Good day, ladies and gentlemen, and welcome to the Zenith Bank full year 2024 conference call. All attendees will be in listen-only mode. There will be an opportunity to ask questions when prompted. Please note that this event is being recorded. Today, I am pleased to present Dame Dr. Adaora Umeoji, OON, GCON, CEO of the Zenith Bank Group. Please go ahead, ma'am.
Good afternoon, investors, analysts, ladies and gentlemen. My name is Adaora Umeoji, the Group Managing Director and CEO of Zenith Bank Plc. It is an honor to anchor this investors' call. With me on this call today are our Executive Directors, Henry Oroh, Adobi Nwapa, Anthony Akindele Ogunranti, Adamu Saliu Lawani, Louis Odom, our Chief Financial Officer, Abiodun Durosinmi, the Chief Risk Officer, Felix Egbon, the Chief Compliance Officer, Lawrence Babalola, Company Secretary, Michael Otu, Head Investors Relations, Jacqueline Yawwa, Head of Treasury, Yeside Banjoko, and some of our colleagues from the Financial Control and Strategic Planning Department. I want to start by thanking everyone for making out time to attend this investors' call, where we will be presenting our 2024 financial year results.
In 2024, the global economy continued to experience uncertainties driven by China's economic slowdown, the Russia-Ukraine war, the U.S.-China trade dispute, and the instability in Middle East.
Security concerns in the Sahel region and the environmental issues that increased natural disaster and affected food security collectively shaped the global economic trajectory. These challenges impacted supply chains, heightened inflationary pressure, and constrained economic growth, particularly in advanced markets, while amplifying debt burdens in frontier and emerging economies. Several governments around the world, in a bid to address these challenges, implemented varied fiscal and monetary policies to stimulate economic growth and rein in inflation. Central banks across the globe deployed monetary policy tools like interest rate adjustments and quantitative easing to stabilize financial markets and boost economic growth. The pass-through effect had its impact on the Nigerian economy. The removal of fuel subsidy and the 74.4% depreciation on the naira to the USD impacted businesses.
Additionally, the incidence of flood in many states in Nigeria and prolonged insecurity challenges led to the increased food inflation, which further strained consumer purchasing power. Despite the numerous challenges, the Nigerian economy demonstrated resilience, which was partly driven by the government's structural reforms and strategic policy actions aimed at stabilizing the economy and placing the country on a stronger development path. On the fiscal policy side, the government embarked on certain fundamental changes to address some macroeconomic challenges. These interventions, among others, include the proposed Nigeria Tax Bill 2024, issuance of domestic dollar bonds, and the revision of the country's inflation, which led to the decline of the official inflation figure by over 1,000 basis points from 34.80% in December 2024 to 24.48% in January 2025.
The Central Bank of Nigeria also acted decisively by deploying various monetary policy measures aimed at stabilizing the naira, curbing inflation, and ensuring economic growth. These policies, among others, include the Nigerian Foreign Exchange Code, Bloomberg B-Match platform for automation of foreign exchange trade, CBN recapitalization policy for Nigerian banks, increase in MPR to 27.5% in 2024 from 18.75% in 2023, increase in CRR of deposit money banks to 50%. The outcome of these initiatives are evident in the stabilized exchange rates, availability of FCY for trade transactions, declining inflation, and significant improvement in the general macroeconomic environment. For us at Zenith Bank, 2024 was an interesting year. We remain adaptive and innovative to the macroeconomic environment as we continue to offer exceptional service and maintain high standard of corporate governance in our operations. These values shaped our 2024 performance as evident in our exceptional results.
The bank recorded a quantum growth of 86% in gross earning year-on-year. This is attributed to 138% increase in interest income and 20% increase in non-interest income. The bank's PBT rose to NGN 1.33 trillion in 2024 from NGN 795 billion in 2023, representing 67% growth. Our profit after tax grew by 53% to NGN 1.03 trillion in 2024. This makes Zenith Bank the most profitable bank in Nigeria. We are proud to say that none of our subsidiaries recorded a loss. It is worthy to mention that our U.K. and Sierra Leone subsidiaries grew their PBT by 71% and 262% year-on-year respectively in 2024. We remain the bank with the highest Tier 1 capital in Nigeria at NGN 3.19 trillion. In addition, Zenith Bank successfully raised NGN 351 billion through a combined offer of right issue and public offer, which achieved 160% subscription.
