Diamond Bank Investor Call Presentation FY10 1Q11 Results

8/7/2019 Diamond Bank Investor Call Presentation FY10 1Q11 Results

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Investor call presentation



Forward looking statementsThis presentation contains or incorporates by reference ‘forward-looking statements’ regarding the belief or current

expectations of Diamond Bank, the Directors and other members of its senior management about the Group’s businessesand the transactions described in this presentation. Generally, words such as ‘‘could’’, ‘‘will’’, ‘‘expect’’, ‘‘intend’’,‘‘anticipate’’, ‘‘believe’’, ‘‘plan’’, ‘‘seek’’ or similar expressions identify forward-looking statements.

These forward-looking statements are not guarantees of future performance. Rather, they are based on current views andassumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the controlof the Company and/or its Group and are difficult to predict, that may cause actual results to differ materially from anyfuture results or developments expressed or implied from the forward-looking statements. Such risks and uncertaintiesinclude, but are not limited to, regulatory developments, competitive conditions, technological developments and general

.this presentation.

Any forward-looking statement contained in this presentation based on past or current trends and/or activities of DiamondBank should not be taken as a representation that such trends or activities will continue in the future. No statement in this

resentation is intended to be a rofit forecast or to im l that the earnin s of the Com an for the current ear or future

years will necessarily match or exceed the historical or published earnings of the Company. Each forward-lookingstatement speaks only as of the date of the particular statement. Diamond Bank expressly disclaims any obligation orundertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect anychange in Diamond Bank’s expectations with regard thereto or any change in events, conditions or circumstances on whichany such statement is based.

2



Outline

• Opening Statement and Strategy (by Alex Otti, GMD)

• 2010 Financial Performance (by Abdulrahman Yinusa, CFO)

• ,

• Q1 2011 Financial Performance (by Abdulrahman Yinusa, CFO)

• Concluding Remarks (by Alex Otti, GMD)

3



2010 Performance Analysis

(N’Bn) Bank Subsidiaries Group

Gross Earnings 85.7 5.3 91.0 The high provision for losses of N22.9billion in the Profit and Loss Account was

Comments

Operating Income 70.3 3.9 74.2

Operating Expenses (43.1) (3.5) (46.6)

ue o e o ow ng:

Bank (provision for losses of N17.7billion)

From existing NPLs (charge of N9.9 billion)

Operating Profit 27.2 0.4 27.6

Provision for Losses (17.7) (5.2) (22.9)

rom new s c arge o . on

Subsidiaries (provision for losses of N5.2billion)

Underwritin commitment loss of N3.7

Profit/(Loss) Before Tax 9.5 (4.7) 4.8billion in our investment bankingsubsidiary (Diamond Capital)

Diminution in collateral value of N0.7billion relating to investment in hospitalitybusiness by Diamond Capital

4

Others – N0.8 billion



2011 Provisioning: Our preliminary view

Impact on P&L (N’Bn)

The initial estimated rovisions for losses in 2011 are

N30 billion projected provisions in 2011

Operating Profit 35.0 / 40.0

Provision for Losses (Circa) ~ (30.0)

broken down as follows:

Impact of divestment from subsidiaries ~ N10.0bn

Net impact from existing NPLs ~ N12.0bn

Profit/(Loss) Before Tax 5.0 / 10.0Net impact from new NPLs ~ N4.0bn

General provision on performing loans ~ N4.0bn

New management’s preliminary view on the impactof provisioning in 2011 will be updated after the team

Comments

5

completes its first ‘100 days’ at the time of the halfyear results conference call expected in July



Overview

Strong presence in Nigeria – 215 branches across36 states including the FCT (target 300+ branches)

West Africa Expansion

Coverage and Channels

The Bank’s Business Segments are split between RegionalBusiness and Corporate Banking as follows:

Regional Business

Core Business Segments

Benin Republic with over 15 branches

Togo, Senegal and Cote D’Ivoire

ATMs, Contact Centre

Internet Banking, Mobile Banking

Specifically our regional business is made up of RetailBanking and Middle Market Corporate Banking, which wecall National Corporate:

Retail Banking

Focus on Core BusinessEvolving into an international commercial bank froma universal bank.; disposing of non-banksubsidiaries:

o Micro, Small and Medium Sized Enterprises (MSMEs)

