Zambia National Commercial Bank Plc reported a 55% rise in its first quarter after tax earnings to K410.3 million on higher revenues propelled by higher interest from lending activities, healthy trading margins and transaction fees. This was according to prudential financial results in the local press on Thursday April 27, 2023. The head start gives Zambia’s largest bank by asset size a stellar boost to a new quarterly high positioning the institution for a stronger 2023.
The lender recorded a net profit of K1.2 billion in 2022 being the first bank in Africa’s second largest red metal hotspot to exceed a yard in two years consecutively. Supporting the performance was a 22% rally in net interest income to K808 million from credit extension and lengthened duration while non-interest income widened 67% year on year to K448 million.
“With a quarterly earnings per share of K0.38 and forecast annualized level of K1.14 resulting in a price earnings ratio of K3.04 renders the stock underpriced by about 50% should this performance persist. There exists latitude for Zanaco stock to rally higher however potential risks to impeding the momentum will be government securities trading given the lower issuances at higher yields,” ZATU Financial Consultant Managing Partner Munyumba Mutwale said in a note to clients.
“However there is potential risk, as most banks in Zambia, given the new found reliance on government securities for growth and the sovereign taking active steps to reduce future long term returns on fixed income by slowing down issuance and working on debt restructuring,” Mutwale said.
Total income expanded 35% to K1.26 billion as the bank retains leadership on revenue lines.
Zanaco stock is the most lucrative banking and third most traded stock on the local bourse recording 8.15% upward valuation year to date with 11.0% seen in the last 4 weeks. Expectations of stronger performance in FY23 reinforced by record dividends and 1Q23 results seem to be driving the stock’s appeal to investors.
Closing price for ZNCO stocks on Thursday 27 April was K3.45 a share.
The Kwacha Arbitrageur
