Emeka Okoroanyanwu
Many steeped observers in Nigeria’s turbulent banking industry had for long known that all was not well with Diamond Bank, a Tier-2 Nigerian Money Deposit Bank.
Therefore, the announcement of the acquisition of the bank on Monday, December 17, 2018 by Access Bank PLC did not come to many as a surprise.
Many have for long expressed worry on the state of the bank following half year returns sent to the Central Bank of Nigeria (CBN) in early August.
As far back as early in the year, the bank, in-spite of its size had its capital base fully eroded due to huge Non Performing Loans (NPLs) with little coming from management to mitigate the disaster. The bank did not declare or paid any dividend to shareholders since 2013 and was only meeting the Central Bank of Nigeria (CBN) Capital Adequacy Ratio (CAR) by the grace of CBN forbearance.
The bank’s loan exposure to private sector was N984.3 billion, which was later reduced to N727.694 billion. Diamond Bank had the previous year recorded a N9 billion loss for the year ended December 31, 2017.
On November 2, 2018 the CBN issued a report announcing that Diamond Bank and two others had failed the 30 per cent minimum Regulatory Liquidity Ratio benchmark. The bank, however, countered saying it had a Liquidity Ratio of 42.2 per as at half Year 2018.
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On November 7, 2018, Standards and Poor’s downgraded the bank on weaker than expected Asset Quality, moving it down to ‘CCC+/C’ from B-/B’. The negative outlook reflected pressure on the bank’s capitalisation and foreign currency liquidity. Fitch, another international rating agency again last month downgraded the bank to “CCC’, a negative outlook.
The last straw that seem to have broken the bank’s back was the action of the CBN which in August debited Diamond Bank’s books N250 million following alleged breach of foreign exchange remittances on behalf of MTN Communications Nigeria Limited.
But before this period, Diamond Bank had been grappling with corporate governance issues which analysts blamed on profligacy of management and the fact that robust risk assessments were never carried out before loans were granted. Insider loans to top management were also rampant and such loans were never recovered.
Diamond Bank’s fortune was reported to have begun its downward trend in 2014, the year Mr Uzoma Dozie, son of founder and first Chief Executive Officer of the bank, Mr. Pascal Dozie took over as the Managing Director.
In 2015, the first full year of his headship of the bank, profit tumbled from N28.36 billion to N5.656 billion. It further went down to N3.499 billion in 2016 before a loss of N9.011 billion in 2017.
Before Uzoma Dozie took over, there was Alex Otti who took the bank to enviable heights. When Otti took over the bank in 2011 from Emeka Onwuka, it recorded a profit after tax of N22.108 billion in 2012, N32.5 billion in 2013 and N28.36 billion when he handed over to Dozie in 2014. The bank also saw its total assets rise from N564.9 billion in February 2011 to N1,18 trillion by December 31, 2012 and N1.52 trillion in 2013.
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Having realised the precarious state of its finances and the fact that it could no longer accommodate losses from its subsidiaries abroad, the bank in 2017 decided to sell off its West African operations in Benin, Togo, Cote d’Ivoire and Senegal to Manzi Finances SA, a Cote d’Ivoire based financial services holding company. It also sold of its United Kingdom operations.
Last month, the bank applied and got the Central Bank of Nigeria approval to change its operating licence from International to National.
Speculations on the health of the bank heightened in October, when the bank confirmed the resignation of its chairman and three other non-executive directors, Oluseyi Bickersteth (chairman), Rotimi Oyekanmi, Juliet Anammah and Aisha Oyebode.
Their resignation followed attempt by an international investor in the bank, the Carlyle Group, an American multinational private equity alternative asset management and financial services corporation to take over the bank through massive capital injection. The move, however, collapsed midway following objections from interest groups in top management.
To save the bank, therefore, three things were suggested: injection of fresh capital that should come from acquisition, forbearance of accounts against the bank and a thorough pruning from the regulatory authority, principally, the Central Bank of Nigeria (CBN). The bank, however, settled on the first option which is acquisition.
Before the announcement of the acquisition (merger) on Monday with Access Bank, Diamond Bank was said to have borrowed so much from the apex bank that it was told in clear terms that it could no longer get bailouts from the Bankers’ bank.