National Corporateo Middle Market Corporates

Corporate Banking

ADIC Insurance Ltd, Diamond Capital andFinancial markets Ltd, Diamond Securities Ltd,Diamond Pension Fund Custodian Ltd,Diamond Mortgages Ltd and DiamondRegistrars Ltd

We are a niche player in Corporate Banking focusing on thefollowing market segments:

o Multinational Corporationso Specialised Industrieso Public Sector Institutions

6

Fitch: A-, GCR: A-

Current Credit Ratingo Financial Institutions



2011 Strategic Priorities

Corporate BankingReverse the recent declineAccelerate growth going forward

People changeRisk managementRelationship management

Retail BankingConsolidate low-cost deposit mobilization

Sustain a higher than average NIM

en or s a op m za on nc u ng aExecutive levelFewer and better

on nue r s asse grow a ow e nquency eve s

Customer experienceCustomer centric organization

Project SparkleOpex has been stabilizedContinue to yield cost reductions

DisciplineAdherence to process and policy

Risk managementVery experienced new Head of RiskSignificant strengthening across theboard

7

mp emen consequence managemen – c earaccountability

More intensity and focus on recoveriesof NPL’s



Improve Shareholders’ Value

24.6 27.6

Deposits (N’Bn)Operating Profit and PBT (N’Bn)

35.0/40.0

1.2%

2009 2010 2011 est 2012 est

ROE

> 1.5%

-23.8

.

2009 2010 2011 est 2012 est

. .

Operating Profit PBT

Cost of Risk

-11.1%

Comments

10.4%

6.4%< 5.2%

Outlook for 2012 is for a return to normal provisioning

Tier 2 capital will be used to finance additional capitalrequirements in the foreseeable future

8

2009 2010 2011 est 2012 est

2010 dividend per share of 15 kobo in line with our

dividend policy



Outline



• ,



9



Group Operational Highlights

6.8 7.48.5

Deposits (N’Bn)Operating Profit (QoQ, N’Bn)7.4%

6.4%

Cost of Funds

4.9 4.5%3.7% 3.4%

-1.4Dec. 2009 Mar. 2010 Jun. 2010 Sept. 2010 Dec. 2010

Cost to Income Ratio

ec. ar. un. ept. ec.

Net Interest Margin

70.9% 70.1%

66.4%64.4%

62.8%

7.4% 7.9%9.2% 9.7% 10.1%

10

Dec. 2009 Mar. 2010 Jun. 2010 Sept. 2010 Dec. 2010 Dec. 2009 Mar. 2010 Jun. 2010 Sept. 2010 Dec. 2010



Group Financial HighlightsStrong Operating Income – N74.2 billion in Dec. 2010 (Dec 2009 – N68.8 billion –12 months)

Net Interest Margin (NIM) still strong – above 10%

Return to profitabilityEarnings

Improving risk asset quality

Non–performing loans ratio down to 14.8% in Dec 2010 (Dec 2009 – 18.2%)Asset Quality

Capital Adequacy Ratio of 16.6% (Bank – 18.7%) against CBN benchmark of 10%

Liquidity ratio of 42% against Central Bank benchmark of 25% (now 30%)Funding and Liquidity

. –

Low-cost deposits – 73% of total deposits (Dec. 2009 – 51%)Strong Growth

Cost to income ratio down to 63% (2009 – 71%)Efficiency and

11

Stable cost base of +5% growth despite double digit inflationProfitability



Profit and LossGroup

Dec. 31, 2010

N' billion

Group

Dec. 31, 2009(8 months)

N' billion

Group

Dec. 31, 2009(12 months)

N’ billion

YoY

%

Bank

Dec. 31, 2010

N' billion

Bank

Dec. 31, 2009(8 months)

N' billion

Bank

Dec. 31, 2009(12 months)

N’ billion

YoY

%

Gross Earnings 91.0 67.7 108.0 (15.7) 85.7 64.7 102.6 (16.5)

Net Interest Income 49.0 25.8 42.2 16.1 49.2 24.7 40.3 22.1

Other Income 25.2 16.6 26.6 (5.3) 21.1 15.6 24.6 (14.2)

Operating Income 74.2 42.5 68.8 7.8 70.3 40.2 64.9 8.3

Operating Expenses (46.6) (30.1) (44.2) (5.4) (43.1) (27.4) (38.9) (10.8)

Operating Profit 27.6 12.4 24.6 12.2 27.2 12.8 26.0 4.6

Provision For Losses (22.9) (24.7) (48.4) 52.7 (17.7) (21.9) (42.3) 58.2

12

. . . . . .