Achieving this milestone demonstrates shareholders' confidence in Zenith Bank as a foremost financial institution and an indomitable brand. At Zenith Bank, we are committed to delivering superior returns to our esteemed shareholders. To demonstrate this, we declared and paid an interim dividend of NGN 1 per share in the course of 2024 financial year. We have proposed a final dividend of NGN 4. This will bring the total dividend for the year ended December 31st, 2024 to NGN 5 per share. We have consistently maintained an improved dividend payment record, and we will continue to create enhanced value for our shareholders. Our dividend payment policy is anchored on building a long-term, resilient, and sustainable institution that protects and creates wealth. Zenith Bank remains a distant leader in the financial technology space, with numerous firsts in the induction and deployment of innovative products.
In 2024, the bank concluded a major IT transformation, which included a change in its core banking application. This state-of-the-art technology is geared towards ensuring that our bank continues to provide best-in-class quality services and products that will create value for all stakeholders. With these achievements, we are set for global expansion into new markets by following our customers' business with a focus in markets with high growth opportunities. We have opened the Paris office and plan to expand to other developed economies as well as African countries, starting from Cote d'Ivoire and Senegal. We recently signed an agreement with the African Continental Free Trade Area to finance the development of a digital portal called SMART AfCFTA to help facilitate intra-African trade. As the first female and fifth Group Managing Director of Zenith Bank, it is pertinent to note that this is my first engagement with investors community.
Be rest assured that our strategy and culture of excellence will continue to drive our business operations. We want to assure you of our commitment to ensuring strict adherence to good corporate governance and exceptional service delivery at all times. Our ESG lending policy retrace the bank's strong commitment to sustainability, prioritizing ethical business while engaging our environment sustainably. We will maintain our cost optimization drive and also take advantage of cross-border banking services to support our clients' international operations and investments. We believe in the power of inspirational and transformational leadership, and our unicorn workforce is our key success factor. We remain committed to strengthening their capabilities, fostering a positive work culture, and cultivating a happy work environment to maintain high staff retention as well as customers retention. We are well-positioned to attract cheap deposits, grow our loan book while maintaining a low non-performing loan ratio.
With all this, we are poised to deliver value to all customers and continue to provide superior returns to our shareholders in 2025 and beyond. It is a privilege to lead this great institution, having risen through the ranks and appointed through a tradition of organic leadership development. We feel honored and committed to carry forward the enduring legacy of our founder and chairman, Dr. Jim Ovia, CFR, to build a successful, sustainable, and strong corporate governance culture institution that will outlive us generations to come. On this note, I welcome our CFO, Abiodun Durosinmi, to present more comprehensive details of our 2024 financial year results. Once again, thank you very much for listening.
Thank you, GMD, and good afternoon, everyone. In terms of the financial highlights, I will refer us to page 14 of the slides, and of course, page 16 for the group details. I will start with the gross annual, like GMD confirmed, it grew by 86% to hit our record of NGN 3.97 trillion. This is interesting because the contribution here came from both interest and non-interest income lines. We have interest income contribute 70% to this and 30% from non-interest line. This for us signifies a very strong and sustainable earning ability from our core business operations. Specifically, if I look at interest incomes, it grew by 138% to hit NGN 2.7 trillion in 2024. Some factors contributed to this. Interest earning on our risk assets, of course, our risk asset group and interest earning thereon also increased.
We also increased our investment in other securities, which also contributed significantly to the interest income. Interest rates hiked in the period 2024. We saw MPC increase the MPR rate six times, like GMD confirmed. That also led to interest rate escalation in the market. Of course, again, the translation effect of interest income on our FCY portfolio also contributed to that, especially with the 62% depreciation of Naira in the course of 2024. Similarly, on interest expense, of course, we also grew by 143% to hit NGN 992 billion in 2024 from NGN 408 billion in the prior year. Similar factors also played out here. We grew our deposit liability by 45% due to our aggressive deposit mobilization drive. Again, the direct impact of the CBN's upward review and the MPR also led to a general rise in the interest rate environment.
We saw cost of fund also escalated by 60%, from 3.0% to 4.8% in the course of the year. Again, due to the increase in the MPR and escalated interest rates environment we operated within. Again, translation effect of interest expense on our FCY borrowings and of course our FCY deposits also contributed to the increase we saw in interest expense, again, on account of Naira depreciation. The combined effect of the movement in the interest income and interest expense resulted in a very strong and positive net interest income for us. It increased by 135%, from NGN 736 billion to NGN 1.7 trillion in the year 2024. So effectively, this resulted in a net interest margin increase of 30%. It went up from 7.3 to 9.5. Another significant item on the income statement will be the impairment charges for the year.
