On the surface, Zenith Bank’s 2025 loan book barely moved, expanding by a mere 0.6% over the full financial year. For investors scanning annual reports, that number looked like stagnation from one of Nigeria’s most prominent Tier-1 lenders.
According to a fresh equity research note from CardinalStone, the real story was buried beneath a regulatory clean-up that masked the bank’s underlying lending engine.
The report, authored by analysts Ifeanyi Osele and Philip Anegbe, CFA, sets a twelve-month target price of N151.80, a potential 17.7% upside from the N129.00 reference price, the report indicated.
How N1.2 trillion in write-offs disguised Zenith Bank’s loan growth
Zenith Bank absorbed roughly N1.2 trillion in forbearance-related write-offs during 2025, a direct consequence of the Central Bank of Nigeria’s decision to end COVID-era regulatory relief. Those write-offs dragged net loan growth down to 0.6%, but gross loans still expanded by 11.9% to N11.1 trillion before the adjustments were applied, the report noted.
The write-offs were a one-time regulatory adjustment, not a sign of weakening credit demand, CardinalStone noted in its May 7 report. Over the last two quarters, the bank added approximately N2.0 trillion in gross loans, redirecting capital from treasury bills into lending across manufacturing, commerce, and mining, the analysts noted.
Why the CBN’s forbearance exit reshaped Zenith Bank’s balance sheet
During and after the COVID-19 pandemic, the Central Bank of Nigeria allowed lenders to defer strict classifications on distressed oil and gas exposures, keeping non-performing loan ratios artificially low for years.
When the CBN ended those concessions in June 2025, industry-wide impairment charges surged 39% to N3.2 trillion, BusinessDay reported.
“What we are seeing is not necessarily a collapse in core earnings but the delayed recognition of credit risk.” — Matilda Adefalujo, Banking and Fixed Income Analyst, Meristem Research, via BusinessDay
Renaissance Capital estimated that roughly 23% of Zenith Bank’s gross loan book had been under forbearance, Daily Post Nigeria reported. Fitch Ratings projected sector-wide loan growth would accelerate above 20% in 2026 as the clean-up concludes, BusinessDay noted.
Zenith Bank’s core banking overhaul is now driving fee income higher
Zenith Bank completed a full overhaul of its core banking system in Q4 2024 using N56.9 billion from its hybrid capital raise, the analysts indicated. Net fees and commission income rose 41.1% in full year 2025 and 44.6% in Q1 2026, driven by mobile and digital banking activity, Nairametrics reported from the bank’s NGX filing. The firm projects 13% fee growth for full year 2026 and expects fee income to average 7.9% of gross earnings over five years, up from roughly 6% over the prior three years, the report noted.
Zenith Bank’s dividend trajectory could reward patient shareholders
The bank’s full-year 2025 dividend per share doubled to N10.00 from N5.00 in 2024, restoring the bank’s historical payout ratio of approximately 40%, Nairametrics reported. The report projects dividend per share will rise to N14.27 for 2026, implying a yield of roughly 11%, with a 19.3% five-year compound annual growth rate in payouts, CardinalStone indicated.
Key figures from the CardinalStone report on Zenith Bank
- Target price: N151.80, a 17.7% upside from N129.00 (CardinalStone Research)
- FY ’26 NIM forecast: 11.7%, on lower funding costs and high-yield lending (CardinalStone Research)
- Borrowings: Down 86% from FY ’24 to Q1 ‘2026 (CardinalStone Research)
- Q1 2026 pre-tax profit: N360.9 billion, up 2.9% YoY (Zenith Bank NGX filing via Nairametrics)
- Projected ROAE: 25.5% five-year average, up from prior 23.3% estimate (CardinalStone Research)
- Stock performance: 108% YTD return, all-time high of N136.90 in April 2026 (Nairametrics)
Risks and catalysts that could shape Zenith Bank’s 2026 trajectory
Nigeria’s 15.4% inflation rate in March 2026 and the CBN’s 45% cash reserve ratio continue to restrict deployable lending capacity, Fitch Ratings warned in an assessment published by BusinessDay.
On the positive side, borrowings fell 86% from the end of 2024 to Q1 2026, shrinking from N2.0 trillion to N286 billion, the CardinalStone report noted. The cost of funds dropped to 3.76% in Q1 2026, Business Post Nigeria confirmed. The stock trades at a price-to-book ratio of roughly 1.1 times, below the 1.4 times median for EMEA peers, the firm noted.
