Zenith Bank Plc's highly capitalised balance sheet and its level of liquidity remains a key part of its strength in a challenging banking environment. Leveraging its strong balance sheet and liquidity position, the bank has established a foothold in the high end corporate market. The bank has also been successful in rolling out a retail funding strategy that has helped keep its cost of funds low. Its group financial results for the nine-month ended September 2013 showed that its total assets stood at N2.853 trillion as at September 30, 2013 , compared to N2.605 trillion as at December 2012 . Zenith bank's liquidity and capital adequacy were also at comfortable levels of 63 per cent and 28 per cent respectively as at September last year, giving the financial institution enough latitude to explore new business horizons while being able to withstand any systemic shocks. Its gross loans and advances also grew to N1.140 trillion at the end of third quarter 2013, as against the N1.014 trillion it stood as at December 2012 . In the same vein, its customers' deposits climbed to N2.034 trillion as at last September, reflecting an increase over the N1.929 trillion recorded as at December 2012 . The nine-month results also showed that the bank's margins expanded, driven by higher asset margins and some benefit on the funding side. The results also showed that Zenith Bank's gross earnings and profit before tax stood at N255 billion and N83 billion respectively. Zenith Bank sustained improvements in its Net Interest margin (NIM) as it responded effectively through reallocation of resources and optimal pricing of assets and liabilities to counter the effects of last year's 50 per cent Cash Reserve Requirement regime and increased savings deposit cost on our operations. But analysts at Renaissance Capital (RenCap), a financial advisory and investment firm pointed out that the bank may face some revenue challenges in its full year 2014 results. "Firstly, asset yields on treasury bills have declined year-on-year as has the yield on interbank placements. We believe Zenith will have to increase its exposure to risk assets to chase better yields, as well as to offset the lost interest from the higher CRR. "Secondly, Commission on Turnover (CoT) is significant for Zenith, at 38 per cent of Net Interest Revenue (NIR) at nine-month 2013. Last year the drop in the cap to 0.3 per cent had a muted impact, as Zenith was already charging well below the cap," RenCap stated. However, the firm also indicated that the management of Zenith Bank had expressed confidence over its ability to offset any revenue loss that may be associated with the policy. But analysts noted that the significant adjustment in the remuneration its members of staff in 2013 would help subdue the bank's operating cost. This should also help to offset some of the revenue challenges faced by the bank. CSL Stockbrokers Limited, a division of First City Monument Bank (FCMB), United Kingdom , also noted that the bank's conservative balance sheet management, its focus on the corporate market for risk asset growth, and its well-diversified loan book "give us comfort that asset quality will not be a major concern in the medium term."
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