Profit / (Loss) After Tax 1.3 (8.2) (16.8) 6.5 (4.9) (9.7)



Balance sheetGroup

Dec. 31, 2010N' billion

Group


YoY

%

Bank


Bank


YoY

%

. . . . . .

Risk Assets 312.2 329.8 (5.3) 312.9 323.8 (3.4)

Other Assets 26.6 33.4 (20.4) 11.7 21.9 (46.6)

Investments 73.5 68.4 7.5 67.0 58.3 14.9

Fixed Assets 36.8 37.6 (2.1) 34.4 34.9 (1.4)

Total Assets 594.8 650.4 (8.5) 548.4 604.0 (9.2)

Deposits 412.0 482.1 (14.5) 378.7 449.0 (15.7)

Other Liabilities 47.4 43.2 9.7 24.5 25.6 (4.3)Borrowings 28.3 19.0 48.9 28.3 19.0 48.9

Equity 107.1 106.1 0.9 116.9 110.4 5.9

Total Liabilities 594.8 650.4 (8.5) 548.4 604.0 (9.2)

13

Off Balance Sheet 228.8 124.0 84.5 155.4 55.3 181.0

Balance Sheet Size 823.6 774.4 6.4 703.8 659.3 6.7



Group Balance Sheet Structure’ ’

330

71 64650

595774 824

482412

epos s na ance ee ze n

181 146

Dec. 2009 Dec. 2010

Cash and short term investmentsLoan and Advances to Customers

330 312

Dec. 2009 Dec. 2010

Investments SecuritiesFixed and Other Assets

650

Total Liabilities Trend – Funding Mix (N’Bn)

Balance sheet size up 6.4% to N824 billion in Dec. 2010 (Dec

Comments

Total assets and Contingents Deposits Loans & Advances

482 412

6276

106 107 2009 – N774 billion. The growth was largely due to increase inContingents by 84.5% to N229 billion

Drop in deposit was to rebalance the cost structure of thebalance sheet, and minimize deposit concentration

Low-cost de osits now accounts for over 73% of total de osits

14

Dec. 2009 Dec. 2010

Customers Deposits Other liabilities Shareholders funds

(Dec 2009 – 51%)



Group Loan Portfolio Analysis

2010Loans by Category – 2010Gross Loans by FacilityType – 2010

2009Loans by Category – 2010Gross Loans by FacilityType – 2009

Chart TitleGross loan analysis by maturity – Dec2010 (2009)

N345Bn (N374Bn)

23%

0 - 30days 30%(38%)

1-3 months 16%(29%)

3-6 months 8%

ec

Dec 2009

22%

5%

69%

8%

(3%)

6-12 months 10%(6%)

Over 12 months36% 24%

Comments

15

Term loans Overdrafts Other Loans64% of the loan portfolio maturity falls within 12months while 36% are medium to long term loans

10% of the loan portfolio relates to an exposure inpower generation

Term loans Overdrafts

Other Loans



Group LendingDec-10Gross Loan Breakdown – Dec 2010 (2009)

N345Bn (N374Bn)374 341 345400

Gross Loans, Non Performing Loans (N’Bn)

21%

2%

2%1%1% 1%

General Commerce 21% (19%)

Oil & Gas 18% (16%)

Manufacturing 16% (13%)

68 64 51

0

200

Dec. 2009 Jun. 2010 Dec. 2010

18%

6%

5%ea state onstr.

Power 8% (8%)

Consumer Credit 7% (4%)

Communication 6% (11%)

. . .

