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Diamond Bank records 10.7% dip in profit

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Diamond Bank Plc has released its audited results for the
2014 financial year, which showed that the group witnessed
a drop in profit.
The results, filed with the Nigerian Stock Exchange on
Monday, showed that the group’s profit after tax had
declined by 10.7 per cent year-on-year from N28.544bn in
2013 to N25.485bn in the year under review.
Diamond Bank also suffered a 12.4 per cent drop in profit
before tax as PBT fell from N32.079bn a year earlier to
N28.101bn in 2014.
This is despite a 12.57 per cent rise in the group’s interest
and similar income to N161.129bn from N143.127bn.
In the year under review, the bank had increased its loans
and advances to customers by 14.8 per cent from
N689.168bn to N791.094bn, while its total assets jumped
by 27.3 per cent to N1.933tn from N1.518tn.
Analysts at FBN Capital Research said Diamond Bank had
witnessed a 33 per cent year-on-year and 42 per cent year-
on-year decline both PBT and PAT in the fourth quarter of
2014.
This, they said, was in spite of the fact that profit before
provisions grew by 14 per cent y/y to N42.0bn.
They observed that loan loss provisions and operating
expenses more than offset the growth in revenue. Loan loss
provisions grew by 77 per cent y/y to N11.7bn, while
operating expenses rose by nine per cent y/y to N25.9bn.
“The negative surprise in loan loss provisions proved
significant and overshadowed a better-than-expected result
on the non-interest income line,” they said.
The FBN Capital Research Analysts explained that although
Diamond Bank’s loan book grew faster than management
had guided to, ending the year up 15 per cent compared
with guidance of 7.5 per cent, the market was likely to
ignore this performance.
“One reason is that FX translation would have helped;
second, and more important, the market will focus more on
Diamond Bank’s asset quality given the extent of the
surprise on the provisions line, they said.
“Diamond’s business model is inherently riskier than most
banks from a customer-focus perspective given the greater
proportion of retail/SME in the loan book.”
According to them, if the extent of the negative surprise
was already this high in Q4, questions will be asked about
the likely deterioration in the loan book through 2015.
They added, “We believe that unlike tier 1 banks which were
relatively aggressive with their loan growth guidance for
2015 (given the state of the macro environment), Diamond
is likely to be in defensive mode to keep a handle on asset
quality going forward. As such, we expect loan growth to be
modest.”

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