Zenith Bank Plc (ZENITHBANK) Earnings Call Transcript & Summary

Hello, and welcome to the Zenith Bank Full Year 2022 Conference Call. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present Mr. Ebenezer Onyeagwu, Group CEO. Sir, please go ahead with the meeting. Thank you.

Good afternoon, ladies and gentlemen. It's my pleasure to welcome all to this analyst call where we'll be speaking to the figures and the circumstances around our performance for financial year ended 2022. Before we go on, I'd like to introduce my colleagues on this call with me, we have Mr. Henry Oroh, Executive Director; Mrs. Adobi Nwapa, Executive Director; Dr. Temitope Fasoranti, Executive Director; Mr. Akin Ogunranti, Executive Director. We have Felix Egbon, our Chief Risk Officer; Mukhtar Adam, our CFO. We have Nsikan Umoren, one of the senior officers in our financial control department. We also have Michael Adesanoye of our financial control department. We have Kayode Akinbinu from our financial control department. We have Eugene Ewubor also from our financial control and strategy unit, as well as Folashade Keleko. So it's my pleasure once again to welcome us to this call. And before we go on, it's important for us to draw attention to the background surrounding the performance of 2022. The year 2022 was extremely phenomenal as it was characterized by unprecedented headwinds. These headwinds can be seen around the geopolitical tension at a global level with respect to the Ukrainian-Russian conflict which impacted supply chain adversely. Again, we saw the continued COVID lockdown in 2022 in China. That also [ exacerbated ] the supply chain challenges. On the back of this, we have also seen at the global level, a rising inflation leading up to an increase in interest rates globally. And we have also seen in Ghana, the special and unusual economic situation that has necessitated the restructuring of the Ghanaian debt instruments as -- at end of the year, which also led to some form of hemorrhage arising from the impairment that needed to be implemented as a result of the [indiscernible] of the Ghanaian debt instruments. Back in Nigeria, we've also seen that the ForEx reserve are sudden. March 29 stood at $35.6 billion compared to $37.1 billion that we ended as such -- we ended with December 2022. When compared with December 2021 figure, that was $40.5 billion. That gives an indication of a drop in terms of the ForEx result. Again, in terms of inflationary trend, Nigeria was not isolated. We have also seen inflation rise to an all-time high of almost 22%. And that has also seen the MPC in the 5 to 6 consecutive meeting increasing interest, the MPR, which currently stands at 18%. The implication of this is that interest rates in the economy has increased, and that has also put a lot of pressure on businesses. Brent crude price was fairly high throughout year 2022. Though Nigeria couldn't benefit from this high price because our volume has been adversely impacted as a result of weaker [ evacuation ] infrastructure and also the unprecedented oil tax. However, on the back of all this, we've been able to maintain and deliver the decent and very strong performance with our top line growing by 24%. We've also seen the total deposits grew by 38% and total asset by 30%. And now withstanding the hemorrhage we suffer in Ghana as a result of the impairment we had to take on Ghanaian instrument, we were able to see -- record a 2% year-on-year increase in profitability for the group. But on a stand-alone, the bank recorded a year-on-year improvement in profitability by 14%. All builds, all the parameters stand very strongly for the bank. We've been able to record a reasonable improvement in terms of the management of our costs and also the management of our interest expense, depicting our strong and very prudent and resourceful credit and liquidity management skills. So ladies and gentlemen, we have also recorded increased volume in terms of electronic products. Towards the end of the year, we saw the implementation of the naira design -- the redesign of naira that created a bit of naira's [indiscernible] that puts a lot of pressure on banks. And that has also led to increased spike in volume of electronic transaction that created some form of service failures, generally in the industry. However, as Zenith Bank who have remediated our system, apart from remediating the systems, we had already embarked on our upgrade of our IT architecture, which commenced last year. On the back of the challenge, you all seen with respect to naira redesign and the pressure on general banking software, we have accelerated implementation date of our own new and transformed IT architecture. So thank you, ladies and gentlemen. This is just to give you a background in terms of how we perform. So we are available to take your questions.