Gross Loans Non Performing Loans

Loan to Deposit Ratio

16%

11%

8%

7% Transport 2% (3%)

Capital Market 2% (6%)

Finance & Insurance 1% (3%)

77.5% 74.0% 83.7%

16

Mortgage 1% (1%)

Dec. 2009 Jun. 2010 Dec. 2010



Group NPL Analysis

13%

12%

Oil & Gas (Energy)

General Commerce

Manufacturing

NPL by Sector (Dec. 2010)

34% 40%

NPL by Category

N51.1BnN68.2Bn

34%

6%

4%3%

1%

Transp & Comm

Capital Market

Real Estate & Mortgage

Others

N51.1Bn 42%27%

24% 33%

Dec. 09 Dec. 10

Consumer Credit Substandard Doubtful Lost

NPL by Sector (Dec. 2009)

18%

21%

10%

Oil & Gas (Energy)Manufacturing

Transp & Comm

Capital MarketN68.2Bn

17

20%

16%

10%3%

2%

Others

Consumer Credit

Agriculture



Group Asset quality

18.2%14.8%

NPL Ratio

64.5% 64.1%

Coverage Ratio

Dec. 2009 Dec. 2010 Dec. 2011 Dec. 2009 Dec. 2010 Dec. 2011

10.4%

Cost of Risk

NPL ratio improved to 14.8% in 2010 (Dec. 09 – 18.2%)

Cost of risk also improved to 6.4% in Dec. 2010 (Dec. 09 –10.4%),target < 5% in 2011

Comments

6.4%

N20 billion currently in the process of being sold to AMCON, whileadditional N20 billion is being projected to be sold in Q3 2011

AMCON sale impacted marginally on Profit and Loss

18

Dec. 2009 Dec. 2010 Dec. 2011



Group Capital and Liquidity

Cash &Equivalent

TreasuryBills 35%

Liquid Assets –Dec. 2010 (2009)

19.5%16.6%

Capital Adequacy

Placement29% (39%)

10% 10%

Dec. '2009 Dec. '2010

Liquidity Comments

Actual CAR Stat. Minimum Requirement

37.6%41.5%

25% 25%

ea y qu y a , a ove s a u ory m n mum o

Tier 2 capital inflow expected to facilitate growth and promotecapacity for transaction

The need for Tier 2 capital inflow will be moderated by capitalrelease followin the sale of subsidiaries

19

Dec. '2009 Dec. '2010Liquidity Stat. Minimum Requirement

Tier 1 increase not planned in the foreseeable future



Bank Funding Mix & Deposits Composition

41.1

91.4

Deposit by Type

N449.0bn

50% 44% 36% 26% 26%

Building Stable Low Cost Funding Base

N378.7bn

181.8 189.0

.98.3

Dec. 2009 Dec. 2010

50% 56% 64% 74% 74%

Dec. 2009 Mar. 2010 Jun. 2010 Sep. 2010 Dec. 2010 . .

Savings Time DemandTime Deposits Demand & Savings Deposits

Loans & AdvancesDeposit Mix, By Business Segments –2010 (2009) Comments

Retail Banking47% (23%)

NationalCorporate 29%

(37%)

Increasing influence of Retail Banking leading torising low cost deposit and reduced concentrationriskGrowth of over 100% YoY recorded in savingsaccount deposits

20

Banking 24%

(40%)



Bank Revenue Composition

24.0% 25.0% Non Int.Income

Revenue mix

7.7%

Cost of funds

76.0% 75.0% Int.Income

3.4%

Dec. 2009 Dec. 2010

Net Interest Margin -QoQNet interest margin (NIM)Yield on earning assets

Dec. 2009 Dec. 2010

7.4%

10.6%16.6% 15.2%

21

Dec. 2009 Dec. 2010Dec. 2009 Dec. 2010



Bank Operational Highlights

6.67.6 8.1

Deposits (N’Bn)Operating Profit (QoQ, N’Bn)

6.7%

Cost of Funds

4.9.

3.9% 3.4%

Mar. 2010 Jun. 2010 sep. 2010 Dec. 2010


ar. un. sep. ec.

