Just months after Diamond Bank Plc divested 100% of its stakes in its former UK subsidiary, it is now hoping to convert its current international banking license to a national banking license.
The conversion is expected to happen latest in December, 2018.
A ThisDay report published today, claims that a reliable source close to the situation has confirmed this development. According to the source, the license conversion is also expected to place “the Capital Adequacy Ratio (CAR) requirement for the bank at 10 per cent.”
The anonymous source went further to claim that the tier 2 bank is seriously re-focusing its business model, even as it works towards becoming more conservative with its loan portfolio. This new way of thinking is one of the major reasons behind the bank’s decision to divest its assets in Diamond Bank UK.
“THIS YEAR, THE BANK IS GOING TO BE LEANER AND FROM ALL INDICATIONS, IT WILL BE CONVERTING ITS LICENCE TO A NATIONAL LICENCE BECAUSE IT HAS SOLD ITS INTERNATIONAL SUBSIDIARIES AND DOESN’T HAVE AN INTERNATIONAL PRESENCE ANY MORE. THAT MEANS ITS CAR WILL BE AT 10 PER CENT AS AGAINST 15 PER CENT”– SOURCE
Understanding the CAR
It should be noted that the Central Bank of Nigeria (CBN) requires banks with national banking licenses to have 10% Capital Adequacy Ratio (CAR). This is 5% less than the 15% that is required of banks with international banking licenses. The reason for this disparity is due to the fact that national banking licensees have smaller operations. This is exactly what Diamond Bank Plc is hoping to achieve.
Why is Diamond Bank streamlining its operations?
As we reported, Diamond Bank Plc had in April, 2018 this year, sold off 100% of its shares in its UK operations to Sanjeev Gupta, the Chairman and Chief Executive Officer (CEO) of GFG Alliance. This followed the company’s earlier decision (in November) to divest its 97.07% equity stake in Diamond Bank SA.
The bank explained that the divestment will enable it streamline its operations in order to “focus resources on the significant opportunities in the Nigerian retail banking market.”
The company has also recognised the immense opportunities that are available in the local market, and is, therefore, making efforts to take advantage of it, even as it hopes to become the “fastest growing and most profitable technology-driven” bank in the country. The divestment will, therefore, help the company optimise its resources towards the actualisation of its refocused business model.
Diamond Bank Plc finally released its 2017 financial report in May, 2018, after repeated delays. Unfortunately, while its revenue increased from ₦184.1 billion in 2016 to ₦189.6 billion in 2017, the company recorded loss after tax of ₦9.01 billion during the year ended December, 2017, as against a profit after tax of ₦3.49 billion in the full-year 2016.
For its Q1 2018 results, the company recorded a 1% decline in interest income at ₦38.13 billion as against ₦38.65 billion in Q1 2017. Profit after tax for the quarter ended 31st March was ₦784 Million as against ₦4.29 billion recorded in Q1 2017.
Diamond Bank Plc commenced operations as a private limited liability company in 1991. By 2005, its shares were listed on The Nigerian Stock Exchange (NSE).
Its shares are currently trading at ₦1.54.