A close source to the bank stated that 'the portfolio is indeed large and the non-performing ones only highlight the poor management decisions and indecisions which are akin to what you may call magic banking. You may not be surprised if the NPL goes beyond this figure when the bank publishes its financial statement shortly.'
TheCitizen also reliably gathered that this development has led to the gale of staff suspensions and dismissals.
It was learnt that a senior management staff, one Sam Egube, has been relieved of his appointment with the bank as he was among those responsible for the precarious loan status of the bank.
Egube was alleged to have been involved in various NPLs. It was said that the matter was widely-known in the bank that some refer to it as the 'Egubegate'scandal.
There are also reports that another top management staff,Lukman Agboola as well as other staff have been relieved of their jobs recently over their inability to recover loans that have become non-performing.
The source said that the loan that brought the wrath of management on Agboola and others was over N10bn doled out to a single customer without an impressive track record or traceable banking history.
The source however alleged that poor assessment of customer profiles before they were granted loans was a bank-wide phenomenon.
He explained that “in some instances, some addresses of the companies were either incorrect or missing in their files. Some have phony directors that no one can account for. In fact, the bank has unleashed Interpol on some of the customers as part of the efforts to recover the loans'. He alleged that 'it is an indictment on the bank to declare such a bazaar; the quality of risk asset management is really poor and annoying'.
It was gathered that the loan situation has generated a lot of tension in the bank lately, as most staff are detailed to recover their loans as quickly as possible to avoid being sacked. However, those under investigation over allegations of compromise and insider aiding would be shown the exit, source said.
The worst is Small and Medium Enterprises (SMEs) that could not access loans in the bank recently. “In a country such as Nigeria, the lifewire of the economy is SMEs and for months now, that window has been closed without notice or even an explanation to them on why they could not get loans, yet the bank prides itself as a leading bank that supports SMEs in the country,” said a customer who pleaded anonymity.
He said that retail loans help the small businesses to grow and appealed to the bank’s management to kindly reconsider its stand on retail loans. Meanwhile, the Central Bank of Nigeria (CBN) and the auditors were said to have taken cautious positions on the size of bad loans to be provisioned in the Bank’s 2014 annualreport because shareholders would bear the brunt of the present situation.
'The loan provisions will expectedly eat deep into anticipated profits and dividend payments may stagnant,become leaner or fall short of what Diamond Bank shareholders should expect', said a regulatory official.
In its 2013 Annual Statement, Diamond Bank recorded anincrease of 37% in loan loss expenses against an increase of 12.9% in the risk asset portfolio. The rapid growth in loan loss expense indicated that the bank still had significant problem assets in its portfolio.
Although earnings per share came to N1.97 in 2013, increasing from N1.53 in the preceding year, the bank onlyresumed dividend payment after a two-year break. “The profit the bank will declare will be shocking and that is due to provisions made to accommodate the bad loans. The situation may even get worse as there are other loans not regularly serviced but are yet to be classified as NPL,” a worried staff stated.
However, when TheCitizen contacted Diamond Bank last week, the Executive Director/Chief Financial Officer, Mr. Abdulrahman Yinusa, stated that 'in banking, there are regulations about making provisions for bad loans and we do not have any problems on loans or any particular loan that is creating problems for us'.
'However, I will advise you to wait when we publish our financial statement next week, then we will have the exact figures on loans and provisions', Yinusa added.
On speculations that some staff have been asked to go and others on the verge of dismissal over the NPLs in the bank, Yinusa stated that 'there is no such thing. No staff has and will be punished for failing to recover bad loans.'
He added that Diamond Bank 'is a bank that follows CBN guidelines on loans and how NPLs are provisioned in the financial statements. In fact, our accounts go to CBN before approval.'
In a matter of days, the bank will release its 2014 Full Year result and it will be assessed in line with a statement accredited to Dr. Alex Otti, the former Managing Director where he said thus in an interview he granted The Sun; “If you are talking of the recent things we have done in Diamond Bank, I remain proud with the team assembled together from 2011 to date, which has delivered superlative numbers, given where we are coming from in 2011 with a loss of over N27 billion, then, turning that around quickly in 2012 to a profit of about N27.5 billion, sustaining that to 2013 to about N33.5 billion…”
However, some staff who spoke to TheCitizen disclosed that the bank was planning to dismiss some staff over the loans but could not understand how loan matters would relate tosupport staff recruited by Workforce, a recruitment agency.
It was said that the some ancillary staff would be sacked as the bank has finalised plans to re-engage C & M Exchange Ltd as its recruitment platform for support staff.
“This end of the month is very critical as most staff are under palpable anxiety as to whether they will continue in the bank or laid off. The Tsunami is imminent and staff can feel it. The new management is going to sack a lot of people because they say the overhead is enormous and the loan portfolio is huge; therefore there is this thinking that many staff may lose their jobs under the cloak of rationalization using appraisal as a guise,” the source stated.
Some staff of the bank who spoke to TheCitizen lamented that 'this is unfair. Why should other staff suffer for the mistakes of senior management?'
They alleged that 'only senior management staff approved those loans as they are members of the approving credit committee. They approved some of those loans for their friends and partners without collateral and now they want to drag us into the mud. If we have to suffer because of this, we may blow the whistle on other matters that may attract regulatory bodies', the staff added.
The fear of job losses in the bank is heightened by speculations that the bank would close down its subsidiary in London, Diamond Bank UK Plc, as a recent strategicbusiness review recommended to the lender. “Honestly, that venture was a wrong move and the bank appears to be regretting the launch out into London. The volume of transactions emanating from there does not justify the subsidiary in anyway,” a source explained.
Meanwhile, shareholders are worried that the bottom-line of the bank and shareholders' dividends will be adversely affected given the anticipated provisions for NPLs.
The National Co-ordinator of Independent Shareholders Association, Sir Sunny Nwosu, opined that 'if the profits are not large enough for loan provisions to be accommodated, then there may be little or no dividends for the shareholders. Everything will depend on the size of the profits the bank will make. But, I have doubts if the bank will present a profit after tax of N100bn or above to provide for such non-performing loans.'
Sir Nwosu added that 'this will not be too good for a bank that recently sourced fresh funds from the investing public', which was N50.374 billion via a rights issue as part of the bank's capital raising exercise.
The rights issue had paved the way for Carlyle Group, one of the world's largest private equity firms, to invest $147m in Diamond Bank, which gave the firm an 18% stake in the bank.
Carlyle Group had hoped in a statement in November 2014 that the rights issue would strengthen Diamond Bank's'balance sheet and support the bank's continued growth plans.'
'Proceeds will be used for the development of the bank's IT infrastructure, working capital support and the expansion andrefurbishment of its branches', the statement added.
Diamond Bank Plc operates as a full service commercial bank in West Africa and the United Kingdom.
As at September 30, 2014, the Bank had over $10 billion of total assets and $7 billion of customer deposits.
The Bank is recognized for its market-leading retail franchise, having extended loans to more than 120,000 MSMEs in Nigeria since 2009, and innovation in e-banking (Diamond Mobile app) and banking the un-banked (Diamond Y'ello account and BETA banking proposition).
The bank has won several awards, including IFC's Award for Best Issuing Bank in Sub-Saharan Africa, Best Credit Card in Nigeria, and Best Bank in Oil and Gas Investment. In 2013 the bank was declared one of eight Systemically Important Financial Institutions (SIFIs) by the Central Bank of Nigeria.
The bank employs over 4,000 people in 286 locations across Nigeria, West Africa and the UK.
However, TheCitizen reliably gathered that the ambitious growth programme of the bank initiated by the immediate past administration has also been sidelined.
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