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Diamond Bank of Nigeria to Raise $300 Million for Lending

Diamond Bank Plc, a Nigerian lender, plans to raise $300 million as it seeks to expand credit to customers, Chief Financial Officer Abdulrahman Yinusa said.

“Our target is for the loan to be raised by the end of this year, which will bring to $500 million what we have borrowed in the year,” Yinusa said yesterday in an interview in Lagos, the commercial capital. “The purpose remains to expand our loan books and fund infrastructure.”

The Lagos-based lender revised its loan-growth target for this year to 40 percent from 20 percent, “a modest projection from our third-quarter performance,” he said. The forecast takes into account the central bank’s decision to increase the cash reserve ratio for banks that has damped their lending, he said.

Central Bank of Nigeria Governor Lamido Sanusi said on July 24 that the Monetary Policy Committee increased the amount of cash as a percentage of deposits that commercial banks must keep with it to 12 percent from 8 percent while leaving the benchmark interest rate unchanged at 12 percent since October last year to stabilize prices.

Sanusi fired the chief executive officers of eight of the country’s 24 lenders in 2009 and bailed them out with 620 billion naira ($4 billion) after loans by banks to equity speculators and fuel importers pushed the industry to the verge of collapse. The government then set up Asset Management Corp. of Nigeria to buy bad debts from the country’s banks, including 25 billion naira Diamond Bank had loaned to Geometric Power Ltd., a power generation company, to enable them resume lending.

Exceeding Targets

Diamond Bank’s first-half profit through June rose more than fourfold to 9.99 billion naira, from 1.71 billion naira a year earlier, it said on July 11. Net interest income gained 71 percent to 42 billion naira. The bank achieved a return on equity of 23 percent in the third quarter against a target of 15 percent for the year.

“Based on our performance in the third quarter we have reviewed our profitability projection to 30 billion naira for the full year, with return on equity upwards from 15 percent to above 17.5 percent,” Chief Executive Officer Alex Otti said today on a conference call from Lagos. The lender’s ratio of non-performing loans is also forecast to drop to 5 percent from 5.2 percent, he said.

With the administration of President Goodluck Jonathan seeking private investment to help overcome the infrastructure deficit of Africa’s most populous country of more than 160 million people, the lender sees opportunities for loans to companies building power facilities, railways and roads, according to Yinusa.

“We want to grow our loan book aggressively to a level before we will consider slowing down,” he said.

Having secured the approval of shareholders to raise $750 million in May, the $250 million that will remain may be borrowed over the next two years, depending on need, according to Yinusa. While the company has no immediate plans for mergers or acquisitions, it intends to go to the capital market if it needs to raise funds after 2013 when “the market would have stabilized” in order to ensure “steady growth,” he said.

Diamond Bank fell 6.3 percent to 4.05 naira at the close of trading in Lagos. Its share price has more than doubled this year, compared with a 31 percent increase in the Nigerian Stock Exchange All-Share Index.

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