It increased by 61% as we charged to the books NGN 659 billion in 2024 as against NGN 410 billion in 2023. It is good to know that this increase is not on account of any deterioration in our loan book. It is just in line with our tradition of making best impairment provisions for our loans as much as possible. We also saw the need to create sufficient buffer to protect our balance sheets and especially our dollar-denominated loans. Again, we took this prudent step, taking the advantage of the revaluation impact on our profitability for the year. However, despite this increase in impairment charges, cost of risk moderated at 7.3, as we had even in the prior year. On the non-interest income line, we also grew by 20% to hit NGN 1.1 trillion.
Major contributors, of course, net trading profits, which increased by 94% to hit NGN 1.1 trillion.
Again, on account of the effective management of our treasury portfolio, and of course, we intend to continue in that step. There was also an 89% increase in our net fees and commission due to increase in adoption of our digital channels. And of course, we continue to see tremendous increase in volumes of transactions on those platforms. Again, on the downside, we recorded a negative net return on other operating incomes. This has to do with the need for us to fully comply with regulators' directive on the need for banks to maintain a zero net open position long and of course, maximum of 20% short. Again, to comply here, the bank has to restructure our balance sheets and the resultant effect of that was the currency loss that we experienced. We can see that on page 148 of the financials under note 11.
Last on income statement, of course, is the operating expense, which also grew by 88% to hit NGN 843 billion. Here, a quarter of that has to do with regulatory costs, talking about the AMCON charges, which is a function of our total balance sheet size and of course, the Nigeria Deposit Insurance Corporation insurance premium, which is a function of our total deposit liability. Another factor here is our ICT spending, which more often than not are dollar-denominated and of course, with Naira devaluation, we see this translating to huge Naira on our income statement. Of course, again, GMD mentioned the high inflation we operated under, which resulted in general price levels in 2024. So when we put all this together, our cost-to-income ratio increased slightly by 8%, from 36.1% to 38.9%. We intend to keep this below 50.
We provided a guidance of 40% as we have on page 45 of the presentation. All said, we returned a profit before tax growth of 67% to hit NGN 1.3 trillion in 2024. Effectively, our earning per share was NGN 32.87, which is a growth from NGN 21.55 we had in 2023. You can see the details of that on page 151 of our financial statement. Briefly on the balance sheet side, highlights, I refer you to page 11 of the presentation and of course, the details on pages 22 to 23 of the presentations. Again, loan book grew by 15.6% to hit NGN 11 trillion. Contribution to that, again, naira devaluation, translation of the FCY component of the loan book, and of course, organic growth, as we also book new facilities to thriving sectors within the economy. The debt facility also grew by 45% to hit NGN 22 trillion.
Again, partly devaluation and of course, our aggressive deposit mobilization also yielded positive results. Total assets grew by 47% to hit NGN 30 trillion. Liquidity, we closed at NGN 8.3 trillion. Shareholder fund, of course, increased by 17% on account of new capital raise and of course, additional retained earnings for the year. On prudential ratios, we continue to operate within the limits. It's either we are below the maximum or we are above the minimum, and we continue to maintain that. In summary, we are confident that we have a very liquid balance sheet. We are well-capitalized, and we will continue to take advantage of profitable earning opportunities in the market. We have capacity to take bigger transactions now, and we will continue to pursue our growth agenda. We'll consolidate on our digital transformation, and we'll continue to create and deliver value, and continue to reward our shareholders.
At this point, I hand over back to the GMD/CEO. Thank you.
Thank you very much, CFO, for those clarifications. We are ready for questions now.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star and then one on your telephone keypad or the keypad on your screen. A confirmation tone will indicate that your line is in the question queue. You may press star and then two to exit the question queue. We request that you limit yourself to one question. If time allows, you are welcome to rejoin the question queue. Just a reminder, if you would like to ask a question, you are welcome to press star and then one. The first question comes from Timothy Wambu of Absa. Please go ahead.