[Operator Instructions] The first question comes from Muyiwa Oni from SBG Securities.

I have a few questions [indiscernible]. So just trying to understand the risks on the [indiscernible]. So one concern is the current impairment includes the euro bond exposure because it is that banks that have excluding in Ghana which were included in the new [indiscernible] in the past investment stats of the [indiscernible] just trying to understand if that's the case with Zenith Bank? And then also with your -- wanted to also understand your [indiscernible] types of [indiscernible] exclusive over then also still run that on [indiscernible]?

Muyiwa, I'm very sorry to interrupt you. I just wanted to check with the main speaker if you were able to hear Muyiwa's questions because otherwise, we are going to -- ask him to reconnect.

Yes. Thank you. Muyiwa, it was so noisy and unstable. So we can barely pick your questions.

Okay. Muyiwa, if I can just suggest if you could please disconnect and reconnect and just come back in the question queue. In the meantime, we do -- we will move on to another question. The next question comes from Oluwaseun from FBNQuest.

Please confirm you can hear me.

Yes, loud and clear.

Okay. All right. So my first question is also around Ghana. I think Muyiwa was asking question along that line. I just want to get a sense in terms of numbers, what your exposure to Ghana looks like right now? And what is your outlook really for your exposure? And how do you think that's going to sort of affect your impairments going forward? Maybe how do you think things are going to felt in that market? That's one. Then the second question is I'm looking at your revenues, your noninterest income -- your noninterest income line. And I want to know what you think -- what you expect going forward given the cost current, what you expect in terms of volumes for e-banking transactions, how do you think that is going to reflect on your books? I know during your presentation, I think you mentioned that probably there was some downtime due to the volume of transaction, I would appreciate if we could give some insight as to how that affected and what we can expect going forward? The other question would be around your deposits. I just want to have a sense of how much of the interest -- the interest rate hike you are able to pass on to our deposits -- speaking to your deposit [ betas ]. I would appreciate if you could give numbers around that. Then for your effective tax rates. By my computation, I think in Q4 alone, your effective taxes was around 39%. I just want to know if this is what should we be expecting going forward, given that the touches and status on fixed income instruments like Aspire. So should we expect effective tax rate around this level? And then lastly, I would appreciate if you could just tell us your net long [ FOI ] position?

What was the last one. Can you repeat it?

Yes, net long foreign currency position.

Okay. [ FS ] long position. Okay. Ghana, I think it's due for us to put Ghana in proper perspective that this is some analysis beyond systemic risk, that is -- its sovereign risk, it is not an idiosyncratic risk. Therefore, it has implication for the overall market and players and it's a redenomination of the government debt's risk-free instrument. Typically, we all know that risk reinstrument is the best kind of instrument that anybody will play with in the market and it turns out that until the redenomination, the returns on those government bonds were quite attractive. Of course, we are not going to -- you'll be holding a treasurer liable for negligence or weakness in decision if a treasurer looked at the 2 instruments, the government bonds and the treasury deal and decide to go for the one that had the weaker yield. So that was it. And what we have there is, by virtue of the redenomination and in line with the IFRS rules. Those instruments assume a new identity. Assuming a new identity now meant that they have to be revalued. That revolution is a one-off change. It's a one-off change, it's just a question of recognizing that these instruments has assumed a deteriorated nature. So that deterioration is not expected to continue into the future because you are not going to have a continued process of restructuring the debt, it's been done, it's a one-off. In terms of the size, if you look at the number in absolute [ nonbetting ] you see that our impairment increased by 106%. If you back out Ghana our impairment would have been much less than that. The -- what you see there is us, because of this impairment due, it also has implications for our cost-to-income ratio. So going forward, we believe that as these instruments have assumed a new status, the further declaration is not likely to be there even as market begins to trade. Even if it trades in such a manner that there is a slight deterioration. The mark-to-market effect is not going to give you that kind of huge impairment that we all seen. So the outlook about it is, the other thing to say that we have very strong capital buffers. And even with impairment, I hear here that there is already an arrangement for banks who recapitalize. We see, maintain very strong capital buffers in Ghana. And we are not caught up -- our shareholders' bond is clearly above the regulatory minimum. On noninterest income, we expect our noninterest income to grow. Yes, in the industry, there was a general downtime because of the unprecedented hike in the volume of electronic transaction. But what I meant was that all the banks in the country with Zenith in particular, we had to remediate us in attempt to cope with the volume. This has since been concluded apart from concluding the remediation and building performance enhancement into our system, we are also installing a brand-new IT architecture that is freed for purpose in a typical digital environment. This project started a year ago, and we earmarked completion to be Q4 this year. But based on the volume we see, the growth we see in the electronic product, we have a accelerated the program of completion, now we should be able to conclude within Q3. And deposit and interest. I think it just -- it's pretty much straightforward. We are an emerging business. Once we see costs move, then we must adjust our lending rate. Just as when cost goes down, we are just lending rate downwards. So what we'll try to do is to make sure that we don't suffer margin compression. So we're able to do that by steadily repricing our the interest on our loan. On effective tax rates, I think the CFO can take that. I think the last one is -- the CFO will take that together with the long position.

