Investment Firm Sets N65.66 Target Price for Zenith Bank
Analysts at a Lagos-based investment firm have set a higher target price for Zenith Bank Plc following an impressive earnings performance in the first quarter of 2025.
In its latest update, analysts at AAG Capital Limited put Zenith Bank’s target price at N65.66 per share versus N47.60 reference price, citing robust growth in net loans and investment securities as core earnings drivers in the first quarter of 2025.
This suggests about 38% upside potential for investors that took a position at the referenced close price in the equities market last week. Zenith Bank’s unaudited Q1 2025 results showed a sturdy 71.5% year-on-year increase in interest income, driven by growth in income from both net loans to customers and investment securities—treasury bills & government bonds.
The bank’s net loans to customers rose by 16.2% year over 12 months. Interest expense rose at a slower pace, up 35.3%m which helped strengthen the bank’s margin.
As a result, net interest income recorded a significant 92.9% year-on-year growth to N591.2 billion. Funding costs stayed under control as analysts noted that customer deposits grew by 35.1% in the first quarter.
However, net fee and commission income declined marginally 2.9% due to a slowdown in credit-related fees, account maintenance fees, fees on electronic products, and foreign withdrawal charges.
Other Income, which includes trading gains and Other Operating Income, declined significantly to N33.2 billion from N213.9 billion in Q1 2024 due to lower gains on other trading books, which declined to N12.9 billion in Q1 2025 compared with N186.3 billion in Q1 2024.
The bank reported foreign currency revaluation gains of N12.8 billion in Q1 2025 compared with N3.4 billion in Q1 2024, reflecting the CBN directive that forced banks to reduce net FX open positions last year.
Reflecting improved asset quality, analysts at AAG Capital Limited highlighted that Zenith Bank’s impairment charge declined 11.8% year-on-year to N49.4 billion in Q1 2025, bringing annualised Cost of risk to 1.8%, compared with 2.4% for Q1 2024.
The bank’s operating expenses rose 38.9% year on year to N280.3 billion in Q1 2025, primarily driven by higher personnel costs and increased spending on FX-linked IT expenses, fuel, maintenance, and regulatory charges [attributed to balance sheet expansion].
However, the rise in OPEX outpaced the 17.7% growth in total operating income, resulting in a deterioration of the cost-to-income ratio (excluding provisions) to 41.2% in Q1 2025, compared to 34.9% in Q1 2024. Still, the bank reported that pretax profit grew 9.6% year on year to N350.8 billion in Q1 2025 from N320.2 billion in Q1 2024.
Also, its net income expanded by 20.7% year on year to N311.8 billion, bringing Q1 2025 annualised return on average equity to 28.1%, reflecting the impact of the new capital raised compared with 36.3% for Q1 2024. #Investment Firm Sets N65.66 Target Price for Zenith Bank#
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