7-8% increase to our 2017-18E EPS forecasts / price target:

We retain our Outperform recommendation on Zenith Bank (Zenith), following its Q3 2017 results which came in well ahead of expectations. We have lowered the cost-of-risk assumption driving our loan impairment forecast for 2017E by c.20bps to 3.0% to reflect the positive surprise in loan loss provisions in Q3 2017.

This reduction underpins the 7% average increase to our earnings forecasts over the 2017-18E period and the 8% increase to our price target to N31.7. Our revenue forecasts have barely changed because weakness in funding income was offset by better-than-expected non-interest income. In contrast to Q2 2017 when fx trading income drove the solid growth in non-interest income, treasury bill trading income which was up markedly in Q3 was the primary driver behind the positive surprise in non-interest income.