Effective tax rate is actually around 20% coming up from the range of 12%, 13%. So what has happened is that now we are taking the full impact of withdrawal of tax holidays on treasury bills and some provisions of the Finance Act before we had some tax losses carrying forward. We had some capital allowances unutilized. Those helped us to reduce the effective tax rates. Now we have utilized them. So we are going back to the regular effective tax rate before those concessions on tax, on treasury bills came into force. Around 2012, 2013, our effective tax rate hovers around 20%, 21%. We are back to that 20%, 21%. So the effective rate is 20% if you look at it from the bank. If you want to do the effective tax rates on the group, the high impairment from other drop in the PBT of the group will distort what you are trying to compute. Then our loan position. If you check our FX balance sheet, we have it in our financial statements, you will realize that our loan position is around -- hover around -- is more than $1 billion, far more than $1 billion and we've been holding those loan positions. So that also gives us opportunity, strong opportunity for our liquidity and FX liquidity and other aspects of our liquidity.

[Operator Instructions] The next question comes from Timothy Wambu from Absa.

Just a couple of questions. The first one, again, is just on the debt -- on the Ghana debt front. To my understanding, this were near-term maturities, which was locked for maturities from 2027, 2028. Just to ask more from more granular, I guess, answers is that the impairments taken, are they on this particular debt that was -- structure that has been swapped? Or is it potentially for debt which might potentially require a higher cut, let's say, a reduction in the coupon or the principal purposely shift? The second question is on your deposits. And I'm just looking at Slide #32 and -- just can you explain the significant or rather very classification in your deposits. I can see that retail deposits previously were around 30%, it shot up to 41%. I think you must have reclassified because of the past presentation clearly shows that they were under 30%. And maybe tied to that is, are there efforts to address the significant increase in your cost of funds?

Okay. The restructuring of Ghana debt instrument is a public information available within the Ghana economy. It's not yet [ populate ] into Zenith and what you say is that the bonds, specifically, we are talking about our investment in Ghana bonds. Those bonds were aggregated together and given a new tenure, thereby assuming a new life. And again, the coupon was also reduced by better of those 2, you have to revalue the bonds. That revolution to recognize the current natural value of the bond is what led to the impairment. Deposits reclassification. I think I can get the CFO to answer that.

Okay. You talked about deposit reclassification and cost of funds. Cost of funds has moved up because we all know the rate hikes globally. So -- and we have guided for cost of funds that reflect what we expect if you check the guidance that we give. Reclassification of deposits, we have not reclassified deposits. So what has happened is that the retail bucket of the deposits continue to grow, right? So we continue to have different retail products, and that has supported the retail deposits. We have not done the reclassification.

The next question comes from Ngozi Odum from CardinalStone. [Operator Instructions] The next question comes from Kato Arnold Mukuru from EFG Hermes.

