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Diamond Bank: Eye on sustainable growth for long term profit

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Recently at the Nigerian Stock Exchange (NSE), Diamond Bank plc –one of the thirty largely capitalised companies at the Nigerian bourse released its  unaudited half year (H1) performance scorecard.

The financial result of Diamond Bank plc for the half-year (H1) period ended June 30 2015 shows that its profit before income tax declined by 11.7 percent to N14.193billion, from N16.072billion in the corresponding H1 period of 2014.

The bank reported profit after tax (PAT) of N12.15 billion, which was lower than its 2014 position of N13.78billion, a decline of 11.83percent. It posted 6 percent year-on-year (YoY) growth in gross revenue from N96.8billion in half-year (H1) 2014 to N103.0billion.

Uzoma Dozie, group managing director/Chief Executive Officer, Diamond Bank plc hinged the bank’s continued success in spite of regulatory headwinds to its focus on the implementation of strategies that promote sustainable growth and profitability for the long term.

Diamond Bank’s focus remains on retail banking and providing convenient and easy banking to the micro small and medium enterprises segment, but it has however continue to grow its corporate and mid-tier business segments. The Bank’s capital adequacy ratio (CAR) surged to 18.6 percent, in excess of the Central Bank of Nigeria (CBN) minimum requirement, and signposting the bank’s preparedness for expanded business.

Listed on the banking subsector of the financial services sector at the NSE, the bank’s market capitalisation is currently in excess of N88.935billion and shares outstanding of 23,160,388,968 units.  The bank’s share price opened this week on a positive note after adding N0.04 or 1.05% increase to N3.84kobo.

According to the bank’s CEO, “our innovative, customer friendly services and retail banking strategy are showing positive results and will enable us to sustain low cost of funds. In the quarters ahead, we will focus on premium quality risk assets, as we continue to explore opportunities to grow our market share responsibly. We shall expand customer relationships, enhanced by our elaborate channels and excellent service delivery”.

The Group’s focus on funding the real sector was reflected in the growth in loans and advances to customers from N791.09 billion to N793.67billion since the beginning of the year amidst a decline in the pace of economic activities and weak economic fundamentals.

Deposits, however, declined from N1.49 trillion to N1.35 trillion, reflecting cumulative changes in regulation such as the new unified Cash Reserve Ratio and Treasury Single Account that necessitated sterilisation of huge sums of money by the Central Bank of Nigeria.

According to the CEO, “the concept of value chain management helps us to provide end to end solution to the value chains of our corporate clients and ultimately improves value for both us and the customers”.

Though, the bank’s H1 2015 unaudited results shows its basic earnings per share (in kobo) declined to 52kobo from 95kobo; total assets declined to N1.830billion from N1.933billion in H1’14; but Net Interest Income (NII) rose to N58.621billion from N55.393billion in H1’2014. Also, Diamond Bank capital adequacy ratio rose to 18.6 percent, in excess of the Central Bank of Nigeria’s (CBN) required minimum. Loans to customers increased by N2.6 billion, customer deposits, declined from N1.5 trillion to N1.4 trillion.

Recall that the bank had earlier this year on the floor of the Nigerian Stock Exchange released its 2014 Business Year (BY) performance scorecard showcasing strong growth in key financial parameters.

For the year ended December 31, the group recorded a growth of 27.3 percent in total assets from N1.52 trillion in the previous year to N1.93 trillion.

This was driven mainly by growth in deposits, which surged 23.8 per cent from N1.21 billion in 2013 to N1.49 billion, demonstrating the Bank’s strong ability and network to generate cheap deposits from the retail and middle market segments. Also, the Bank grew its loan portfolio to customers from N689 billion to N791 billion, representing 14.8 per cent increase.

The CEO had while commenting on the result stated that the performance and steady growth in the 2014 Business Year under review despite the inclement operating environment, was the result of management’s focus on the strategic projections.

“We at Diamond Bank are pleased to announce continued success in implementing our strategy across the group, following another year of strong top line growth and an asset base that grew from N1.5 trillion to N1.9 trillion in 12 months”.

Gross earnings increased by 15 percent from N181.2billion in 2013 to N208.4 billion, showing an increase of 9.6% in net operating income which stood at N116.3 billion in 2013 to N127.4 billion. However, Profit Before Tax (PBT), declined marginally by 12.5% from N32.1 billion in the previous year to N28.1 billion, reflecting the harsh regulatory headwinds that hallmarked business operations in 2014. 

According to the CEO, “Amidst regulatory headwinds that characterised the industry, and a dynamic macroeconomic environment, growth was recorded in operating income although our profit before tax dropped from 2013 levels on the back of higher operating expenses and loan impairment charges. For further growth and profitability in 2015, we shall implement our digital banking strategy rigorously, and this will go a long way to reduce operating costs and drive customer acquisition as we seek to increase market share.”

The Bank maintained very strong showing in its capital structure, as the group’s capitalization improved significantly by 50.5 percent due to a combination of the impact of its highly successful rights issue in the last quarter of 2014, as well as the capitalisation of profits for the BY. Shareholders’ funds increased from N138.7billion as at December 31, 2013 to N208.8 billion as at December 31, 2014, making Diamond Bank one of the most capitalised banks in Nigeria.

The strong capital base reflects the Bank’s resilience and its preparedness to grow business in the future despite the implementation of Basel 2 and 3 by the Central Bank of Nigeria (CBN) and the related high capitalization requirement. On the enhanced capitalization, the Bank recorded enviable performance, as the return on average equity moved from 23.1 percent in 2013 to 14.7 percent while return on average asset decreased from 2.1 percent to 1.5 percent. These were driven purely by efficient growth in the volume of business represented by increase in loan book, and investment securities.

Speaking further on the performance of the bank, the CEO stated, “We are encouraged by these positive results and sustenance of our business growth, and affirm our commitment to continue delivering healthy shareholder returns in 2015 and beyond.”

Iheanyi Nwachukwu