By Peter OBIORA investadvocate

Lagos (INVESTADVOCATE) –Diamond Bank Plc is planning to sell a N40 billion Non-Performing Loan to the Asset Management Corporation of Nigeria (AMCON).

This was contained from the highlights of the teleconference Call the Bank hosted for Analysts and investors with its Seniour Management to discuss the Banks year 2010 Financial Year End (FYE) and its First Quarter 2011 Financial Results.

InvestAdvocate gathered from the highlights of the Conference Call made available to it by Afrinvest Research Monday April 11 2011 that the Bank is looking to sell N20.0 billion of NPLs to AMCON shortly, subject to finalising terms and an additional N20 billion by the third Quarter (Q3) 2011 culminating to N40 billion in NPLs.

“The Bank also plans to sell an additional N20.0 billon by (Q3) 2011, depending on AMCON’s timetable, as well as increase Tier 1 capital in 2013” it said.

In the same vein, the Bank plans to raise between $150 million and $200 million in the form of Tier-2 capital via a seven-year (7-year) instrument in the 2011 Financial Year; which is already at an advanced stage and on the verge of concluding the transaction.

Other highlights at the Conference Call is that the Bank will be disposing all of its non-banking subsidiaries as it has opted for international Banking License; as earlier reported, in line with the new banking regulations.

Diamond Bank affirmed its performance in year 2010 fell below expectations as it had to take significantly larger provisions – N22.9 billion in total; compared to the N17.0 billion initially anticipated by its Management.

“The N5.0 billion in extra provisions were add-ons from its under-performing Capital Market (Diamond Securities) and Investment Banking (Diamond Capital) subsidiaries” the Bank said.

The Bank further affirmed that on the back of the planned disposals, it made additional N4.5 billion in provisions in the First Quarter (Q1) of year 2011, N2.5 billion for Diamond Mortgages (which has been collapsed into the Bank) and an additional N2.0 billion accruals for both old and new Non-Performing Loans (NPLs).

Also, Diamond Bank estimates total FY 2011 provisions to be in the N30.0 billion ($194.4 million) range, broken down as follows: N10.0 billion ($64.8 million) relating to divestments from subsidiaries; N12.0 billion (US$77.7m) net impact of existing NPLs (relating to loans of 2010 and before).

Also N4.0 billion ($25.9 million) in new NPLs (risk assets to be created in 2011) and N4.0 billion ($25.9 million) in general provisions (based on the return to the 1.0% Nigerian Accounting Standard Board (NASB) rule).

Diamond Bank said that management guidance indicates FY2011 operating profit of approximately N35.0 billion and Profit Before Tax (PBT) of N5.0 billion.

The Bank further affirmed that provisions are expected to drop to pre-crisis levels as from year 2012.

“The new Management expects to clean up the books in FY 2011; while aggressively growing risk asset creation simultaneously.

 

The Bank had practically shut down loan growth in 2010 in the wake of the asset quality problems unearthed by the Central Bank of Nigeria (CBN) intervention. It targets a 30.0% growth in loans and advances while deposits are expected to increase by 25.0% on 2010 levels” it affirmed.