I think my first question is going to be on Page 112 of your financials, looking at your FX risk, of the bank. What is interesting is when I sum up the naira assets and deduct the liabilities, I see that you get a long position. And when I do the same with the dollars, you get another long position. How could you be long in U.S. dollars and naira at the same time? It's really hard for me to reconcile that. And also, I don't understand how the deal from other banks increased 125% in 2022 versus 2021? I think that's my first question. My second question is on Page 150 of the annual report as well I'm having a hard time understanding how -- hold on. Sorry about that. Excuse me one second. So what I don't understand is in the loss and gain on other traded books, you say this includes a derivative gain of NGN 43 billion -- NGN 45 billion -- NGN 43.5 billion in 2002 (sic) [ 2022 ] and NGN 42.8 billion in -- I mean, for the group and then for the bank. But in the previous year, there was also a very, very similar gain. Yet the net is a loss. And I'm trying to understand where that loss comes from. Is it some type of hedging instrument? And indeed, what instruments exactly were these? Trying to understand because -- and also, I don't understand how the gain was booked on treasury bills if yields rose over the last year. I just want to get -- I just want to try and get a better understanding of how these trading gains are booked so that we can get a better sense of how to forecast it because right now, it looks really, really tough.

So I get the CFO to address your questions.

Okay. So thank you very much, Kato for your questions. So you're talking of the FX balance sheet, how we can be long in naira and can be long in dollar. Okay, so our FX balance sheet, we have -- we make income from dollar income, we make naira income. So we don't exchange or swap naira to dollar to create the long position. So when we make income in dollars, it's safest part of our retail and is part of our income. So that sits separate irrespective of the naira. So we don't use naira to convert to dollar to create a long dollar position. So it is theoretically possible to have long dollar position and long naira position, because we have retained earnings that we are building in naira, and we are also making income that we are retaining in dollars. So that explains that. But if you need further clarification, we can have a talk on that, that's what happens on our long. If you go to the Page 150 that you are talking about in terms of our derivatives, you are making reference to the gain in the trading book. So you see the loss, strong gain in other trading book that you have there, you have the derivatives, is sitting there. And as you pointed out -- for us to do some of these placements or dollar placement or swaps or some transaction with dollar we have borrowings that are in dollar. So we have a hedging in place that matches the exchange movement of the liability to the asset that is used to create or their costs, we match it to the revenue that is used to create in ahead that is effective. So that explains why you see that number there. Again, if you want more discussions, we can have that. So -- and how do we make treasury bills gain when rates are going up. Our instruments, our swap transactions are in different buckets and different tenures. We have different swap transaction maturing at different points in time. So as they are maturing, we are renegotiating them. We are entering into new arrangements. So it's not one-off swap that is maturing or we are valuing the whole book at once. Each of them come at different prices as the rates are changing. And those were done strategically to ensure that we don't get caught up in rate hike or rate drop or rate volatility in general. I hope that is clear.

The next question comes from Olaolu Boboye from CardinalStone.

So I have a couple of questions. The first is, I noticed a 10% on the collateralization of credit impairment loans. I will -- I don't mind if you can speak to the implications of this and how the bank's plans to provide this going forward? Secondly, is the bank considering holdco structure, maybe this year or in the net and future. And then my next question is on the Pan African contribution to revenue and PAT. What's the company's targets over the next 3 years? So that will be my questions for now.

The 10% collateralization of the credit impairment. The CFO will take it. On the holdco, we already announced the market that we have CBN in principle approval to transition to holdco. So we have a 6-month period approved by CBN also affect the implementation. So work is ongoing in terms of the necessary regulatory approval and documentation. In terms of performance, it's important to say that because of the hemorrhage in Ghana, we understand that -- if you look at it group-wise, the group would have performed about 103%. That's the home office, the bank on the standalone would have achieved 103% because of the diminution in profits arising from the loss in Ghana, that's why you have it there. Then we've also seen Zenith U.K. increasing very, very significantly in profitability, growing profitability by over 315%, then other subsidiaries have also contributed, but albeit, we can say that the bank remains a flagship business of the group. And our U.K. subsidiary is coming on strong, and we -- there's no indication that will not continue. So let me get Mukhtar to take the other question. Okay. Yes, you talked about the Pan African presence. Well, one thing is certain. Having a holdco structure gives us opportunity to leverage our experience, our size and our contacts too. We have always mentioned that growth is an important part of our strategy. So being holdco means that is an opportunity for us to also think about other markets to go to. So we are quite open. We are looking at the options. I'm sure pretty soon. we'll be able to update the market with respect to new opportunities and new markets that we hope to go into. But we are interested in extending our footprint beyond where we are. The answer is a big, yes.

