The Board of Directors of Diamond Bank Plc has approved the Bank’s plans to divest from its non-bank subsidiaries and focus on Commercial Banking. The Board however, decided to uphold its foreign bank subsidiaries and operate as an international bank.
Following the repeal of the universal banking model, the Central Bank of Nigeria (CBN) introduced specialised banking that permits banks to have licences solely for any of core areas including commercial banking, Islamic banking, Micro-finance banking, among others. The monetary authority also made provision for Holding Company (HoldCo), where a bank could decide to carry along its subsidiaries.
Under commercial banking, the guideline provided for an international bank with a capital base of N50 billion, a national bank with N25 billion minimum capital and a regional bank supported with N10 billion in shareholders’ fund.
The Board of Diamond Bank announced last weekend that based on the regulations released for commercial banking, the bank will divest from the following subsidiaries: ADIC Insurance Limited; Diamond Capital and Financial Markets Limited; Diamond Securities Limited; Diamond Registrars Limited; and Diamond Pension Fund Custodian Limited.
The Bank resolved to integrate Diamond Mortgages Limited into the Bank.
The Board in a statement said the decision is not expected to have any significant impact on the Bank’s performance going forward as the non-bank subsidiaries contribute less than five per cent to the Group’s earnings.
“The Bank’s Management and Board were already critically reviewing the performances of the non-bank subsidiaries with the objective of maximising shareholder value before the CBN policy was unveiled. In furtherance of that exercise, the Bank’s shareholders at its last annual general meeting gave approval for the Bank to “enter into a business combination with or transfer, assign or otherwise dispose of its shareholding in any of its subsidiaries as may be determined necessary by the Board of Directors for the purpose of optimizing of Diamond Bank Group.
“The Board’s decision is based on the primary objective of allowing the Bank to concentrate on its core banking business in the new regulatory environment, drive operational efficiency, as well as provide unique customer services anchored on creative solutions to customer’s business challenges, and ensure improved shareholders value in the short to medium-term,” it stated.
The Board said that the choice of International Commercial Banking is in line with the Bank’s vision to build “a strong financial services institution with effective presence in Nigeria and Africa and, indeed all the key financial centre’s of the world,” adding that in pursuit of that vision, the Bank in 2001 established a subsidiary in Benin Republic.
“The subsidiary, through its unified banking license in the Francophone West Africa zone is currently expanding into three more countries, namely Cote D’Ivoire, Senegal and Togo to significantly enhance its performance. The new offices should commence operations in the first quarter of 2011. Given the minimum capital of N50 billion currently required for international banking license, the Bank’s shareholders’ funds in excess of N100 billion is far higher than the regulatory requirement,” the bank added.