Why Diamond Bank is not issuing bonds


MD/CEO of Diamond bank, Uzoma Dozie says the bank will sell off assets that are of no benefit to its retail strategy. He made the disclosure during an interview he granted Thisday newspapers.

Here is a summary of what we gleaned from the interview:

  • The bank said it has enough capital and does need to raise equity or borrow from foreign investors, unlike Zenith, UBA and Access Bank which have all assessed the FX market..
  • The CEO also reveals that the bank will not be opening additional branches as it steps up efforts to reduce investments in brick and mortar businesses.
  • He also said going forward, the bank will focus on corporate and mid tier market segments this year.

Why sell assets?

The CEO did not reveal the assets that it wants to sell however, the bank may have chosen this route, because it is the most cost-effective. An asset sale gives it immediate access to the funds which it can deploy immediately. An equity raise would lead to share dilution which the bank would be keen to avoid, since it has 23.1 billion shares issued already. Looking at the bank’s balance sheet also did not immediately reveal what assets it hopes to sell from its total assets of over N2 trillion. If it is to sell any assets aside from some securities it holds on behalf if its customers, it has about N15 billion in investments in its subsidiaries including Diamond Pensions.

What would the funds be used for ?

Proceeds from the sale will most likely be used to boost its capital base. Even though the MD has stated that the bank is adequately capitalized, the bank may make this move to preempt any possible loan provisions it may have to make. Diamond Bank has already taken a loan loss provision of over N100 million between 2015 and 2016 alone.

A combination of low oil prices, and a harsh economic climate have made many companies to either default on loans or renegotiate repayment terms.

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