Banking
S&P Downgrades Diamond Bank Ratings, Raises Alarm
By Dipo Olowookere
The long and short-term issuer credit ratings on Nigeria-based Diamond Bank Plc have been lowered by S&P Global Ratings, Business Post has learnt.
A statement issued by the rating agency disclosed that the ratings were downgraded to ‘CCC+/C’ from ‘B-/B’, with the outlook negative.
In addition, S&P said it also lowered its issue rating on the bank’s senior unsecured debt to ‘CCC+’ from ‘B-‘, with the long and short-term Nigeria national scale ratings on the bank dropped to ‘ngBB-/ngB’ from ‘ngBBB-/ngA-3’.
According to the statement, the rating action reflects Diamond Bank’s dependence on favourable business, financial, and economic conditions to meet its financial obligations.
“We believe that Diamond Bank will have to set aside higher provisions than we initially expected, following the adoption of International Financial Reporting Standard No. 9 (IFRS 9), which implies weaker asset quality than we expected and exerts significant pressure on the bank’s capitalization.
“Following Diamond Bank’s successful disposal of its West African subsidiaries, and imminent disposal of its UK subsidiary, we expect it will convert its license into a national banking license. The license conversion would mean a lower minimum capital adequacy ratio (10 percent versus 15 percent currently) and lower risk of breach.
“However, the timing is uncertain, and we consider that there is significant pressure on its capital position.
“Moreover, four of the bank’s 13 board members have resigned recently, which could create instability if left unresolved in the near term,” the statement said.
It was disclosed that as of December 31, 2017, the bank’s regulatory capital adequacy ratio reached 16.7 percent, dropping to 16.3 percent in September 30, 2018, on the back of IFRS 9 implementation and amortization of tier-2 capital instruments.
The initial implementation of IFRS 9 resulted in the bank taking N2.5 billion deduction from retained earnings at June 30, 2018.
S&P said it believes Diamond Bank will have to take higher provisions for IFRS 9, using the N31 billion of regulatory risk reserves that it holds under the local prudential guidelines.
“Based on peers’ experience and the bank’s weak asset-quality indicators, we estimate the impact will significantly exceed the regulatory risk reserves and estimate that our risk-adjusted capital (RAC) ratio will reach 3.4 percent to 3.9 percent in the next 12-24 months compared with 5.3 percent at year-end 2017.
“The impact will be somewhat tempered by the capital gain when the sale of the bank’s UK subsidiary is finalized. We expect the bank’s credit losses to average 5 percent over the same period, while nonperforming loans (NPLs; including impaired loans and loans more than 90 days overdue but not impaired) will remain above 35 percent in the next 12 to 24 months after reaching 40 percent at September 30, 2018.
“Overall, we think the bank will display losses in the next 12 to 24 months. In May 2019, Diamond Bank will have to repay its maturing Eurobond principal of $200 million. The bank plans to use its foreign-currency liquidity and the proceeds from the sale of its UK subsidiary for the repayment, among other sources.
“Any delays or unexpected developments could exert downward pressure on the ratings.
“Following the recent resignation of board members, the bank could face some outflows of deposits, but the granularity of its deposit base and its historically good retail franchise are mitigating factors,” the agency said.
It explained that the negative outlook reflects the pressure on the bank’s capitalization from weaker-than-expected asset-quality indicators, and on its foreign-currency liquidity due to a large upcoming maturity in May 2019.
“We could lower the ratings if provisioning needs proves higher than what we currently expect, leading to a decline in capitalization as measured by our RAC ratio (below 3 percent) or a breach in the local regulatory requirements.
“We could also lower the rating if the bank is unable to secure sufficient foreign-currency funding for the repayment of its Eurobond. When the latter is repaid, we may revise the outlook to stable if the banks’ asset quality and capitalization improves, and the make-up of its board stabilizes,” the statement said.
Business Post reports that shares of Diamond Bank rose by 3 kobo or 2.54 percent at the local stock market at the close of business on Wednesday.
By Modupe Gbadeyanka
About N3.6 trillion has been repaid to the Central Bank of Nigeria (CBN) by the Asset Management Corporation of Nigeria (AMCON) since its inception in 2010.
This information was revealed by the chief executive of AMCON, Mr Gbenga Alade, during a media parley to update the press on the activities of the agency.
Mr Alade said at the moment, the organisation still owes the central bank about N3 trillion for toxic assets of banks in the country.
He praised the organisation for its asset recovery drive, stressing that when compared with others across the world, Nigeria has done well.
“It is important to stress that the corporation has done tremendously well, especially when compared to other notable government-owned Asset Management Corporations around the world.
“Based on the balance at purchase, AMCON outperformed other Asset Management Corporations all over the world by achieving over 87 per cent in recoveries despite the unique challenges associated with debt recovery in Nigeria.
