Diamond Bank, a mid-tier lender, has received approval from the Central Bank of Nigeria (CBN) to operate only in the country in a move to lower capital requirements after selling its international units, it was learnt at the weekend.
The Bank also said on Friday that it is planning to pay off a $200 million Eurobond due in May with dollars generated from operations and has no plan to refinance the debt.
With this approval, the bank will cease to operate as an International Bank, as the re-licensing as a national bank will enable it focus resources on the significant opportunities in the Nigerian retail banking market, and economy as a whole.
The change to national bank status also enables the bank to maintain a lower minimum capital requirement of 10% as against 15% required for international banks.
Uzoma Dozie, CEO, had said: “The move to a national banking licence marks a continuation of our strategy to focus on Nigeria’s significant fundamental trends, including a large underbanked population and Africa’s biggest economy.
The bank was recently Downgraded On Weaker-Than-Expected Asset Quality; Outlook Negative by S&P Global Ratings.
With the latest S&P Global Ratings downgrade, it is evident that the fortunes of the bank, once one of Nigeria’s top financial institution about a decade ago, has strangely deteriorated into a bank in coma.
S&P believes the bank’s provisioning needs will be higher than expected, which will put pressure on its capitalisation.
Additionally, its foreign-currency liquidity position also remains vulnerable, due to a large upcoming Eurobond maturity in May 2019.
“As a result, we are lowering our global scale ratings on Diamond Bank to ‘CCC+/C’ from ‘B-/B’ and our Nigeria national scale ratings to ‘ngBB-/ngB’ from ‘ngBBB-/ngA-3’.
“The negative outlook reflects pressure on the bank’s capitalisation and foreign-currency liquidity,” part of the report stated.
“S&P Global Ratings lowered its long and short term issuer credit ratings on Nigeria-based Diamond Bank Plc to ‘CCC+/C’ from ‘B-/B’. The outlook is negative.
“Furthermore, we lowered our long- and short-term Nigeria national scale ratings on the bank to ‘ngBB-/ngB’ from ‘ngBBB-/ngA-3’.
“At the same time, we lowered our issue rating on the bank’s senior unsecured debt to ‘CCC+’ from ‘B-‘.
“The rating action reflects that we consider Diamond Bank to be currently dependent on favorable business, financial, and economic conditions to meet its financial obligations.”