Nigeria’s Diamond Bank Seeking Deposits to Offset Tougher Rules

Diamond Bank Plc (DIAMONDB), a Nigerian lender with operations in four other West African nations, plans to boost customer deposits to offset the impact of tougher regulatory requirements on earnings.

Higher cash reserve requirements imposed by the central bank crimped profit last year by 3 billion naira ($18.3 million), according to the Lagos-based bank’s chief financial officer, Abdulrahman Yinusa.

“It did affect us,” Yinusa said in a telephone interview from Lagos, Nigeria’s commercial capital. “Higher volume of customer deposits will help us reduce the effect.”

The Central Bank of Nigeria increased cash reserve requirements on public sector deposits to 75 percent from 50 percent last year and also told lenders to lower fees and commissions to reduce costs to customers. The regulator raised requirements on private deposits to 15 percent from 12 percent on March 25 to reduce liquidity and support the naira.

Customer deposits rose by almost a third to 1.2 trillion naira last year, helping to boost Diamond Bank’s profit by about 29 percent to 28.6 billion naira, according to March 28 filing to the Nigerian Stock Exchange.

The lender plans to grow its loan book by 10 percent to 15 percent this year, with the bulk of that going to finance upstream oil and gas as well as telecom assets, Yinusa said. Return on equity is targeted from 25 percent to 30 percent against 22 percent in 2013, while return on assets is projected to climb to about 5 percent from 4.5 percent, he said.

Diamond Bank’s shares declined 0.6 percent to 6.37 naira at close of trading in Lagos. They have dropped 13 percent this year, compared with a 6.3 percent fall in the Nigerian Stock Exchange All Share Index.

To contact the reporter on this story: Emele Onu in Lagos at eonu1@bloomberg.net

To contact the editors responsible for this story: Vernon Wessels at vwessels@bloomberg.net Dylan Griffiths, Frank Connelly

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