Okay. You're talking of under collateralization, I'm sure you're referring to the notes around Page 70 and beyond. So for us, as a bank, we have very top-notch customers. Our loan customers are the large corporates that are very strong in terms of cash flows and have very variable business. So it's not always that you lend with collateral. Some of the customers are good enough with very strong cash flows. If you check that particular note and go further, you will see where we have provided ratings of our various customers. Some of them we've rated A, some of them we rated B. If you read those 2 notes together, you will understand or you appreciate why the A-rated loans will not necessarily have to have full collateral cover before we can lend to them. So you're saying we have 10%, really you need to understand it's in that context. It also reflects the quality of the customers we lend to.

The next question comes from Ronak Gadhia from EFG Hermes.

My first one maybe is -- both my questions really just follow-ups. Firstly, on Ghana. Could you just clarify if the full write-down has been done? Or should we maybe expect maybe a further write-down this year? The reason I ask is if I estimate the haircuts that you've taken. By my estimate, it's roughly around 30%, whereas some of your peers have taken a haircut of around 50%. So if you could just a, clarify how much of a haircut you took and if all of that has been done? And then the second question, I guess, maybe a follow-up to what Kato was asking earlier. If I look at the dollar balance sheet there that you have on the financial statements. As you mentioned, it's a long USD position. Could you just clarify, is that long USD position inclusive of the swap arrangements that you have? Or is that net of the swap position i.e., does that dollar balance sheet -- do you derive that dollar balance sheet after taking into consideration the dollars that you've lent out or is this before? Would be useful if you could clarify that.

Okay. For Ghana, like I said earlier, every information regarding the Ghana debt instrument restructure is in the public space. What we've done is to take the full impairment. The full impairment, one of the reasons we had a delay was because we are waiting for the regulatory authorities to provide guidance regarding the discount rate to use. So that has been done. And there is no way the regulators will allow you to defer this impairment. I mean, otherwise, you contravene an IFRS treatment of financial instruments. On the issue of the dollar position, Mukhtar, you want to deal with that once again?

Yes. If you go back again to Page 112, that Kato made reference to, you would realize that we made additional notes to say we have $1.66 billion in swaps with various counterparties with various maturities, right? That $1.66 billion is not included in the table that you have seen up. So if you check the table that you have seen up, you can calculate the supposed long dollar position there. If you factor in the $1.6 billion, you will see that we have a stronger long dollar position than the table is indicating. So it's actually net of that swap arrangements that we have.

The next question comes from Josh Arowolo from [ Stan bank ].

Just wanted to go back to the Ghana discussion quickly because it is topical. Can we just get a sense of the breakdown of less rated T-bills and bond exposure and even the euro bond exposure in the Ghana investment portfolio can get a breakdown maybe percentage of how much those different classes of instruments were in the overall investment portfolio in Ghana?

It's interesting to see how this Ghana debt instrument is attracting so much attention and question. Like I said earlier, what has been done is the T-bills were not part of what was restructured. It is about the government bonds. They were all the maturities who were put together in 1 bucket and recall that the initial discussion was for them to have 0 coupon for about 1 or 2 years. But at the end of the day, they arrive at a standard kind of coupon in the first year. I think it's about 5% and subsequently 8% or so. So what you have there is government bonds. The T-bills are not there, the T-bills are -- there is no impairment on the T-bills. Let us bear in mind that -- in terms of -- it is just because of the unique and special treatment of IFRS for financial instruments. Otherwise, if we are looking at it in terms of accounting wise, my government bond of, say, GHS 10 million did not suddenly become GHS 5 billion. What has been done by [indiscernible] so far as -- is to revalue to say that, yes, these bonds were annual returns of about 30% before. Now you've reclassified, they are not going to end up for you a gain, they are going to end much lesser. Therefore, the valuation has to change. And as I said, you can look at the treatment given, every bank is adopting the same. The guidance given by the regulatory is between 15.6% and 21% and pretty much everybody is at that 15.6%. So in terms of the numbers, I would say, liquidity wise, it has not threatened the liquidity position of anybody. But the implication of that impairment is that because you are going to recognize a loss in your P&L, some banks that didn't have adequate reserve they are going to have a situation where they will need to recapitalize in the immediate term. Luckily, we are not -- we maintain robust shareholders from across all the markets where we operate. So in terms of asking for the numbers, I think pretty much -- it's not necessary. All we know is that this is what has been done to government instruments in Ghana, and that is what it is, it's not an idiosyncratic situation. It is a systemic and further more sovereign situation.

