Zenith Bank reported roughly double the net profit it made in the first half of last year from the same period this year, its audited financial records show, helped by sharp increases in the lending rate introduced by the country's central bank earlier this year in its effort to slow inflation.
Interest and similar income from Nigeria's second-largest lender by market value rose 176.7 percent to N1.1 trillion, alone accounting for more than half of the revenue generated during the period.
Even after deducting interest expenses from that sum, what remained was a bumper business for the bank as net interest income stood at N715.1 billion, compared with N261.9 billion a year earlier.
Nigeria's monetary authorities have aggressively raised borrowing costs so far this year, lifting them by 800 basis points in one of the longest rounds of rate tightening on record, hoping to temper inflationary pressures that have fueled a cost-of-living crisis in Africa's most populous country.
Zenith Bank’s provision for impairment of financial and non-financial instruments for the period nearly doubled to N415.3 billion, driven by an increase in cash it set aside to settle non-performing loans that are unlikely to be repaid off its books.
The bank's non-performing loans accounted for 8.4 percent of its total loans, up from 7.1 percent at the end of last year.
A major driver of growth was trading profits, which rose to N795.6 billion from N103 billion thanks to a huge increase in the value of its financial instruments.
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Gains from exchange rate revaluation, which largely boosted revenue at the lender and other banks in the country last year, saw only a tepid rise this time around, increasing by just 3.3 percent.
A depreciation in the value of the naira by about 70 percent between last June and the beginning of the year triggered a surge in the exchange rate of the dollar to the local currency, consequently creating opportunities for banks with investments in foreign currency assets to make huge profits after converting such securities into naira.
The huge profits that banks are reaping from this windfall have become a bone of contention between them and the government, forcing the latter to introduce a one-time tax on such revenues.
In July, President Bola Tinubu sent a bill to the Senate, asking lawmakers to approve a one-time 50 percent tax on banks' currency revaluation profits.
Parliament, which wanted the government to have the biggest slice of the pie, approved a 70 percent cut in interest rates, a move that rating agencies and financial consultancies say could hurt banks' finances.
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Pre-tax profits rose 107.5 percent, while after-tax profits grew from N291.7 billion to N578 billion. The bank is proposing a total interim dividend of N31.4 billion for shareholders, double the cash it paid out to them in the same period last year. That translates to N1 per share.