Net Interest Margin

67.4%

63.7%

61.7% 61.4%

8.2%9.4% 9.9% 10.6%

22

Mar. 2010 Jun. 2010 sep. 2010 Dec. 2010 Mar. 2010 Jun. 2010 sep. 2010 Dec. 2010



Bank Staff Productivity

28,267

Operating Income Per Staff

N’000

36.8%

Staff Cost to Total Cost

19,99123,312

.33.9%

Dec. 2008 Dec. 2009 Dec. 2010 Dec. 2008 Dec. 2009 Dec. 2010

Continued improvement expected as a result of fullimplementation of Project Sparkle initiatives

Key Operational Enhancements

23

Growth in staff productivity attributable to increase incentralised processing



Outline



• ,



24



Bank Business segment performance – snapshot

176.7154.8 163.2 175.8

Deposits (N’Bn)Deposits (N’Bn)

Impressive growth of 61% in retail liabilities

Comments

75.4110.0 .110.8

90.1

Dec. 2008 Dec. 2009 Dec. 2010

gn can rop n vo ume o g cos corpora e

fixed deposits

e a an ng a ona o rpora e e ar e orpora e an ng

Deposits (N’Bn)Risk Assets (N’Bn)

6.0 9.7 27.2

203.0173.5 174.6

135.3 140.6111.1

Retail now 9% of total risk assets after 180%

increase (YoY)

National Corporate (Middle Market) remains the

25

Dec. 2008 Dec. 2009 Dec. 2010

Retail Banking National Corporate (Middle Market) Corporate Banking

om nant mar et segment



Nigeria’s fastest growing Retail Bank

455

Deposits (N’Bn)Retail Monthly Fee Revenue (N’mn)

30% 35%

41% 47%

Deposits (N’Bn)Retail Deposits to Total Deposits (%)

242317 313

Dec. 2009 Mar. 2010 Jun. 2010 Sept. 2010 Dec. 2010 Dec. 2009 Mar. 2010 Jun. 2010 Sept. 2010 Dec. 2010

161177

Deposits (N’Bn)Deposits (N’Bn)

Retail Banking now contributes around one third of the bank’s income’

Comments

110 129

.

As our customer base grows, the recurring monthly fee income willcontinue to grow giving consistent, steadily increasing fee income.

Daily product sales numbers were 50% higher in last quarter 2010compared to 2008 – averaging 1,800 per day.

26

Dec. 2009 Mar. 2010 Jun. 2010 Sept. 2010 Dec. 2010

Growth in Retail liabilities has helped to push down COF andincrease in percentage of low-cost deposits to total deposits

We have a very effective Direct Sales Force of 1,000 outsourcedagents



Retail Risk Assets Growth

The growing retail customer asset base is helping the

bank to maintain “best in class” net interest margins

Comments

27.2

Retail Banking Risk Assets Trend (N’Bn)

At the year end, retail assets accounted for about 9%

of group net assets. We anticipate that this will grow to

around 15% by the end of 2011

Delinquency levels are largely below expectations,exce t for the small credit card ortfolio where

18.1

delinquencies are now reducing.

Investment is being considered in Scoring and

Collections systems

Partnership in place with USAID, giving partial9.7

11.713.1

guarantee support on medical equipment loans;

further partnerships will follow with major retailers on

point of sale financing and co-brand credit cards.

Dec. 2009 Mar. 2010 Jun. 2010 Sept. 2010 Dec. 2010

27



Outline



• Business Se ments Performance b Abdulrahman Yinusa, CFO



•

28



Group Operational Highlights – Mar 2011

6.4

Deposits (N’Bn)Operating Profit (YoY, N’Bn)

6.4%

Cost of Funds

.

2.2%

Mar. 2010 Mar. 2011


ar. ar.

Net Interest Margin

70.1%

65.2%7.9%

10.3%

29

Mar. 2010 Mar. 2011 Mar. 2010 Mar. 2011



Profit and Loss – Mar 2011Group

Mar. 31,2011

N' billion

Group

Mar. 31,2010

N' billion

YoY%

Bank

Mar. 31,2011

N' billion

Bank

Mar. 31,2010

N' billion

YoY%

Comments

Gross Earnings 20.3 24.5 (17.1) 19.3 22.7 (15.0)

Net Interest Income 12.3 10.2 20.6 12.0 10.0 20.0

Other Income 5.9 6.3 (6.3) 5.2 5.0 4.0

Bank operating profit up 31% toN6.4 billion (YoY)

