Just a day after FBN Holdings PLC, Nigeria’s biggest financial services group released a grim result for its full year 2015 earnings, Diamond Bank PLC [DIAMONDB:NL], a tier 2 bank released a its full year 2015 result with huge losses it suffered from credit impairments.
Here are the facts:
While Diamond Bank’s gross revenue slightly rose from 217 billion in 2015 compared to NGN 208 billion in 2014, representing 4% growth. But as a result of credit impairments, the group’s profit before tax fell to NGN 7 billion compared to NGN 28 billion it recorded in 2014 when its gross revenue was lower than what it earned in 2015. The bank’s profit before tax has therefore slumped by -75%.
As a result of its impairment problem the group’s net profit stand for 2015 fell to 5 billion compared to 28 billion it reported in 2014. As reported by the bank net impairment loss is about NGN 55 billion compared to NGN 26 billion it suffered in 2014.
To shore up its deposit base and have a stronger support base, the bank had launched series of marketing campaign to drive deposits, mobile banking apps to drive non-interest revenue and other campaigns for targeting credit for SMEs.
However, the Diamond Bank was greatly exposed to the oil and gas sector to the tune of NGN 236 billion representing about 36.1% of the total credit profile of NGN 648 billion. The crash of global crude made the bank’s bet on oil one that finally went sour.
With over 4,500 staff, Diamond Bank’s is one of the smallest banks in Nigeria by asset value. A kneel jerk approach might be to cut cost by laying off many staff.
The bank will need to improve its loan value as many of its debtors might still default as Nigeria’s economic situation might relapse if the government does not get its acts together.
Share of Diamond fell sharply after it released the result yesterday. Its share price is a currently as low as NGN 1.49 per share. If it falls below 50 kobo, the bank might be delisted from the Nigeria Stock Exhange, NSE.