Central Bank of Nigeria (CBN)
Access Bank is set to add Diamond Bank’s portfolio to its assets
in the next few months, The Nation reports.[1]
Talks on the acquisition are on, according to sources, who said
the fusion is set for the first quarter of next year.
It was gathered that both financial institutions have reached an
agreement in broad terms on the acquisition. What is left is the
valuation of assets, with a view to determining the level of
compensation and systems’ integration, the sources said, pleading
not to be named because they are not allowed to talk to the media
on the matter.
It was learnt that the development leading to the impending
acquisition was triggered by Diamond Bank directors who approached
Access Bank for intervention in a bid to stave off a possible
regulatory intervention that could lead to the withdrawal of the
lender’s operating licence in the light of the bank’s depleting
capital adequacy ratio on account of a huge Non Performing Loans
(NPLs) portfolio put at over N150billion.
The Nation gathered that Access Bank directors examined the
proposal and, after series of meetings and evaluations, accepted to
acquire the entity. However, the agreement so far reached, it was
understood, will not alter the name of Access Bank nor its
management structure.
“It’s a complete acquisition and not a merger,” a source, who
asked not to be identified, but who is familiar with the
transaction, said, adding that one of the major considerations that
swayed Access Bank’s directors in accepting the offer was the large
branch network of the lender. “ It’s burgeoning NPLs, however, was
of serious concern to Access Bank and almost becoming a
disincentive, but it has been addressed,” the source added.
It was also gathered that the CBN is well acquainted with the
development. The regulator’s acquiescence to the deal was informed
by the recent event that led to the liquidation of Skye Bank, and
the apex bank not being disposed to following that route because of
the huge cost implication that a bailout of Diamond Bank might
require, encouraged the discussions, “and the regulator is pleased
with the level of discussions so far.”
“ The CBN encouraged the ongoing arrangement, given the fate
that befell the defunct Skye Bank a few months ago. The apex bank
gave its consent and approval for the actualisation of the
marriage. ”
The Nation learnt that the regulator’s un-alloyed support for
the emerging entity followed its unpreparedness to commit any
further huge funds for the rescue of any wavering bank.
Bloomberg reported that a major investor was in the process of
injecting funds into Diamond Bank on condition that the CEO, Uzoma
Dozie, exits his position. The report attributed to the Chairman,
Seyi Bickersteth, has since been denied by the bank.
Diamond is one of a number of smaller Nigerian lenders
struggling to maintain a regulatory requirement for banks with
international operations to have reserves of capital that cover at
least 15 percent of outstanding loans. The company’s ratio stood at
16.3 percent at the end of September, the lender has said.
The bank cut its full-year profit forecast by more than half on
Tuesday after income from operations declined. It now expects
profit before tax to reach 3.8 billion naira ($10.4 million), down
from a previous target of 8 billion naira.
The shares rose 2.5 percent on Wednesday, trading at 1.21 naira
at the close in Lagos. The stock is down 19 percent this year,
compared with a 12 percent fall on the NSE Banking 10 Index.
Diamond Bank, in a statement, said contrary to media articles,
“the Board wish to clarify that the company has not received an
offer from an investor to inject cash. Further to the Company’s
announcement of 26 October 2018, Diamond Bank and its Board of
Directors continue to review all strategic options on a regular
basis. Diamond Bank would also like to clarify it enjoys the
support of its major shareholders, including The Carlyle Group and
Kunoch Holdings who are, as ever, working in cooperation with the
Board and management as appropriate to ensure the successful
operation of its business in Africa’s most dynamic banking
market.
“Further to the announcement of 24 October 2018, Diamond Bank is
in active discussions with regards to the appointment of new
non-executive directors to the Board and, subject to CBN approval,
these will be announced in due course.” “Diamond Bank’s recent
Third Quarter results published on October 26, 2018 show the
business continues to execute its clearly articulated tech-led
retail strategy despite headwinds in the Nigerian economy,” the
bank stated.
References
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The Nation reports.
(thenationonlineng.net)