Thank you very much, and good afternoon. Thank you for the presentation and taking time to answer our questions. I will just ask one question as advised. I can see your PBT guidance is higher, and I would imagine this is because you expect to still have a very strong performance from your trading book. Just give us a sense of what to draw that strong performance. I believe it has a lot to do with the swaps. Could you tell us the status of those swaps? Have they been resolved by the Central Bank of Nigeria or are they still in existence? Give us an idea of the size. Tied to that is just a question on the FX devaluation loss that you booked. Explain how that turnaround happened from a gain of NGN 223 billion to that loss of NGN 178 billion. Thank you.
The next question comes from Ifeanyi Osele of CardinalStone Securities Limited. Please go ahead.
Yeah. Hi. Good afternoon. Thank you for having us. I just have a couple of questions to ask. Looking at just a quick update on the plans to adopt a HoldCo structure, what is that looking like and what timeline should we be looking at for this to be completed? Also, I would like to ask from non-interest income. This was majorly driven by we had gains on trading books. Could you shed more light on this as a breakdown was not provided? Also, the NGN 63.3 billion in windfall taxes that we saw in the notes, can you give us some sort of information on what portion relates to 2023 and what portion relates to 2024, as well as your expectation for this going forward in 2025? That is all from me. After that, I will come up with the next.
Thank you. The next question comes from Felix Okolo of Standard Chartered Bank Nigeria Limited. Please go ahead.
Good afternoon, and congrats on the numbers. I would just like to ask quickly just one question. We saw from the financials that there was a new fresh borrowing of about NGN 800 billion.
From the Central Bank of Nigeria. Please, could you shed more light on that line and what drove this? Do we expect this going forward? Thank you.
Thank you very much for your questions so far. I will take some, while the CFO will. I will start with the question on the FX swap position. As at 2024, we had an exposure of $1.6 billion, and presently it has really come down significantly. The maturities have been reinvested into other interest-yielding instruments to diversify our portfolio in that segment. For the question that has to do with the HoldCo, thank you as well for that insightful question, because following the shareholders approval for HoldCo, the bank set out to actually get regulatory approval. However, the CBN came up with a recapitalization exercise along the line. Pursuing the HoldCo have delayed the capitalization exercise for us as a bank. We decided to suspend the HoldCo structure to actually enable us raise the capital for the bank.
More so, as our peers were already getting prepared to the market, we wanted to be part of those to take the first-mover advantage. After our capital raise, our focus is now on global market expansion and efficient deployment of the new capital. If the need arises, of course, the HoldCo structure will be revisited. But for now, we've suspended it so that we can focus on the global market expansion and then making sure we grow our market share in the industry. Thank you very much. I yield to the CFO to take the rest of the questions.
Thank you, GMD. The question on the trading book, the income on that line is a mix of income from trading transactions, instruments, and of course, including the derivatives, trading income on various hedges taken out by the bank. Of course, it excludes the trading bills and bonds. The good thing is, as the investments in that portfolio continue to mature, we continue to roll over or even diversify into other higher-yielding investments. We continue to look for the opportunity, and we continue to see in the market. So we'll continue to optimize returns from that portfolio. Our treasury is good at that. There was a question on windfall tax. The liability for windfall tax as far as 2023 and 2024 is concerned is fully taken into the books. It's already disclosed in the financial statements for 2023 and 2024 combined. It's there, it's declared.
It's NGN 63 billion, almost near 50/50 if we are to divide it between 2023 and 2024. There was a question on borrowing from CBN. It's a collateralized borrowing. CBN has dollars which is in placement with CBN. Thank you, GMD.
Thank you very much, CFO, for those responses. Can we take more questions now?
Thank you. The next question comes from Ifeanyi Osele of CardinalStone Securities Limited. Please go ahead.
Thank you for your answers to my questions earlier. I just have a few more. One is on your payout ratio for your dividends. Seeing as there has been, I will say, recent discussion in the trend for payout ratio, could you provide a guidance as to what we should be expecting in the future? Would we expect the bank to maintain this current payout ratio of about 15%, or should we be expecting something higher? Next, I have something on NIM. Looking at how we are expecting a potential decline in interest rates in the latter half of the year, what is the bank's plans to maintain a healthy net interest margin and also higher net interest income? Even also looking at your interest expense, this has kind of been elevated.
