Good Returns Await Buyers of Zenith Bank's Shares
The nation's capital market is set to experience a new dawn as Zenith Bank Plc through current Initial Public (IPO) that commenced a few days back. The Offer closes on Thursday, July 29, 2004.
Going by the promises from Zenith Bank's Managing Director/Chief Executive, Mr. Jim Ovia at the recent Investors' Forum in Lagos, there serious indications that those who invest on the shares of the bank will enjoy bountiful returns on their investment in the company.
The bank's forecast that its profit before tax for the three years ending June 30, 2004, 2005 and 2006 will be in the order of N6.13 billion, N7.82 billion and N9.98 billion respectively is an attractive indicator of the good times ahead.
At the end of the bank's recent Completion Board Meeting, Ovia said that the IPO is being undertaken to broaden and increase its market share in all fronts and many directions.
He added that the Zenith family would be delighted to welcome the new investors who will partner with the existing shareholders to grow and strengthen one of the most formidable financial institution in Nigeria.
Ovia said that his bank_s _shares are the cheapest thing you can ever buy today. Now, why should we buy zenith shares? We are arguably the third largest bank in Nigeria by total assets. The bank_s shareholders_ fund is N16.7 billion. There are only two banks in Nigeria today that have shareholders_ fund probably above N16.7 billion. So these are the compelling reasons why we must go for Zenith and they are the compelling reasons why the price of N10.90 is a good buy._
Zenith Bank's Offer for Subscription of 800 million ordinary shares of 50 kobo each at N10.90 per share is expected to raise gross proceeds of well over N15 billion
Prospective and existing investors have been waiting for the opening of the Offer that will provide them sustainable investment reward. Perhaps, the reasons for the aggressive hunt for the bank's shares can be found in the most recent responses to questions by the Managing Director/Chief Executive Officer, Mr. Jim Ovia and other market operators.
He noted that Zenith IPO is unique because it is the first time in the history of the Nigerian capital market that an institution which has achieved high level of success will be doing an IPO.
"And, there is no institution as successful as we are in terms of profitability. Being the third most profitable bank in the country for the past four years conservatively, doing an IPO. Usually, institutions are more smaller when they do an IPO. But, we have grown Zenith bank to a very excellent position before doing an IPO. This is why this IPO is exciting, and people are saying that Zenith Bank is a national cake that needed to be distributed. Not only that our business locations, offices and branches are spread across the major cities in the country, but our brand name also goes with it. We have a very strong brand name, and a strong reputations that the customers and the public identify with. We are proud of that and we will continue to hold onto those reputations and also protect our brand name, in addition to strengthening them," Ovia declared.
Zenith Bank's boss has said it all. Everybody living soul wants to identify with success. And, it is with the investors who are now very are eager to join a successful banking institution that offers more brighter future for stakeholders, shareholders and its customers.
The proceeds from the Offer will finance Zenith Bank's strategic business development and the expansion of its network of branches in order to make quality banking more accessible to existing and potential customers. The Offer would also enable the bank continuously upgrade its information technology installations to meet the demands of its expanding network and customer base and maintain the tradition of service excellence irrespective of geographical location. It would also provide the bank with additional working capital to support its enlarged operations and allow it take advantage of emerging opportunities.
Ovia announced that the new strategic innovations by the bank will translate:
�Into bigger market share
�Into wealth creation for the new shareholders, as well as the older shareholders.
He assured investors that there will be bumper harvest for every body as bigger dividend will be declared as well as bonus issue that will also be done.
These are the unique features that make the Zenith Bank's IPO a must buy for the investors.
Articulating further points on why investors must grab any available shares of the bank, Ovia said that "the capital market today has grown to a level that all of us are beginning to be very excited about its evolution with the recent growth in market capitalisation to well above N2 trillion. That is a huge amount of money. So, with that kind of size of the capital market, and Zenith Bank coming to the market at this point in time, we will have a lot of value to add. We are creating value, but we need to add more value. We have been very supportive of the private sector and also the real sector of the economy. We will be in better position to do more when we can spread our resources and support to all the sectors of the economy," Ovia said.
It is no longer a secret that Zenith Bank is leading in the banking industry going by the current (2004) credit rating analysis undertaken by Agusto and Company.
The bank scored "Aaa" (more than 89 per cent), the highest grade on the agency's scoring grid.
Zenith Bank would be leading the industry for six consecutive times having being rated "Aaa" in 1999, 2000, 2001, 2002, 2003. According to Agusto and Company, Aaa means a financial institution of impeccable financial condition and overwhelming capacity to meet obligations as and when they fall due.
