Diamond Bank to Boost Nigeria Loans Upon West Africa Retreat

LAGOS (Capital Markets in Africa) – Diamond Bank Plc plans to boost lending and its customer numbers in Nigeria as it targets growth in its home market after divesting its units elsewhere in West Africa.

The Lagos-based lender sees its loans growing by about 10 percent next year and customers increasing by a third to 20 million by 2019, Chief Executive Officer Uzoma Dozie said in a Nov. 23 interview in the commercial capital, Lagos. “The divestment is to enable us to focus on our Nigerian business; it is going to improve our capital and our bottom line,” he said.

Diamond Bank, of which private-equity firm Carlyle owns about 17 percent, said this month it is in the final stages of divesting its majority stake in four West African units to Abidjan, Ivory Coast-based Manzi Finances SA for 61 million euros ($71 million) to build up its capital and fund Nigerian operations. Its capital-adequacy ratio dropped to the regulatory threshold of 15 percent in 2016 following a contraction in the economy that triggered a surge in non-performing loans for banks.

Diamond Bank expects the ratio to increase to more than 16 percent after the sale, Dozie said, which will enable the bank do more lending and “have enough shock absorbers to take any losses from those businesses,” he said.

‘Growth sectors’
Nigeria’s economy expanded 1.4 percent in the three months through September from a year earlier compared with a revised 0.7 percent in the second quarter. It contracted 1.6 percent in 2016, the worst annual slump in 25 years following a drop in the output and price for crude oil, its main export. 

Diamond will target “growth sectors” of the economy including “health, education, manufacturing and agriculture,” for lending, according to Dozie. It is also teaming up with mobile phone company MTN Group Ltd.’s Nigerian unit to offer mass-market financial services that won it 9 million customers in two years, the biggest surge in its history, he said.

The lender expects non-performing loans as a percentage of total loans to fall to below 5 percent by the end of 2018 from 9.5 percent in September after the bank restructured problem loans, Dozie said. Nigeria’s central bank recommends a maximum NPL ratio of 5 percent for lenders.

“If the economy continues in a positive trajectory, asset quality will improve,” he said.

Source: Bloomberg Business News