Zenith Bank: The success story of Nigerian banking

Zenith Bank is undoubtedly the biggest success story in Nigerian banking, a story that has evolved over twenty years, writes Marcel Okeke, Head of Research at the bank


Zenith Bank has, over the past 21 years, grown to be one of the biggest and most profitable banks in Nigeria. Established in May 1990, the bank started operations in July of the same year as a commercial bank. It became a public limited company on June 17, 2004 and was listed on the Nigeria Stock Exchange on October 21, 2004 following a highly successful Initial Public Offering (IPO). The bank currently has a shareholder base of over one million and is the bank with the highest shareholders’ funds – $2.46bn – Q3 2011 – in Nigeria.

Headquartered in Lagos, Nigeria, Zenith Bank has over 500 branches and business offices nationwide, with a presence in all the state capitals, Federal Capital Territory (FCT), major towns and metropolitan centres in the country. In April 2007, Zenith became the first Nigerian bank in 25 years to be licensed by the UK Financial Services Authority (FSA), giving rise to Zenith Bank (UK) Limited. Zenith Bank also has a presence in: Ghana, Zenith Bank (Ghana) Limited; Sierra Leone, Zenith Bank (Sierra Leone) Limited; Gambia, Zenith Bank (Gambia) Limited and a representative office in Johannesburg, South Africa. Another representative office is being opened in Beijing, China this year.

Zenith Bank’s management team is made up of seasoned professionals headed by Godwin Emefiele, the Group Managing Director and CEO, who is a pioneering staff member and has been on the board for more than a decade. He took over the reins from the founding CEO, Jim Ovia, in August 2010. The bank’s exceptional performance stems from its experienced leadership, professionalism and vision of the management and staff.

The operating results of the bank, since it went public in 2004, indicate an impressive performance in all of its parameters. Total assets grew from $1.25bn in 2004 to $14.19bn in Q3 2011, representing a growth of 1,039 percent. Within the same period, total deposits went up by 1,079 percent from $845m to $9.97bn, as at September 2011.

Zenith’s strong growth
Zenith Bank has built a brand as a reputable, international, financial institution, recognised for innovation, superior customer service and performance while creating premium value for all stakeholders. Today, the bank is easily associated with the following attributes: Innovation, solid financial performance, stable and dedicated management, highly-skilled personnel, leadership in the use of ICT, strategic distribution channels and good asset quality. The key strategies used over the past 12 months to drive the robust growth are as follows:
– Always delivering superior service experience to all customers;
– Developing deeper and broader relationship with all clients and  striving to understand their individual and industry peculiarities with a view to formulating specific solutions for each segment of the customer base;
– Optimally expanding the bank’s operations by adding new distribution channels and entering into new markets where opportunities exist;
– Maintaining the bank’s position as a leading service provider in Nigeria, while expanding its operations internationally in West Africa and the financial capitals of the world;
– Striving to be a leading service provider in Nigeria by continuing to build on longstanding relationships, capabilities and the strength of the Zenith brand and reputation;
– Continually enhancing the bank’s processes and systems to deliver new capabilities and improve operational efficiencies and achieve economies of scale.

Capital management assurance
The strategy for assessing and managing the impact of Zenith Bank’s plans on present and future regulatory capital forms an integral part of the bank’s strategic plan. Specifically, it considers how the present and future capital requirements will be managed and met against projected capital requirements based on our own assessment and against the regulatory capital requirements, taking account of the bank’s business strategy and value creation to all its stakeholders.

The capital adequacy of the bank is reviewed regularly to meet regulatory requirements in order to adopt and implement the decisions necessary to maintain the capital at a level that ensures the realisation of the business plan with a certain safety margin. The Central Bank of Nigeria (CBN) requires each bank to maintain a certain ratio of total regulatory capital to the risk-weighted asset at or above the minimum of 10 percent. Zenith Bank Plc has consistently met and surpassed this requirement. Most of the bank’s capital is Tier 1 (Core Capital), which consists essentially of share capital, retained earnings and reserves.

The group’s capital plan is linked to its business expansion strategy which anticipates the need for growth and expansion in its branch network and IT infrastructure. The capital plan sufficiently meets regulatory requirements as well as provides adequate cover for the group’s risk profile. Its capital adequacy remains strong and the capacity to generate and retain reserves continues to grow.

Robust liquidity methods
Zenith Bank’s liquidity profile remains very strong (being a consistent net placer of funds in the interbank market) and its risk management practices give assurance that this profile will be maintained. The bank has a sound and robust liquidity risk management framework that ensures it maintains sufficient liquidity, including a cushion of unencumbered, high-quality liquid assets at all times. Zenith Bank’s compliance with liquidity and funding requirements includes the following processes: projecting cash flows and considering the level of liquid assets necessary in relation to needs; monitoring balance sheet liquidity ratios against internal and regulatory requirements; maintaining a diverse range of funding sources with adequate back-up facilities; managing the concentration and profile of debt maturities; monitoring depositor concentration in order to avoid undue reliance on large individual depositors; and ensuring a satisfactory overall funding mix, while maintaining liquidity and funding contingency plans.

In 2009, the Central Bank of Nigeria (CBN) conducted a special audit to ascertain the stability of the banking sector in the country. Zenith Bank was one of the 14 banks that passed the audit. The result of the audit led to the quasi-nationalisation of 10 banks representing about 50 percent of system assets.

Corporate social responsibility
Corporate Social Responsibility (CSR) remains a key component of Zenith Bank’s strategic drive for the overall development of the society in which it operates. The bank’s commitment and efforts in CSR have not only won several awards and accolades within Nigeria, but it has also done so internationally. Zenith Bank’s efforts cover a broad range of human needs and have impacted positively on the quality of life of a large number of individuals, interest groups and communities.

These efforts cover areas such as education, health, community development, sports, youth and women empowerment, arts and culture, disaster relief, security, government agencies and non-governmental organisations’ activities among others. As a responsible corporate citizen, the bank endeavours to make contributions that make a meaningful impact on the well-being of the beneficiaries and the society at large.

Ratings and corporate governance
Zenith Bank has consistently recorded good ratings from both the international (Fitch Ratings, Standard & Poor’s) and local (Agusto & Co.) rating agencies. The ratings on Zenith Bank Plc are supported by its leading market position in all key performance indices.

Zenith Bank has consistently put in place a robust system of corporate governance, bearing in mind the key elements of honesty, trust, integrity, openness and accountability as well as commitment to the organisation’s goals. To uphold strong corporate governance and transparency, the bank adopts a robust public disclosure policy. This is to forestall incidences of abuse, such as insider trading.

All financial information, as well as exceptional and extraordinary events capable of influencing the public decision concerning the bank, are approved for dissemination by the board and then related through authorised means to the public at the same time. The release of such information is done speedily and as often as stipulated by the regulatory bodies.