Diamond Bank sees “minimal” loan growth as economy falters

LAGOS (Reuters) – Nigeria’s Diamond Bank said it plans to build up cash reserves to ride out a slowdown in the economy that will depress lending after a sharp drop in global oil prices and the weakening naira.Abdulrahman Yinusa, the chief financial officer of Nigeria’s sixth biggest lender by assets, told Reuters Africa Investment Summit on Wednesday that overall loan growth would slow this year compared with last year. The bank will release its results soon when it will say how much its loan book grew in 2014.”Loan growth is going to be very minimal, we don’t see anything more than 10 percent,” Yinusa said in Lagos.Africa’s biggest oil producer expects to lower its forecast for 2015 economic growth again, after cutting its forecast to 5.54 percent in January, as oil prices fell and the naira weakened further last month.Yinusa said the bank also planned to increase its holding of government bonds, where yields are at around 15 percent.Government bonds accounted for 35-40 percent of assets, which is expected to grow to 45 percent this year, he said.”Our philosophy for 2015, is to put cash first. Liquidity is the first order of priority and … then conservative lending.”Yinusa also expected half of its deposits to come from consumers over the three-year period, up from 40 percent now.Yinusa said he expected return on equity (ROE) to fall this year to 15 percent, after it sold shares last year. But ROE would climb back above 20 percent by 2017.Yinusa said he expected the naira to trade at 200 to the dollar by year-end, as pressure on the currency was expected to ease after a presidential election in three weeks time.But he said the currency could fall to between 220-230 to the dollar if the outcome of the elections brought violence.The naira fell through the psychologically important level of 200 to the dollar last month after Nigeria delayed its presidential election by six-weeks to March 28, sending financial markets into a tailspin.A five-year insurgency by Islamist Boko Haram militants has also rattled the economy.Shares in the bank are down 23.5 percent so far this year.”We’ve started the year quiet slowly. Everybody is waiting and watching to see. We all hoped the elections had taken place so that may be we’d have had some direction,” Yinusa said.($1 = 200.50 naira)