Josh, do you have a second question?

No, that's fine if it's not getting disclosed.

The next question comes from Abdulrauf Bello from WSTC Financial Services.

My question is around your loan book. So on Page 158 of your financial statement, I saw that the classification of your loan book shows a significant reallocation from current to noncurrent. And when I checked your interest rate risk, I realized that the negative interest rate gap widened significantly. And in my head, it tells me that in a rising interest rate environment, your net margins may not increase in line with the shift in interest rates. I just wanted to get a sense of the thought process around first, the reallocation of the loans from current to noncurrent and why there was a significant shift in your interest rate gap?

Okay. First is that in terms of net interest margin, we had an [ acquisition ] from 6.7% to 7.2%. And that clearly shows that as we had some resourcefulness and profound treasury management to be able to maintain a bigger margin as it were. So let me also invite I think between, the risk officer and the CFO to throw more light to this.

Okay. Overall, I can see the 158 here, to make your reference to. So you know that we have had instances where certain loans have to be restructured. So when you say current to noncurrent, current means loans that are expected to be paid down within 12 months, that's within a year. But those loans that are expected to be paid out in more than 1 year then you put them as noncurrent. That's what it means. So if you say there have been classification. In 2021, you have [ NGN 1.4 trillion ] as current and now is [ NGN 600 billion ]. What it means is we have booked more long-term loans as some of the short-term loans have matured. If you check the financial statements of -- and Zenith Bank and a lot of the Nigerian banks, in the past 5 years, we have seen a movement from short-term loans to longer tenured loans. Most of them pushed by the CBN intervention that we have in various sectors that come with very long-term loans, intervention by BOI and also our own ability to fund long-term transaction. So it's not a reclassification, and it does not represent deterioration. It should reflect the fact that we are now funding businesses that are into real sector, that are long term in nature, and we have their funds to be able to handle those.

The next question comes from Damilola Michael Olupona from Chapel Hill Denham. [Operator Instructions] The next question is a follow-up question from Oluwaseun from FBNQuest.

I was going to ask about Ghana bond, but I think justice has been done to that. But something else I would like to know is when the CBN started the old cash withdrawal limits policy and naira redesign basically transitioning to cashless economy. I think one of the major highlights was that to reduce the cost of ceidi with cash management. So I just want to understand how has that been so far based on your impact assessment, what you have so far? What has been the impact for you? And how do you see that going forward?

