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Diamond Bank Plc – Funding Income Up by 25% YoY in Q1 2017

Proshare

Thursday, April 27, 2017/ 6:50PM / FBNQuest Research

­Event
: Diamond Bank reports Q1 2017 results
Implications:
Neutral reaction expected by the market
Positives:
Funding income up 25% y/y
Negatives:
9% y/y growth in opex

Diamond Bank released its Q1 2017 results this afternoon. The results showed that both PBT and PAT were down y/y. PBT fell -17% y/y while PAT was down -3% y/y because other comprehensive income of N827m supported the results.


The decline in PBT was driven by a 23% y/y decline in non-interest income, a 20% y/y increase in loan loss provisions, and to a lesser extent, a 9% y/y increase in opex. The changes on these lines more than offset a 25% y/y increase in funding income to N31.5bn. Sequentially, PBT improved remarkably from a depressed Q4 2016.


Compared with our forecasts, both PBT and PAT were ahead, by 19% and 44% respectively. The positive surprise in the earnings was driven by a better-than-expected outturn on the funding income line. This more than offset negative surprises in non-interest income (-12%) and opex (+8%).


To a lesser extent, loan loss provisions also helped, coming in 8% lower than we were expecting. We would not make too much of the provisions at this point because the reported (provisions) figures tend to be lower in Q1 compared with the rest of the quarters in the year.


Management is yet to hold a conference call for its Q4 results. We expect one to hold, combining both the Q4 and Q1 results. Given that profit before provisions in Q1 2017 grew by 7% and was only 5% ahead of our forecast, we suspect the market will be expecting a muted performance by the bank in 2017. Our estimates are under review. We rate Diamond Bank shares Underperform.


Diamond
Bank Q1 2017  results vs. FBNQuest Research estimates

 

Q1 2017

 

Actual

Y/y

Q/q

FBNQuest est.

Actual vs FBN Quest est. (%)

Interest income

44,527

24.7%

5.5%

39,495

12.7%

Interest expense

-13,071

25.1%

-2.5%

-11,415

14.5%

Net interest income

31,456

24.5%

9.2%

28,080

12.0%

Other income

10,840

-23.3%

-33.3%

12,339

-12.1%

Profit before provisions

42,296

7.3%

-6.2%

40,419

4.6%

Provisions

-10,580

20.1%

-43.6%

-11,549

-8.4%

Operating expenses

-26,133

9.4%

3.8%

-24,186

8.0%

PBT before exceptional item

5,584

-16.6%

389.0%

4,684

19.2%

PBT

5,584

-16.6%

389.0%

4,684

19.2%

Tax

-775

-16.9%

-32.8%

-749

3.5%

-Tax rate

13.9%

 

 

16.0%

 

PAT before comprehensive income

4,808

-16.5%

n/a

3,935

22.2%

Other comprehensive income

827

2840.1%

n/a

0

n/a

PAT before min. Interest

5,635

-2.7%

n/a

3,935

43.2%

Minority interest

-16

-19.7%

n/a

-23

-29.8%

PAT after minority interest

5,619

-2.6%

n/a

3,911

43.7%

 
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