Alabingo Finance Report || In spite of the decline in its net trading income and other incomes, Diamond Bank grew post-tax profit by marginally in the first half of this year catalyzed by an increase in interest earned on loans to customers and fee and commission income.
The bank’s half year profit was up 2.97 per cent to N9.32 billion underpinned by 31.46 per cent increase in interest and similar income to N89.08 billion from N67.76 billion in H1 2016 and fee and commission income also appreciated marginally 2.55 per cent to N21.64 billion.
It suffered a significant cent decline in net trading income by -63.88 per to N2.8 billion when compared with N7.76 billion in the same period last year, caused by -75.08 per cent drop in foreign exchange earnings, in spite of making N660.35 million gain from financial assets held for trading instead of N839.06 loss it recorded from this activity.
Mr. Victor Ukpai, Credit/Market Risk Manager, Stanbic IBTC Pension Managers Limited, wondered how the bank intends to earn interest income with its decision to cut down risk assets.
“Their capital adequacy ratio also dropped. In 2016, their capital adequacy ratio was 16.6 per cent; it has now dropped to 15.4 per cent. Nobody would love to see capital adequacy ratio going down. Also worrisome is the bank’s NPL that has been on the upward movement,” he emphasized.
But the Group Managing Director, Diamond Bank Plc, Mr. Uzoma Dozie claimed in a recent interview with ThisDay Newspaper, “Right now, we have adequate capital because we are not building new branches anymore, which is one thing that takes a lot of costs. We are also looking at assets that are not in line with our goals again, to see what to do to them.”
Other income, which slumped by -77.78 per cent to N309.26 million (N1.4 billion H1 206) due to N115.76 million loss on disposal of property and equipment and -60.77 per cent dip in documentation and telex charges to N402.3 million also combined to moderate the lender’s profitability.
Diamond Bank also struggled with rising loan recovery as impairment rose 6.91 per cent to N20.31 billion during the period under review. It also recorded massive growth in interest and similar expense, which was up 53.93 per cent to N27.39 billion, though fee and commission expense was reduced -16.65 per cent to N3.42 billion in H1 2017.
However, the bank succeeded in scaling down personnel expenses -3.27 per cent to N16.34 billion in the first six of the year as a result of -7.29 per cent reduction in retirement benefit cost to N355.84 million (H1 2016: N383.82 billion) and a massive -60.75 per cent drop in productivity expenses to N 674.92 million from N1.72 billion in the reversed period in 2016.
But other operating expenses were 20.95 per cent higher than the N25.2 billion spent in the first half of last year (H1 2017: N30.49 billion). This rise was majorly occasioned by 6.29 percent increase in Asset Management Company of Nigeria (AMCON) resolution fund; repairs and maintenance cost, which up 44.51 per cent; security and power expenses going up 26.22 per cent , service staff salaries which climbed 23.27 per cent and a significant 93.14 per cent increase in channel services expenses during this period.
Diamond Bank total assets appreciated somewhat 0.78 per cent to N2.07 trillion as a result of fundamental growth in financial assets held for trading, which rose 79.92 per cent to N12.36, prepayments and accounts receivable, which increased 66.92 per cent to N128.75 billion, in spite of -7.53 per cent and -1.10 per cent drop in loans to bank to N92.8 billion and loan and advances to N984.35 billion respectively.
Correspondingly, its total liabilities went up just 0.25 per cent to N1.82 trillion on the back of 31.94 per cent growth in deposits from bank to N 136.44 billion, despite deposits from customers and bank declining -1.82 to N1.4 trillion (H1 2016: N1.42 trillion) and -8.56 per cent cut in borrowings to N154.69
Dozie noted that the bank would be exploring retail banking and technology to improve its profitability. “Our strategy enables us to use capital efficiently because retail banking requires lower capital. We are not growing our branches anymore and what we are rolling out are channels that help customers carry out transactions much more conveniently,” he further said.
The lender’s earnings per share was up 2.56 per cent 40 kobo in H1 2017. And its share which stood at N1.25 at Monday’s trading.and has appreciated 8.70 per cent year-on-year and 42.05 per cent year-to-date. The bank’s price-earnings ratio was 7.7.
Diamond Bank Financial Performance H1 2017 verse H1 2016
