Fitch Ratings has affirmed Diamond Bank's Long-term National ratings at 'A-(nga)' and Foreign Currency Long-term Issuer Default Rating (IDR) at 'B' with a Stable Outlook. The ratings according to a statement made available to THISDAY, were based on the Bank’s earnings and diversified deposit base. It however, noted the negative impact of loan loss provision on the Bank’s profitability.
Fitch, according to a statement said that net interest income of the bank improved 78.4 per cent to N42.4billion during full year ended April 30, 2009. The increase led to a substantial improvement in net interest margin to 8.3 per cent in 2009. The widening of the net interest margin can partially be attributed to the increase in gross interest income from placements and short_term funds to N21.4billion.
The international rating agency according to the statement, noted that non_interest income of the bank increased by 23 per cent to N29.5billion and accounted for 41.1 per cent of the bank’s gross income in 2009. The growth in net fees and commissions arising from increased credit_related fees was more moderate given slowing loan book growth in 2009, increasing by 25.7 per cent. Operating income was further supported by gains on trading, which rose by 36.6 per cent, with foreign exchange income of N3bn representing the bulk of the gain.
Diamond Bank’s net profit reduced significantly - by 59.7 per cent to N5.2billion - during 2009 due to a 387.6 per cent increase in the loan impairment charge, despite strong growth in net interest income. The consolidated net earnings, which were lower than the bank entity’s net income, were negatively affected by a loss of N2.9bn in Diamond Securities Limited as a result of the adoption of the mark_to_market (MTM) approach for its margin_ or share_based lending portfolio. Loan loss provisions rose steeply by 387.6 per cent to N23.2billion in 2009 due to significant absolute growth in NPLs. The MTM of margin_ or share_based lending in Diamond Bank and DSL contributed N4.3billion towards this provision. Provisions arising from the downstream petroleum industry and other assets were the other major contributors to the impairment charge.
Fitch Ratings however, downgraded Diamond Bank's Individual Rating to 'D/E' from 'D'. The agency stated that the downgrade of the bank's Individual Rating reflects the bank's weaker financial performance and deteriorating asset quality in an increasingly challenging operating environment. Fitch according to the statement, recognised that the Nigerian banking sector has been confronted with a number of challenges in the Nigerian operating environment in 2009.
Diamond Bank was one of the five banks in the first grouping of 10 banks to pass the CBN’s special examination in August 2009.