new stipulation, the bank requires an additional N229.225bn.
Despite its robust historical performance, the CBN’s new capital requirement has necessitated this substantial capital raise.
According to Dame Dr Adaora Umeoji, OON, Group Managing Director/CEO of Zenith Bank, this capital infusion will help meet regulatory requirements and enhance the bank’s information technology infrastructure.
The hybrid Offer includes a Rights Issue of 5.233 billion ordinary shares priced at N36 per share for existing shareholders, alongside a Public Offer of 2.767 billion ordinary shares available to the public at N36.50 each.
The offer commenced on August 1, 2024, and is set to close on September 9, 2024. These figures suggest that Zenith Bank’s shares are undervalued and present a promising opportunity for capital appreciation.
Engaging in the bank’s upcoming capital-raising offer could yield significant capital gains for investors who recognise the potential upside. Zenith Bank’s strong financial performance makes it appealing as an investment opportunity. The bank has consistently demonstrated resilience, with impressive profitability metrics and a solid track record.
Over the past five years, Zenith Bank’s share price has grown by approximately 57%, establishing itself as one of the most capitalised banks on the Nigerian Exchange Group (NGX) with a market capitalisation of N1.130trn. In 2023, the bank emerged as the most profitable listed bank on the NGX, reporting a pre-tax profit of N795.962bn. Notably, in the first quarter of 2024, Zenith Bank achieved about 40% of its total pre-tax profit for 2023, indicating a solid trajectory.
Zenith Bank’s stock trades at a price-to-earnings (P/E) ratio of 1.30x, significantly lower than the banking sector average of 2.2x, suggesting it may be undervalued compared to its peers. Additionally, its price-to-book (P/B) ratio stands at 0.4, while its price-to-sales (P/S) ratio is 0.44, indicating a considerable discount relative to its book value and annual sales.
The bank reported a pre-tax profit of N795.962bn in 2023, with a solid net interest income of N736.182bn for the same year. However, concerns linger regarding its loan portfolio; loans and advances surged by 63% to N6.6trn, accompanied by a cost of risk increase of 128% to 7.3%.
Zenith Bank Plc offers its ongoing Rights and Public Offer at its lowest price range, locking in about a 32% gain in potential immediate return for existing shareholders and new investors. Nigeria’s largest bank by profit, Zenith Bank, is offering a Rights Issue of 5.233 billion ordinary shares of 50 kobo each at N36 per share. The shares were pre-allotted to existing shareholders based on one new ordinary share for every six existing ordinary shares held as of the close of business on Wednesday, July 24, 2024.
The Rights Issue and Public Offer represent an enticing opportunity to acquire shares at competitive prices. With strong historical performance and favourable valuation metrics, investors seeking stability and potential growth may find this offer particularly appealing.
A review of Zenith Bank’s trading history on the stock market shows that the bank’s shares had recently traded as high as N47.35 per share, a price range that market pundits believe is a fair price for the stock. This recent price range implies a discount of about 32% locked into the ongoing hybrid rights and public offers.
With earnings per share of N21.55 for the 2023 business year, Zenith Bank’s offers carry an earnings yield of about 60%, the most attractive value addition among peers and competing offers. This means that beyond its industry-leading dividend payout, investors in Zenith Bank have significant value creation in the investment that can sustain above-average, long-term returns.
At the latest audit, Zenith Bank led the banking industry with a pre-tax profit of N796bn and a profit after tax (PAT) of N677bn in 2023. The bottom-line performance was driven by aggressive business expansion and brand adoption across domestic and foreign markets. The bank’s gross earnings crossed two milestones from N946bn in 2022 to N2.13trn in 2023. There are only three Nigerian banks with N2trn gross earnings.
The bank’s first-quarter results for 2024 already indicated that it could surpass the 2023 performance in the current year. Gross earnings jumped by 189% from N270bn in the first quarter of 2023 to N781bn in the first quarter of 2024. Profit before tax tripled by 267.8% to N320bn in March 2024 as against N87bn recorded in March 2023. After taxes, net profit leapt by 291% from N66bn to N258bn. Earnings per share rose simultaneously from N2.10 to N8.22.
Analysts believe Zenith Bank has entered a new phase of phenomenal growth. Annualised, the first quarter 2024 performance indicates that the bank’s net profit could surpass a trillion, with potential earnings per share almost covering the cost of buying into the ongoing offers. Such fundamental performance usually triggers a rally for a stock, underscoring the belief by investment experts that the bank could set a new all-time high within the next few months.
The financial lender has been adjudged the Best Commercial Bank in Nigeria for the fourth consecutive year by the prestigious World Finance Banking Awards. For the past three years, it has also been honoured as the Best Corporate Governance in Nigeria.
These awards were revalidated in the Summer 2024 issue of World Finance Magazine, which provides comprehensive coverage and analysis of the financial industry, international business, and the global economy. The awards recognised the bank’s economic performance, customer service, sustainability initiatives, and corporate governance practices.
Established by Jim Ovia, CFR, in May 1990, Zenith Bank began operations in July 1990. The bank became a public limited company on June 17, 2004, and was listed on the Nigerian Stock Exchange (NSE) on October 21, 2004, following a successful initial public offering (IPO). In 2013, the bank listed US$850m worth of shares at $6.80 each on the London Stock Exchange (LSE).
The bank has grown into one of Africa’s leading financial institutions. Its philosophy is to remain customer-centric and clearly understand its market and environment. Zenith Bank’s excellent performance has earned numerous international awards, including being recognised as the Number One Bank in Nigeria by Tier-1 Capital for the 15th consecutive year in the 2024 Top 1000 World Banks Ranking, published by The Banker Magazine, Finacial Times.
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