Zenith Group’s capital adequacy ratio in the first half of 2026 was 25.1%

Zenith Group’s capital adequacy ratio in the first half of 2026 was 25.1% at June 2026, against a regulatory requirement of 16% (15% plus a 1% systemically important bank add-on), leaving about 9 percentage points of headroom. 

Adjusted Tier 1 capital rose 2.9% to N3.82tn, or 21.9% of risk-weighted assets, because H1 profit exceeded the N359.36bn final dividend, while Tier 2 capital fell 16.3% to N559.2bn on lower OCI reserves. At Bank level the ratio fell to 24.9% from 26%, as retained earnings declined N98.1bn after dividends exceeded the Bank’s H1 profit of N307.4bn. The proposed N61.6bn interim dividend will reduce retained earnings further once ratified.

According to Coronation Zenith Bank Plc’s H1 2026 financial results reflected mixed earnings performance, as strong fee income growth and lower loan impairment charges supported modest pre-tax profit growth despite weaker net interest income and a significant reversal in trading revenue. 

The half year report showed interest income declined 8.9% y/y to N1.68tn from N1.84tn in H1 2025, while interest expense fell 12.9% y/y to N421.80bn. Consequently, net interest income declined 7.4% y/y to N1.25tn. The decline in interest income reflected divergent trends across asset classes: interest income from customer loans increased by just 1.1% y/y to N945.8bn, despite 13.6% growth in gross loans, while income from Treasury bills declined 22.3% to N406.2bn. This indicates weaker income generation relative to loan growth and lower returns from Treasury bill holdings. Net interest income also declined against an approximately 4.0% increase in interest-earning assets to N24.18tn.

In a note to investors Coronation said “On the revenue side, net fee and commission income rose 39.6% y/y to N178.77bn and other operating income rose 314.3% to N71.63bn, adding roughly N105bn. This was far too little to offset trading revenue, which swung from a N467.79bn gain in H1 2025 to a N92.24bn loss, a N560.04bn reversal and the main driver of the 43.8% fall in pre-provision profit. Realised FX trading explains N553.39bn of the swing (a N268.49bn gain became a N284.90bn loss) and a lower unrealised derivatives gain (N110.60bn against N192.48bn) a further N81.88bn.

 “A N97.69bn turnaround in fair-valued treasury bills (a N22.64bn loss became a N75.05bn gain) was the only material offset. Some FX gains sit outside trading, as revaluation gains in other operating income rose to

N38.36bn from N11.13bn. Operating expenses increased 9.0% y/y to N633.76bn, resulting in a 43.8% decline in pre-provision operating profit to N778.72bn. Pre-tax profit nevertheless increased 1.9% y/y to N637.60bn, supported by an 81.5% reduction in loan impairment provisions to N141.12bn. This decline was measured against an exceptionally high prior-year base, which included a Q2 2025 impairment charge of approximately N711bn.

“The bank also recorded approximately N222bn in loan write-offs during H1 2026. Net profit declined 19.1% y/y to N430.29bn, while EPS fell to N10.48 from N12.95. The cash flow statement records dividend payments of N359.361bn during H1 2026. The divergence between pre-tax and net profit was largely attributable to higher tax expense. The tax charge

rose to N206.84bn from N93.45bn in H1 2025, lifting the effective tax rate to 32.4% from 14.9%. 

“The tax note attributes the increase to an N89.88bn prior-period under-provision (H1 2025: N22.89bn) and a N48.75bn minimum-tax charge. Excluding these two items, the H1 2026 charge would have been N68.21bn, or 10.7% of pre-tax profit. On the same basis, the H1 2025 charge excluding the prior-period under-provision would have

been N70.56bn, or 11.3%. 

“The underlying effective tax rate was therefore broadly flat at around 11%, and the rise in the reported rate reflects the two items rather than a heavier underlying tax burden. The low underlying rate against the 30% statutory rate reflects tax-exempt income, which reduced the H1 2026 tax charge by N155.03bn (24.3% points of pre-tax profit). The reported decline in net profit therefore reflects weaker operating performance and these tax adjustments.

“Profitability and asset quality indicators presented a mixed picture. Net Interest Margin declined by 132bps to 10.6% from 11.9%, as net interest income fell 7.4% against an approximately 4.0% larger interest-earning asset base. Cost of Funds improved by 70bps to 3.3% from 4.0%, despite a 10.7% increase in interest paid on customer deposits to N387.3bn. The improvement was instead supported by lower interest on borrowed funds, which declined to N32.5bn from N132.4bn, following reduced borrowing costs associated with the repayment of borrowings. 