The naira redesign policy, yes, apart from the redesign of the naira, if you look at it, one of the objectives is also to accelerate the advancement of a cashless economy. That program is still on notwithstanding the further the Supreme Court has ruled that the redesigned loans remain legal tender until end of this year. What we've seen is that -- first was that the industry underestimated the volume of -- the possible volume of increase in electronic transaction and that led to unprecedented hike in volume of transaction. In Zenith, for instance, we realized that in some channels where we are experiencing like an average of, call it 500,000 transactions a day. Volumes suddenly moved to almost 8 million transaction a day. And the way it is, data traffic is like human traffic. As soon as you have a spike like that you have congestion, what happens? There is a slowdown. So that resulted in a slowdown in terms of electronic payments across the market that we noticed. But, right now the response the industry has given, not just Zenith alone, this will return the IT architecture and also build in remediation, increase investment in infrastructure and creating a more expansive and robot network to cope with the increasing transaction but albeit we can say that the agenda to have a cashless society is good but pretty much a reasonable part of the transaction is still denominated in cash. So that is why even when we try to implement, we've seen unusual surge in customers trying to still withdraw cash. CBN right now has provided more cash and we are able to pay customers up to the maximum permissible limit for individual NGN 500,000 and for corporates, NGN 5 million. But -- however, the whole exercise has created that appetite for people to migrate to digital channels. So the volume has already increased, and we don't see it receding. So we see increased opportunity for a lot more transaction to be done through the electronic channel. Some customers who never enrolled before have seen the confidence. As somebody who runs out of airtime can easily, through his phone, buy airtime at any point in time, depending on the location. So we'll say that it's a big plus. It's a big plus for the economy and which has -- we already anticipated that we are going to get to a time where this economy is going to advance steadily towards digital payment, which informed the huge investment we are making in the new IT architecture. We never knew the naira redesign was coming up when we -- back on our old IT architecture. So I will say that we are very much excited about what this has brought us and where we are in terms of capturing opportunities there. So it has changed the landscape. It have changed the landscape, and there's increased adoption. And we don't expect cash drawing to go back to the same level it was before the commencement of the naira redesign program.

The next question is another follow-up from Kato Arnold Mukuru from EFG Hermes.

Can you hear me?

Yes, we can. Go ahead.

I just wanted to go back to Page 112 on the FX risk for the bank. What funded the increase in the deal from other banks in 2022? Because if I look at the liabilities, the dollar liabilities, they didn't grow much. I mean they were up 14%. And the loan book is slightly higher, about 21% higher in dollars. But then this massive increase in interbank placements in U.S. dollars. What funded that? Because I can't see any change on the liability side. So if you help me understand that. Then secondly, I guess, on Ghana, not to keep on, on Ghana, but I guess the question at the heart of what everyone is asking is, why were the auditors not asking you to revise or rethink the fair value on the other bonds whether it be the euro bonds or the treasury bills that you hold from Ghana, I mean, they've defaulted on the bonds. There is a risk that they could default from other bonds, i.e., the euro bonds or their T-bills. And why isn't that a possibility? And why haven't we had any type of provision for that risk that the situation is not done.

Okay. Kato, I can rephrase your question. You were to rephrase you would say why didn't Ghana come up with a default last year. They could have come up with a default last year, it's not within our control. And they just presented the situation to us and we have no choice but to follow the guidance. So if they come back tomorrow, like somebody asked, do we think it will continue. We don't know. If subsequently, they come back after 1 year and say, we need to restructure again. Well, the thing is you can -- you always have to adapt to the situation of the environment that contains you. We cannot improve our own environment to a uniquely different environment. So whatever it is, [indiscernible] presented a restructuring of the debt last year so they remain the way they are. So if they bring you back, recall, I said, this is beyond market risk but a sovereign risk. So it's going to necessitate another conversation. It's not to be seen whether they are going to come back and tell us, "yes, we will research on this, we need for our research," we don't know. But whatever it is, we wait and it's not going to be an isolated situation, it would be a market issue and development. So I can get Mukhtar to come back to your Page 112 question.

Okay. Before I go to Page 112, I think across the firm, the audit firms, they have also looked at the -- all the Ghana government instruments and some of them have moved to Stage 2, in line with IFRS. Quite a number of those instruments are not in Stage 1. They have moved to Stage 2, although there is no direct default yet on them. So to represent or to capture the fact that the risk on those instruments have increased. So in our Ghana subsidiary, the investment in treasury bills is not having 0 impairment. It has moved to Stage 2 under impairment that is appropriate for that stage, has been taken. That is to reflect the increase in credit risk for that instrument. So you will find that across all the banks in Ghana and even in Nigeria, and I guess, globally. So we have reflected that, just for you to note. Then you are talking of funding, how did we fund the due from other banks. Due from other banks in our book is funded by deposits, liability your dom deposits. If you look at our deposits, in naira terms our total deposit has grown by over NGN 2 trillion. And part of that growth is our dom deposit, domiciliary deposit has grown. That's number one. Number two, if you look at our borrowings, our borrowings from different sources, different international bank, multilateral agencies have also grown within the period. Then you also look at other liabilities, customers funds that they have been green for LC and other trade finance transactions have also grown. When you add the 3 that accounts for the growth in the due from other banks.