We have also seen your cash ratio at 77% and interest expense going to, let us say, close to NGN 1 trillion. What measures is the bank looking to, I would say, attract cheaper funding, cheap funds in order to finance its operations, cheap deposits, basically? What is the plan of management? Also just a follow-up question to the question I asked earlier on the trading gains. You said it was broken down into a number of items. Can you give a sense, if you could attach percentages to those breakdowns, what percentage of the gains was as a result of the exposure to FX? If you could just give an estimate or a sense to that. That is all from me for now.
Thank you. Ladies and gentlemen, just a reminder, if you could please limit yourself to one question at a time, and if time allows, further ups can be achieved once you have rejoined the question queue. Thank you. The next question comes from Isaac Asoro of WSTC Financial Services. Please go ahead.
Hello, good afternoon. Can you hear me?
Yes, we can. Please go ahead.
Okay. The last person I just spoke to, I tried to know what percentage is derivative gain, trading gain and all in your trading gains income. That was my question.
The next question comes from Gideon Oshadume of Chapel Hill Denham. Please go ahead.
Hello, good afternoon. My question is about Zenpay. Are we likely to see more traction from the new subsidiary? I want you to just shed more light on the status of Zenpay.
Are there more, or I should go ahead with a response? We should go ahead? Okay. I guess we can start. I will take some and then the CFO will take some, then we will have ED Akin to take the question on Zenpay, and then we will have ED Lawani to take on the swap question. I will start with the dividend payout question. Zenith Bank has remained investors' delight, and this made us one of the first banks to achieve Central Bank of Nigeria's mandate on recapitalization. We actually achieved 160% subscription. It is pertinent to note that over the past five years, Zenith Bank has cumulatively paid the highest dividends in the Nigerian banking industry. The bank's dividend policy is anchored on building a resilient and sustainable bank for the future.
Our dividend payout was also influenced by the need to build a counter-cyclical buffer, given the operating environment. We will continue to enhance our dividend payout sustainably to be able to ensure that we sustain it and we improve on it based on the economic environment. Our minimum dividend payout will be upward of 20%, subject to the economic and regulatory requirements. You should rest assured that we will continue to give greater returns and value to our esteemed shareholders at all times. CFO, can you take before Akin?
Thank you, GMD. There was a question on interest rates regime coming down. Well, it is not going to be one-sided. If that happens, the important thing is we continue to maintain our margin. If that happens, interest income will come down quite all right. But of course, interest expense too will also go down. Our ability to manage and retain our margin is what is important, and that we can assure you we will do as we have always done. There was another question on the elevated interest expense. I think I explained that that is partly due to naira depreciation, translation effect of the interest expenses that were in FX. When translated, of course, they amounted to a significant naira amount. I also mentioned the hike in MPC rates in the course of the year, which was a contributory factor.
And of course, the growth in our stated liabilities giving rise to this interest expense. That should not be a problem for us going forward. There was a question on trading gain in terms of what percentage breakdown. Well, it is safe to say that, of course, between 50%-60% derivative related. There are other trading instruments apart from that. Thank you. I think that is it from me.
Okay. Lawani, can you go ahead with the FX swap?
Yeah. Thank you. Thank you, Group GMD. I think the question on the FX swap, and as the Group GMD did mention in the last response, at the beginning of 2024, we had about $1.6 billion. We had several maturity with the Central Bank and split, liquidated. But this liquidity have been reinvested in other interest-yielding instruments, again, to improve our yield and diversify our portfolio. We like to assure our shareholders that the maturity or the payback by CBN will not in any way impact on our yield and our returns on investment because we will intelligently look for other high interest-yielding instruments to invest this maturity. Thank you.
Thank you very much, Lawani. Akin, can you please take the Zenpay?
Yeah. Thank you very much for your question and interest in Zenpay. We are in advanced stage of concluding the build for the platform, and we expect that that should be ready within the second quarter of this year. Once that is up and running, we expect that it would also be able to support our digital expansion in the marketplace. Yes, indeed, we expect a lot of interest in developments and activities in that space. Thank you.
Thank you very much. Can we take more questions, please?
Thank you. Next question comes from Ngozi Udom of CardinalStone. Please go ahead.
Okay, thank you so much, and congratulations on your results once more. In particular, I just want to really clarify on your trading gains. I know we've discussed it, but on the notes under your trading gains, you have another sub-line item, gains on other trading book, and this amounted to about NGN 1 trillion. On that note, you stated about NGN 2.2 billion was on gains on derivative and about NGN 15.4 billion was related to foreign currency trading gains. That is significantly less than the NGN 1 trillion booked in gains on other trading books.
