ZENITH BANK’S HYBRID RIGHTS ISSUE AND PUBLIC OFFER HOLDS IMMENSE VALUE FOR INVESTORS
Zenith Bank Plc, in a significant move to meet the Central Bank of Nigeria’s (CBN) new
minimum capital requirement of N500 billion, is offering its ongoing hybrid rights and public
offers at the bank’s lowest price range, locking in about 32 percent gain in potential immediate
return for existing shareholders and new investors. This Hybrid Rights Issue and Public Offer,
aimed at raising approximately N290 billion, will not only enable the bank to meet the CBN’s
requirement but also provide additional working capital to support its expanding operations and
investments in information technology infrastructure.
Currently, Zenith Bank’s issued and fully paid share capital stands at N15.698 billion,
complemented by a share premium of N255.047 billion. To meet the CBN’s new stipulation, the
bank requires an additional N229.225 billion. 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 not only
undervalued but also 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 adds to its appeal 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 N1.130 trillion. In 2023, the bank emerged as the most profitable
listed bank on the NGX, reporting a pre-tax profit of N795.962 billion. Notably, in the first quarter
of 2024, Zenith Bank achieved about 40% of its total pre-tax profit for 2023, indicating a strong
trajectory.
Currently, 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.
Financially, Zenith Bank reported a pre-tax profit of N795.962 billion in 2023, with a solid net
interest income of N736.182 billion for the same year. However, concerns linger regarding its
loan portfolio; loans and advances surged by 63% to N6.6 trillion, accompanied by a cost of risk
increase of 128% to 7.3%.
Zenith Bank Plc is offering its ongoing hybrid rights and public offers at the bank’s lowest price
range, locking in about 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 on the basis of one new ordinary share for every six existing ordinary
shares held as at the close of business on Wednesday, July 24, 2024.
For investors, Zenith Bank’s Hybrid 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 the trading history of Zenith Bank at the stock market indicated 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 simply 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 N796 billion and
profit after tax of N677 billion 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 N946 billion in 2022 to N2.13 trillion in 2023. There
are only three Nigerian banks with N2 trillion gross earnings.
First quarter results for 2024 already indicated that the bank could surpass the 2023
performance in the current year. Gross earnings jumped by 189% from N270 billion in the first
quarter of 2023 to N781 billion in the first quarter of 2024. Profit before tax tripled by 267.8% to
N320 billion in March 2024 as against N87 billion recorded in March 2023. After taxes, net profit
leapt by 291% from N66 billion to N258 billion. 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 that almost covers 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.
Zenith Bank has been adjudged the Best Commercial Bank in Nigeria for the fourth consecutive
year by the prestigious World Finance Banking Awards. It has also been honoured for the past
three years 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 financial 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 $850 million 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. The bank’s philosophy is
to remain customer-centric with a clear understanding of 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.
