Carlyle-Backed Diamond Gets Cash Offer From Unnamed Investor - BLOOMBERG

NOVEMBER 08, 2018

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  •  Ex-chairman Bickersteth also says there’s been M&A talks
  •  Nigeria Lender looking to shore up funds to meet threshold

Diamond Bank Plc has received an offer from a major investor to inject cash by increasing its stake, a move that would help the Nigerian lender keep its capital adequacy ratio above the required threshold, according to the outgoing chairman.

The proposal was on condition that Chief Executive Officer Uzoma Dozie resigns, Seyi Bickersteth said in an interview in Lagos, the commercial capital, without naming the shareholder. Diamond’s biggest investor is U.S. private equity firm Carlyle Group LP, which declined to comment.

Ezechinyere Anyanwu, a spokesman for Diamond Bank, declined to comment on whether there has been a recapitalization offer.

Diamond is one of a number of smaller Nigerian lenders struggling to maintain a regulatory requirement for banks with international operations to have reserves of capital that cover at least 15 percent of outstanding loans. The company’s ratio stood at 16.3 percent at the end of September, the lender has said.

Bad Loans

Capital requirements became a concern for many Nigerian banks in 2016 after a contraction in the economy caused by an oil-price slump triggered a surge in non-performing loans. Standard & Poor’s on Tuesday cut Diamond Bank’s rating to CCC+/C from B-/B, citing pressure on capital and foreign-currency liquidity.

Diamond has also discussed selling itself to a larger rival, but this plan was eventually rejected after a boardroom vote, Bickersteth said, declining to identify the potential acquirer.

“The majority of us voted against” the takeover, he said. “The bank cannot be pushed into the hands of one suitor,” if it intends to get the best value for shareholders.

Diamond Bank’s Anyanwu confirmed that a board meeting took place last month but declined to give details of what was discussed.

To add to the confusion surrounding the lender, Bickersteth is challenging an announcement by the bank that he’s no longer chairman. He initially quit alongside three other non-executive directors in a walkout last month, only to rescind his resignation and vote on the proposed takeover proposal. Nevertheless, Diamond announced his departure on Oct. 25.

The lender has announced plans to dispose of its U.K. subsidiary, which would follow the sale of four divisions elsewhere in West Africa. That would leave it as a purely Nigerian company, meaning it could qualify for a national license that would reduce its minimum capital adequacy ratio to 10 percent from 15 percent.

The bank cut its full-year profit forecast by more than half on Tuesday after income from operations declined. It now expects profit before tax to reach 3.8 billion naira ($10.4 million), down from a previous target of 8 billion naira. Return-on-equity is expected to fall to 2 percent this year from initial target of 3 percent.

The shares rose 2.5 percent on Wednesday, trading at 1.21 naira at the close in Lagos. The stock is down 19 percent this year, compared with a 12 percent fall on the NSE Banking 10 Index.

— With assistance by Ruth David

(Updates with return-on-equity in penultimate paragraph. An earlier version was corrected to clarify the comment from the company.)


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