The next question is a follow-up question from Abdulrauf Bello.

Okay. So I'm sorry, but I didn't get your response on the widening interest rate gap on Page 116.

This is operator. I just wanted to take if you heard the question?

Please ask your question again. What did you say about interest income, please?

Okay. So on Page 116, I said there was the interest rate gap widened significantly. And that's when I spoke about outlook for -- so I saw that at the end of 2022, and I'm trying to make sense of, okay, what to expect going forward? So the sensitive portion of your customer deposit went up and the sensitive part of your loan book declined. So I just wanted to get an understanding of the thought process around that move, that's all.

Well, I'm trying to understand your question with regards to the sensitivity of both the deposits and [ the symbol ]. They were to understand the movement in that so look at the NIM. So if you look at the NIM and if you also look at the absolute number in terms of interest income. If you dissect the dimension of performance, you see that 1 of the strongest areas of growth was increase in interest income. We recorded a double-digit increase in interest income, but I'll leave Mukhtar to explain that.

Okay. So you will know that within this period, we have seen a lot of rate hikes by the central bank, NPL has increased. So once you have NPL increasing, you have savings accounts going up. So your deposit, you're having people putting their deposit more in savings before their savings used to be very stable. You don't have a lot of rate hikes. Now, rate hikes, it's going up. So the savings account is also repriced more frequently. Then we also have the tenure right? You have a situation where the tenure is also shorter because people expect it to reprice, so they do shorter tenure. But overall, when you look at the rate sensitive and the non-rate sensitive, as has been mentioned earlier and you go back to the NIM that we have done within the period, it shows you that we have been able to take advantage of the rate hikes to reprice our assets in a reasonable way to accommodate the increase in the cost of funds. That is why our NIM has grown year-on-year. We have also guided for growth in the NIM. We have guided 8% of NIM next year. So I don't think this seeming rate sensitivity between the asset and liability is something that will affect our performance.

Thank you very much. Mr. Onyeagwu, at this time, I'd like to hand over to you for closing remarks. Thank you very much, sir.

Okay. Thank you very much, everyone. The -- there's a lot of uncertainty. We are quite mindful of the fed ups. There is increased volatility. And what we can assure the market is that typical Zenith. We are going to maintain deliberate calm and make sure that we respond to trends we see in the market in the most intelligent and strategic manner. We will ensure that we are not garrison in a position of difficulty where we find it -- I mean, impossible for us to respond as appropriate. We'll continue to watch the market. We -- notwithstanding all these, the headwinds, we see fine tailwinds, with respect to the fact that there are some positive development in our economy we also expect that our soon-to-be assumed new structure of a holdco will give us that opportunity to develop new business verticals, especially in the fintech space, given the growing awareness and acquisition of digital and electronic banking transaction. We also expect that the CBN raise to $200 billion program to promote exports, repatriation of non-oil export to continue. And let me say that based on what was achieved last year, Zenith Bank clearly stands as the dominant export Bank and the non-oil export bank in the country because based on the rebid, Zenith Bank customers got an average of 55%. That did not happen -- it was not by chance. It was as a result of a delivery focus and attention to grow the non-oil exports based on the program we started about 8 years ago. We'll continue to pursue this program, and we'll continue to enroll new exporters and helping our exporters to scale in terms of assets to funding and capital and also exposing them to export markets. So we'll monitor the situation and ensure that we remain -- we continue to create value. We will create value in a most innovative manner, and we'll do it responsibly and ethically so. So I want to assure you, based on the guidance we have given, it will be tough, certainly, this year is going to be tough. There is no joke about it. But we'll fall back to our adversity cautions and make sure that we deliver even stronger and more resounding numbers. Thank you very much.

Thank you very much, sir. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your lines.