Adverse changes in the environment (macro-economic, political and regulatory), according to the agency, are unlikely to lead to deterioration in financial condition or an impairment of the ability to meet its obligations as and when they fall due.
"Regulatory and/or shareholders support will be obtained, if required. Typically, a financial institution in this category, will score more than 89 per cent on our scoring grid", the agency added.
The agency is of the opinion that "the bank has maintained a professional work ethic borne out by an impeccable risk assets quality regime which has been validated by a consistent triple 'A' rating (Aaa) from Agusto & Co., Nigeria's foremost rating agency for four years running since 1999."
THISDAY checks revealed that Zenith Bank has consistently maintained very good asset quality achieving the lowest non-performing loans to total loans ratio of 1.4 per cent as at 2003 year end, compared with the industry average of about 18 per cent.
The bank has an outstanding e-business department that handles issues relating to all electronic products which include telephone banking, mobile banking, internet banking, Zenith view facility, flow line facility, on-line bills payment and electronic bills collections to mention a few.
The bank is on record as one of the first to invest in technology which rejuvenated the otherwise slow/dormant processes in banks. By so doing, it created a new market in customers who hitherto had to move cash from one location to the other. This brought on-line banking that has now become the prerequisite for account opening by customers.
Zenith also added value to its technologically-driven service with the registration of the Zenith Bank's domain name on the internet (wwwzenithbank.com) several years ago to emerge as one of the first banks in Nigeria to have a website on the internet.
The financial market was further galvanised when the bank introduced free internet surfing for all Zenith corporate customers who could visit some of the corporate branches of the bank, making Zenith the only bank that offers this type of services as far back as 1999
Zenith Bank recently upgraded its relationship with Western Union Money Transfer (WUMT) to direct agent status in Nigeria.
The bank delivers impeccable and efficient Western Union services to its customers from its various branches throughout the country with the aid of fully computerised state-of-the-art Information and Communications Technology (ICT).
The appointment of Zenith Bank as direct agent was a further testimony to the bank's strong financial position and its resolve to continuously provide efficient financial services to its customers nationwide.
At Zenith Bank, speed, efficiency and flexibility are abiding watchwords, and the bank's customer specific approach has consistently reinforced its value creation processes by helping customers develop strategies that help them excel.
In its continuing effort to render service to the society, the bank recently reinforced its philanthropic gesture by empowering and increasing the budget of its outfit, Zenith Philanthropy. Indications are rife that the bank is budgeting as much as one per cent of its profit before tax in the realisation of philanthropic causes.
The bank in 2003 emerged the fourth largest bank in Nigeria. It was rated the biggest player in Dutch Auction System for foreign exchange allocation reintroduced by the Central Bank of Nigeria (CBN) during the period.
In its audited statement of accounts for the financial year ended June 30, 2003 as approved by the Central Bank of Nigeria (CBN), the bank also recorded an increase in its shareholders funds from N9.3 billion in 2002 to N12.6 billion in 2003.
With a profit before tax of N5.4 billion up from N3.9 billion in 2002 and profit after tax of N4.4 billion up from N3.5 billion in 2002, Zenith Bank remains the third most profitable bank in Nigeria after First Bank and Union Bank.
The bank which emerged Nigeria's fourth largest bank in 2002 recorded a 47.24 per cent increase in its gross earnings which hit N17.844 billion in 2003 from N12.12 billion in the preceding year.
According to the accounts, the bank made a provision of N663.6 million for transfer to statutory reserve during the year under review as against N525.6 million in 2002 while it proposed a dividend of N1.08 billion as against N923.9 million as at year end June 30, 2002.
With a called-up share capital of N1.548 billion in 2003 as against N1.02 billion in 2002, the bank which recorded an increase in deposit base also reserved N1.22 billion for small scale industries representing a little over 30 per cent of its profit before tax.
During the year under review, profit for the year transferred to general reserve amounted to N2.13 billion, an increase of N478,040 from the N1.65 billion transferred in 2002.
The bank showed strength and consistency in supporting industries by increasing its loan portfolio from N20 billion in 2002 to N27 billion in 2003 which were targeted at the real sector of the economy.
It also made significant reserves of N544 million for the year ended June 30, 2003 for Small and Medium Scale Enterprises resulting in a cumulative reserve of N1.2 billion for SMEs out of which about N435 million has been disbursed.
Zenith Bank, despite recording a 35.47 per cent growth in its loan portfolio has also maintained its supremacy as the bank with the lowest loan loss ratio in the industry.
The bank's non-performing loans as a ratio of total loans stood at 1.4 per cent as against the industry average of about 18 per cent, for the year ended June 30, 2003.
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