Also, given your answer that at least 50% of your total trading gains was related to derivative, I would then believe that another, let's say the NGN 1 trillion is still related to, apart from the notes that you give about NGN 2.2 billion being gains on derivative, I would believe that there are still other gains in derivative resident in that NGN 1.1 trillion on that line item. Just to clarify. Going forward, what are your expectations for this kind of income, it is quite substantial. Are we to expect this kind of result given the relative currency stability that we are experiencing as of now? I think that is it for me. Thank you.
The next question comes from Sodiq Safiriyu of SBG Securities. Please go ahead.
All right. Thank you very much for taking my question. Please, can you confirm that you can hear me?
Yes, we can.
All right. Yeah. All right, thank you very much. Number one, I wanted to confirm the operational risk portion of the bank's risk-weighted assets in 2024, increased by about 76%. I would like to more understand the cause for that, likely implication, and what we are looking at as the outlook in 2025. One of the concerns I flag is the proportion of Stage 2 loans to total gross loans. I know for now it's been increasing over 30%, but as at FY 2024, reduced to 30%, but still remains high in my opinion. I would like to know what details concerning or reasons why it has stayed relatively high.
Okay. Thank you very much. For the question on the trading gains, like CFO stated earlier on, he will still take that, but I know indicated that the other trading gains in our books is a mix of trading transactions and instruments, including derivatives, trading income on various hedges taken out by the bank, excluding trading bills and bonds. CFO is going to clarify on the trading gain aspects as well, as well as operational risk, which the CRO will take, and then as well as the proportion of Stage 2 loans. That one, CRO will take that as well. Go ahead, Abiodun.
Thank you, GMD. Just like we said, it's a box of trading activities. We've spoken about swap here today, and we have other derivatives that are cycled out and hedges. We've also spoken about reinvesting the proceed of those investments, recycling or even diversifying to other high-yielding instruments as they mature. For more specifics on this, of course, we are available. We can also reach out outside this call. Thank you. CRO.
Thank you very much, Abiodun. On the operational risk increase, as you well know, the industry operates a standardized approach measurement for operational risk. As your turnover increases, your operational risk is measured as an average of your last three years turnover. If you see the way we have grown fairly, you will understand why operational risk has significantly increased. We are one of those that had tried to champion movement to more advanced approaches, but CBN feels safer with the current standardized approach because it offers them more confidence and safety within the banking industry. It's something we'll continue to manage. We understand that we'll continue to grow as a bank, and as we grow as a bank, we must recognize that size alone also brings operational risk challenges to us that we'll continue to manage. So that we understand and we'll continue to manage that.
On the proportion of the Stage 2 loan, it is worthy to know that we have always had assets in Stage 2 loans that we are trying to deal with. Interestingly, most of those loans have been restructured, and we are seeing significant performance in them. But for prudence sake, we have left them there because we want to attain a comfortable clear period before we start thinking of moving them back. For the few ones we have not restructured, we have put them in Stage 2, offers us an opportunity to make significant impairments, which you have seen in our impairment charge in the year. It is an area we will continue to manage.
It has not grown significantly because we have grown other loan types and the contributors to that particular asset, that kind of loan has been tempered until we get our way out of it before we start growing loans in that same category.
It is an area we are managing quite significantly, and we think we will be out of it latest by the third quarter of the year when there is a resolution on most of them. Thank you.
Okay, thank you very much. Now we take more questions.
Thank you. The next question comes from Mubarak Ajenipa of Zrosk Investment Management. Please go ahead.
Thank you so much for taking my question. Congratulations on your results. My question is basically on your dividend payout. I know you gave a bit of context to that, and you mentioned stuff around taking some buffer. Is it safe to say that you have from the CBN, and can we assume that the 20% payout ratio that you gave is the new dividend policy going forward? Because I understand that excluding 2023, the split payout ratio has averaged around 43%. Is it safe to now assume that 20% is now the new payout ratio, or there are just some consideration around this 15% that you paid out this year? I will just come back to you for my next question.
The next question comes from Timothy Wambu of Absa. Please go ahead.