“The Cost-to-Income Ratio increased to 44.9% from 29.5%, reflecting weaker operating income relative to the expense base. This ratio is calculated using Coronation Research’s internal definition and may

differ from the company’s published ratio because of differences in methodology. Asset quality weakened against year-end 2025. Stage 3 loans rose 54.9% to N654.14bn, lifting the NPL ratio to 5.2% from 3.82% and cutting coverage to 68.5% from 74.9%. The closing balance understates the deterioration: adding back N222.4bn of H1 write-offs (53% of opening Stage 3) takes Stage 3 exposure to about N877bn, roughly double the N422.41bn at year-end and implying about N454bn of new Stage 3 formation, against gross loan growth of 13.6%.

“Although Cost of Risk declined to 2.4% from 14.3% in H1 2025, the substantial reduction partly reflects the exceptionally high prior-year impairment base and should not be interpreted in isolation as an improvement in underlying credit quality. ROAE declined by 720bps to 17.6% from 24.8%, while ROAA fell by 80bps to 2.7% from 3.5%, reflecting weaker net earnings relative to the bank’s equity and asset bases.

“Q2 2026 performance weakened sequentially, as lower interest expenses and higher fee income were insufficient to offset declining net interest income and a larger trading loss. Interest income declined 7.1% q/q to N807.02bn, while interest expense fell 20.5% q/q to N186.78bn. 

“Consequently, net interest income declined 2.2% q/q to N620.24bn. Fee and commission income increased 20.6% q/q to N97.73bn, providing some support to operating income. However, trading reveanue deteriorated to a loss of N67.46bn from a loss of N24.79bn in Q1 2026, while other income declined 57.3% q/q to N21.44bn. Operating expenses fell 3.2% q/q to N311.72bn, but pre-provision operating profit declined 13.9% q/q to N360.23bn. Loan impairment provisions increased 45.1% q/q to N83.55bn from N57.57bn in Q1. 

“Pre-tax profit consequently declined 23.3% q/q to N276.68bn. Net profit fell 62.8% q/q to N116.57bn, while EPS declined to N2.84 from N7.64. The sharper decline in net profit was driven by Q2 tax expenses of N159.94bn, equivalent to 57.8% of pre-tax profit, compared with N46.90bn in Q1. The recognition of the prior-period tax under provision and minimum-tax charge in H1, neither of which was recorded in Q1, contributed to the sequential deterioration in earnings.

“On the balance sheet, Zenith Bank continued to expand its asset base, supported by growth in customer lending and deposits. Total assets increased 3.8% YTD to N32.65tn, while interest-earning assets rose 4.0% to N24.18tn. Net loans increased 15.3% YTD to N12.05tn, while gross loans rose 13.6% to N12.57tn. In contrast, interbank assets declined 23.3% YTD to N2.09tn, while securities holdings remained broadly flat at N5.39tn. Customer deposits increased 8.3% YTD to N26.35tn, while interest-bearing liabilities rose 5.0% to N26.55tn. 

“Net loans to deposits increased to 45.7% from 42.9%, indicating a higher proportion of deposits deployed in net lending. Long-term funding declined from approximately N651bn to N11bn following the repayment of borrowings, while total liabilities increased 4.6% YTD to N27.76tn. Shareholders’ equity declined 0.8% YTD to N4.89tn (December 2025: N4.92tn) despite H1 net profit of N430.3bn attributable to shareholders. Payment of the FY2025 final dividend (N359.36bn, about N8.75 per share on 41.07bn shares), a N92.8bn currency translation loss and N16.4bn of fair value losses on FVOCI instruments more than offset the profit. The Board has also proposed an interim dividend of N1.50 per share (N61.6bn; H1 2025: N1.25), which is subject to shareholder ratification and not yet deducted from equity. 

“Net loans grew 15.3% against customer deposit growth of 8.3%, lifting the net loans-to-deposits ratio to 45.7% from 43.0%, while borrowings fell to N11.1bn from N651.2bn, although customer deposits continued to expand. The decline in equity highlights the importance of assessing capital retention alongside the bank’s dividend policy and lending ambitions.

“Overall, Zenith Bank’s H1 2026 results highlight its ability to maintain modest pre-tax profit growth despite weaker net interest income and a substantial reversal in trading revenue. Strong fee income growth and lower impairment charges supported the headline pre-tax outcome, but the decline in net profit, higher Cost-to-Income Ratio and deterioration in Stage 3 exposures temper the positive performance. 

“Higher tax charges materially affected reported earnings, while Q2’s larger tax burden contributed to a sharper sequential decline in net profit. Going forward, the recovery of trading income, the sustainability of fee income growth, the trajectory of credit quality, operating cost management and capital retention will be the key determinants of earnings performance.”