“The Malaysian Danaharta, which is adjudged one of the best performing Asset Management Corporation’s, only achieved 58 per cent. The Chinese Asset Management Corporation, despite its stricter laws, achieved just 33 per cent.
“Only the Korean Asset Management Corporation (KAMCO), South Korea, has achieved more recoveries than AMCON, with about 100 per cent. This was due to their brute force with which they chased the obligors.
“Despite KAMCO’s recovery records, the agency is still operational to date with slight realignments in its mandate.
“Other noted Asset Management Corporations that have transitioned into a perpetual institution of the various governments include, China Asset Management Company, Federal Deposit Insurance Corporation (FDIC) USA, and KFW Germany.
“So, gentlemen, without sounding immodest, AMCON has done well, and we will not relent until all the outstanding debts are fully realized,” Mr Alade stated.
On the financial performance of AMCON, he said last year, the firm posted a revenue of N156.25 billion and operating expenses of N29.04 billion, while for the 2025 fiscal year should be a revenue of N215.15 billion and operating expenses of N29.06 billion.
By Modupe Gbadeyanka
One of the non-interest banks in Nigeria, The Alternative Bank (AltBank), has opened a new branch in Effurun, Delta State.
The new office will serve the Edo-Delta region and provide purposeful banking and real financial empowerment for individuals, entrepreneurs, and businesses, a statement from the firm stated.
The lender disclosed that the Effurun branch is a bold move in its mission to reshape banking in Nigeria.
The launch was graced by key dignitaries, including the Ovie of Uvwie Kingdom, Emmanuel Ekemejewa Sideso Abe I; the Chairman of Uvwie Local Government, Anthony O. Ofoni, represented his vice, Andrew Agagbo; and the Special Adviser to the Governor of Delta State on Community Development, Mr Ernest Airoboyi; amongst others.
The Divisional Head for South at The Alternative Bank, Mr Chukwuemeka Agada, emphasised the institution’s commitment to Warri and its surrounding communities.
“By establishing a presence here, we are initiating a transformation in the way banking serves the people of Delta. Our purpose-driven approach ensures that customers’ financial goals are not just met but exceeded,” he stated.
“This branch represents our pledge to empower Warri’s dynamic businesses and families, providing them with the tools to grow without compromise,” Mr Agada added.
“We understand the heartbeat of this community, and we are excited to integrate our bank into the fabric of this dynamic region,” he stated further.
On his part, the representative of the Ovie, Mr Samuel Eshenake, challenged the bank to facilitate development and employment within the Effurun community.
The Regional Head for Edo/Delta at The Alternative Bank, Mr Akanni Owolabi, embraced this challenge, pledging that the bank will work sustainably to drive local commerce.
“At The Alternative Bank, we are committed to being an active partner in the development of Effurun. We see this branch as a catalyst for creating opportunities, driving employment, and supporting the growth of local businesses.
“Our mission is to empower this community, ensuring that every step forward is one of progress, prosperity, and shared success.”
By Aduragbemi Omiyale
A partnership aimed to enable seamless, real-time and secure transactions for cardholders across Africa and the rest of the world has been entered into by Payattitude and PAPSSCARD, the card scheme initiative of the Pan-African Payment & Settlement System (PAPSS).
The collaboration will allow Payattitude cards issued by banks and other deposit-taking institutions to be co-branded with PAPSSCARD, Discover, Diners and Pulse for acceptance across their networks in Nigeria, Africa and worldwide.
As an initiative of the African Export-Import Bank (Afreximbank) and a key financial infrastructure supporting the African Continental Free Trade Area (AfCFTA), the PAPSSCARD scheme will facilitate instant cross-border payments in local currencies.
“This partnership reflects our commitment to cross-enterprise alliances and enabling inclusive, efficient, and borderless payments across Africa and the world
“With Payattitude, Nigerian cardholders and financial institutions can now enjoy the benefits of a Nigerian card that can be used worldwide,” a director at Payattitude, Dr Agada Apochi, said.
The acting chief executive of PAPSSCARD, Mr John Bosco Sebabi, said the aim is “to connect African payment ecosystems, reduce the cost and inefficiencies of cross-border payments, and strengthen African sovereignty over payments infrastructure.
“Collaborating with Payattitude, a key innovator in Nigeria’s payment space, represents a significant step towards a more unified African payment landscape.”
The chief executive of PAPSS, Mr Mike Ogbalu, said, “By bringing together PAPSSCARD’s robust cross-border payment capabilities with Payattitude’s leadership in the Nigerian digital payments, we are taking tangible steps toward building a single African market where individuals and businesses can transact easily and securely, both within and beyond Africa.”
Payattitude is the first-in-kind Nigerian Payment Scheme to pioneer multibank App and USSD Code *569#.
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