Thank you. Mine is a follow-up from a question that I asked earlier. When you mentioned that the cross currency swaps have declined significantly from $1.6 billion, are you able to give us a figure that is outstanding currently? With this reduction, does this not impact on your ability to generate such significant trading gains? I had also asked a question earlier, and this was on the foreign currency revaluation loss that was reported. I understand the state chart, the loss was due to compliance with the CBN NOP directive. Just explain what changed, what transpired there, for you to book such a significant loss compared to the significant gain you had in the prior year, from NGN 223 billion gain to NGN 178 loss. What currency movement played out? Thank you.
The next question comes from Sodiq Safiriyu of SBG Securities. Please go ahead.
Yeah. Thank you very much. I just wanted to get a sense of the guidance for cost of risk. So what we saw last year was cost of risk guidance at 10%, be 7.3. For 2025, you are giving cost of risk of 7%. I just want to get a sense generally around what exactly is transpiring or giving this a cost of risk. Can we just get a sense generally to that? And also, the significant loan loss reserves that was made last year, and about 55% of it was to the oil and gas sector. Is it possible
Sodiq, are you still with us today? I am sorry, but it seems like Sodiq is having technical issues.
Yes, I think we have technical issues. Maybe we should go ahead and respond to the questions we have already while he reconnects. Okay. So there is a question on the swap position. Like we said earlier on, that the exposure of $1.6 billion has significantly reduced to less than $1 billion, and the CFO will give more clarity on that. For the guidance and cost of risk, the CRO will take that aspect, and we will have our ED. Our ED is present too, to talk on same currency swap issue and the dividend payouts. Thank you very much. Henry, can we start with you, please?
All right. Thank you very much. And thank you for the question on dividend payout. Yes, for 2024, our dividend payout is at 20%, but over the last five years, Zenith Bank cumulatively has recorded the highest dividend payout in the market. We continue to take our returns to shareholders as a very significant interest. You are right. Before the uncertainties in the market in the last three, four years, remember COVID and all that, our payout ratio was somewhere around 48%. Now we are beginning to see some level of stability in the economic environment. Our dividend payout ratio, I can assure you, we are going to push northward. I think the 20% is just the bottom mark.
In the coming years, we see our bank raising our dividend payout to a very substantial ratio, how be it to the levels of 48% where we have been in the last previous years. Like the GMD said, we see a reward to our shareholders as a significant interest, and we are confident that our returns, which is very stable, our balance sheet, which is also very stable, will provide that high return that will enable us pay high dividend payout and also maintain a very high dividend payout ratio moving forward. Thank you.
Thank you. Can we start with the CFO, then CRO, you can now conclude with your CFO, go ahead with your clarity.
Yeah. Thank you GMD. There was a question on FX loss. I think like I said before
At the point of fully complying with the regulators' directive on several net open position long, we restructure our balance sheet, like I said. We move from long to short. If you look at page 109 on the full FS that we have uploaded, you can see the short position. With that position and subsequent naira devaluation, we incur huge currency loss at that point. Again, the good thing is this is one-off. It will not reoccur, and that won't affect us in 2025. It's done with 2024, and that's the position as we have now. Thank you. CRO?
Thank you very much. On the cost of risk projection and the guidance we gave on 7%, clearly you would see that our economic conditions are becoming more stable. Issues that gave rise to the uncertainties last year following the reforms is stabilizing.
Our commitment is that, and what we see is that as these rates begin to get better managed, we don't see them significantly impacting on the cost of risk within our environment. We do realize that there are still some attached sensitivities within the market, and we must put that into play in our projection. 7% for us, we think is sufficiently good enough for guidance at this stage until we see what happens before the middle of the year. That's why we guided 7% for our cost of risk.
Thank you very much. Judy, do we have more questions?
No, ma'am. At this stage, ladies and gentlemen, we have reached the end of the question and answer session. I will now hand back to the GMD for closing remarks.
Thank you very much, Judy. Thank you, ladies and gentlemen, for all your insightful questions and valuable perspectives. We appreciate your continued interest in Zenith Bank, and we have shared our strong fundamentals, discipline, execution, and strategic focus on resilience, innovation, and sustainable growth. We remain agile and focused and forward-looking as we innovate to scale and create more value for all stakeholders, as we look forward to building an institution that will outlive all of us generations to come. On behalf of the board, management, and staff of Zenith Bank, we want to thank you very much for your trust and partnership in Zenith Bank, and we want to assure you that we will continue to build value for all stakeholders. Thank you very much.
Thank you, ma'am. Ladies and gentlemen, you are welcome to reach out to the bank's investor relations unit for further questions after the call. Once again, ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.