Diamond Bank Chief Executive Officer, Uzoma Dozie has confirmed the bank has no plans to raise capital either through equity or bonds. He made this known in an interview with Daily Trust.
“To achieve the development within the banking system, we need funds and capital. Without a plan to raise capital from the stock market or anywhere, there is the need for us to maximize what we have to perform bigger in operations than being big without significant impact.”
Where will the needed funds come from?
Diamond bank had in a notice sent to the Nigerian Stock Exchange in November 2017, stated that it was at the verge of concluding the sale of its 97.07% stake in Diamond S.A. for 61 million Euros to Manzi Finances S.A. Diamond S.A. was the bank’s holding vehicle for its West African branches.
The bank’s Managing Director had also indicated last year, that it would shift its focus to retail lending. Diamond had prior to this being focused on lending to Small and Medium Scale Enterprises, but this appears not to have worked. The bank has had to write off over N100 billion in loans.
The struggle of tier two banks
Banks in the country can be broadly divided into two: Tier one and Tier two. Tier one banks comprise FBN Holdings, UBA, GT Bank, Acces Bank and Zenith. Other banks in the country are collectively known as Tier two banks.
They typically have higher non-performing loans and lower Capital Adequacy Ratios (CARs). In a bid to mobilize deposits, they pay higher rates. Their relatively small size also denies them the advantage of a large pool of funds, like their Tier 1 counterparts. They also typically take riskier lending decisions.
Diamond bank is currently trading at N2.50 in today’s session on the Nigerian Stock Exchange. Year to date, the stock is up 70%.