A review of Zenith Bank Plc’s 2025 audited financial statements reveals a year marked by numerous risks, pressure on profits, and new challenges in business operations.
Although the bank grew in size and strengthened its financial position, from difficult accounting decisions to risks linked to climate change, the bank’s performance was influenced by five major issues affecting its operations, regulation, and future outlook, Pinnacle Daily analysis shows.
High-Stakes Judgment in Credit Loss Provisioning
At the centre of the bank’s financial reporting is the heavy role of management judgement in calculating Expected Credit Losses (ECL), which the bank’s auditors highlighted as a key issue.
This process relies on estimates and assumptions, particularly in classifying loans based on their overdue status, as measured by Days Past Due (DPD), which determines their stage under IFRS 9.
This classification has a direct impact on how much the bank sets aside for possible loan losses, making it very sensitive to judgment and possible bias.
With total loans of ₦11.06 trillion and ECL provisions of ₦615 billion, it shows that even small errors in classification could significantly affect the quality of the bank’s assets and its earnings.
These estimates also affect key risk measures like the chances of borrowers defaulting and how much the bank could lose if they do, showing how much depends on management decisions.
Profitability Under Pressure Despite Revenue Growth
Although Zenith Bank increased its gross earnings by six per cent to ₦4.19 trillion, its actual profit performance weakened, showing growing pressure on earnings.
Profit before tax fell by five per cent to ₦1.26 trillion, reflecting a challenging business environment.
One major reason was trading activities, which moved sharply from a ₦1.1 trillion gain in 2024 to a ₦63.1 billion loss in 2025, mainly due to a ₦414 billion loss on derivatives.
At the same time, the bank set aside more money for possible loan losses, with impairment charges rising to ₦742.2 billion, showing increased caution about credit risks.
Returns to shareholders also dropped, as earnings per share fell from ₦32.87 to ₦25.32, partly because the number of shares increased.
Higher operating costs, including a ₦142.6 billion AMCON levy, added further pressure on the bank’s profits.
Mounting Litigation Exposure with Minimal Provisions
Legal risks became another major concern during the year, as total claims against the bank rose to ₦1.9 trillion from ₦1.3 trillion in the previous year.
Despite this large exposure, the bank has only set aside ₦1.7 billion to cover possible losses.
READ ALSO:
- Five Forces Collide to Shape Nigeria’s Economic Path in April — Report
- CPPE Calls for Targeted Approach to Enforcing New Tax Laws
- CBN Dragged to Court Over Controversial BVN Phone Rule
- Only 6% of Nigerians Feel Financially Secure – Report
- Risks, Opportunities US-Iran War Poses for Nigeria
According to the management, these cases are part of normal business and are unlikely to lead to major losses, based on advice from its lawyers.
However, the large difference between the total claims and the amount provided shows there is still a significant risk if court decisions go against Zenith Bank.
Regulatory Penalties and Looming Tax Burden
Zenith Bank continued to face high regulatory costs, paying ₦1.64 billion in fines during the year.
Most of this amount, about 85 per cent, was linked to issues involving the Central Bank’s Real Sector Support Facility.
Looking ahead, the bank is expected to face higher taxes due to new tax laws that start in 2026.
These changes include an increase in tax on foreign exchange gains from 50 per cent to 70 per cent, a minimum tax rate of 15 per cent for large companies, and a new development levy.
Together, these are likely to increase the bank’s tax expenses and put more pressure on future profits.
Climate Risks Enter the Financial Equation
In a new development, Zenith Bank began to show how climate change could affect its business by using different scenarios to estimate possible impacts.
Under a situation where policies change quickly and carbon costs rise, the bank expects additional loan losses of ₦119.2 billion in the short term and ₦149.5 billion in the medium term.
There are also long-term risks to assets, especially properties used as loan collateral in coastal areas like Lagos, where flooding and rising sea levels could reduce their value.
The bank also noted that extreme weather conditions could disrupt business activities, delay loan repayments, and reduce interest income.
Despite these challenges, Zenith Bank continued to grow, with total assets increasing to ₦31.46 trillion and customer deposits rising by 11 per cent to ₦24.33 trillion.
Income from its core lending business also improved strongly, with net interest income reaching ₦2.64 trillion.
The bank maintained a strong capital position, with a capital adequacy ratio of 25 per cent, and increased its total dividend to ₦10 per share, showing confidence in its financial strength.
However, the 2025 financial year highlights a more complex situation: while the bank is growing and remains strong, it is also facing increasing pressure from risks, unstable income sources, and changes in regulation and the wider environment.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
