Read:Diamond bank analysis from 2015 and now - World updates

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Wednesday, November 14, 2018

Read:Diamond bank analysis from 2015 and now


According to Webster's New World Dictionary, a DIAMOND is "a very precious stone, usually colorless, formed of nearly pure carbon. It is hardest known mineral and is used as a gem, in the cutting edge of tools, as the tip of a photograph needle etc".

One is wondering if Diamond Bank plc is living up to its name (as a precious stone) and VISION: "To be a leading financial institution, with the best people, providing unequaled customer experience and delivering superior shareholder value".

It's share price, as at FRIDAY, October 28, 2016, @ N1.09 representing 52.61% depreciation since the beginning of the year is certainly not pleasant news to the shareholders!

Moreover, it's aspiration "to be a leading financial institution" is not supported by its capitalization. As at Thursday, October 27, 2016, it's market capitalization at the Nigerian Stock Exchange is a misery N26,402,843,424 - a far cry from Guaranty Trust Bank plc and Zenith Bank plc capitalizations of N706,348,301,376 and N469,377,582,100 respectively!

Diamond Bank is a Tier 2 banking institution, in the same league with Sterling Bank, Fidelity Bank, WEMA Bank and First City Monument Bank (FCMB).

For the nine months ended 30th September 2016, the Bank grew its loan portfolio N763.634 billion to N1.041 trillion, representing 36.4% increase. Similarly, it recorded a growth of 16.9% in total assets, which grew from N1.753 trillion in December 31, 2015 to N2.050 trillion. This was driven mainly by the growth in Customer Deposits, which surged by 13.6% from N1.233 trillion as at December 31, 2015 to N1.401 trillion as at September 30, 2016. 

Despite the strong growth in non-interest income, which leapfrogged by 38.1% from N27.254 billion in 2015 to N37.625 billion in 2016, the Profit Before Tax (PBT) fell by a whopping 79.1%, from N18.595 billion to N3.892 billion, on the back of impairment charges, as the Bank opted for "prudent provisioning by cleansing its books of assets with poor quality, thus paving the way for operational efficiency and improved earnings for the business years ahead". Ditto for the Profit After Tax (PAT), which decreased by 78.0% from N15.967 billion to N3.511 billion. 

Recall that impairment charge has been the Bank's albatross. It's impairment charge of N55.2 billion in 2015, more than twice the impairment charge in the corresponding period of 2014 (N26.4 billion), is an indication that the credit process and administration needs to be strengthened, if the Bank must live up to its vision of "delivering superior shareholder value". For the nine months ended 30th September 2016, the Bank's impairment charge was N40.3 billion (30th September 2015 - N19.5 billion). This huge provision was rationalized by the MD/CEO of the Bank as follows: "The economic environment has also impacted business and industry as a whole, particularly those in the Oil and Gas sector. For Diamond Bank, this has translated to elevated impairment charges for the third quarter, as we push for a healthier loan book and to comply with regulations".   

My hope is that the younger Dozie, the son of the founder (Dr. Pascal Dozie), Mr. Uzoma Dozie, the Group Managing Director/Chief Executive Officer should strive to maintain "the foundations that we have laid gives us confidence in our ability to achieve the strategic objectives that we have set for ourselves".

There is dire need for the Bank to go back to the capital market to raise more share capital to enable it play in the premiership!. 

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