Stable cost base (group) of +2.6%growth despite double digitinflation

Operating Income 18.2 16.5 10.3 17.2 15.0 14.7

Operating Expenses (11.9) (11.6) (2.6 ) (10.8) (10.1) (6.9)

The bank’s provision for losses ofN4.5 billion is made up of:

Impact of integration ofDiamond Mortgages of N2.5billion

Operating Profit 6.3 4.9 28.6 6.4 4.9 30.6

Provision For Losses (4.5) (2.9) (55.2) (4.5) (2.8) (60.7)

Profit / (Loss) Before Tax 1.8 2.0 (10.0) 1.9 2.1 (9.5)

ccrua s or ex s ng an new

NPLs of N2.0 billion

30

Profit / (Loss) After Tax 1.1 1.5 (26.7) 1.2 1.7 (29.4)





Key Performance Metrics – Mar 2011

Group BankMar. 2011 Dec. 2010 Sept. 2010 Mar. 2011 Dec. 2010 Sept. 2010

NIM 10.3% 10.1% 9.7% 10.7% 10.6% 9.9%

NPL 14.4% 14.8% 16.8% 14.0% 13.7% 16.7%

. . . . . .

Coverage 72.1% 64.1% 82.5% 66.2% 60.1% 78.3%

Capital Adequacy 15.2% 16.6% 15.4% 17.2% 18.7% 16.6%

qu ty 42 .9% 41.5% 39.9% 42.9% 41.5% 39.9%

Cost to Income Ratio 65.2% 62.8% 64.4% 62.8% 61.4% 61.7%

32



Outline



• ,



33



Diamond Bank – Setting a New Direction

2010 – A Challenging Year

Additional loan loss provisions on legacy loans, subsidiary losses negatively impacted performanceUnderlying performance of the bank was strong despite legacy issuesClear si ns of recover that are ke for future erformance include:

o Growing SME franchise providing a strong NIM that is sustainableo Stable inflation adjusted OPEXo Strong operating profit growth

2011 – Concluding on Legacy Issues

The underlying operating performance of the bank remains strong as indicated by Q1 resultsContinued drag from legacy loans and subsidiary disposals being addressed proactivelyNew management is already implementing a clear recovery plan to unleash growth potential and build on the

strong Diamond Brand:

o Rebuild corporate businesso Drive recoveries and unwind NPLo Enhance risk management, processes and upskill teamo Reduced cost base and divest of unprofitable subsidiarieso Drive retail business penetration

34

In 2012 we anticipate our return to normal provisioning and healthy ROE levels that will comfortably reach into

the high teens



35



Outline



• ,



36



Appendix – New Management Team BiographiesAlex Otti (GMD) joined DiamondBank from First Bank of Nigeriawhere he held the position ofExecutive Director. Prior to the tenyears he spent at First Bank Nigeria

Abdulrahman Yinusa joined DiamondBank as Chief Finance Officerfollowing the completion of his CBNappointment as Executive Director ofFinance and Strategy for

he held managerial and businessdevelopment positions at UnitedBank and Nigerian Merchant BankLtd.

He started his banking career in 1989 with Nigeria

n an . r or to t eappointment, he was ManagingDirector/CEO of the United Bank forAfrica subsidiary in Sierra Leone.

He has accrued over two decades of high quality bankingInternational Bank Ltd, a subsidiary of Citibank N.Y,where he worked in Operations. Alex graduated from theUniversity of Port Harcourt with a First class honoursdegree in Economics in 1988. He was subsequentlyawarded an MBA from the University of Lagos in

experience having previously worked in managementpositions for FSB International Bank, now part of Fidelity& UBA Plc. A graduate in Accounting from Ahmadu BelloUniversity he also holds both an MSc in Economics andan MBA from the University of Lagos. Abdulrahman is a

. ex s a mem er o e ns u e o rec ors an

Honorary Senior Member of Chartered Institute ofBankers. He holds an honorary doctorate degree inbusiness administration, an alumnus of Harvard BusinessSchool and also trained at Stanford Business School,

e ow o e ns u e o ar ere ccoun an s o ger a

and Chartered Institute of Bankers of Nigeria, is acertified member and Associate of the Chartered Instituteof Stockbrokers, Chartered Institute of Taxation, NigeriaInstitute of Management and he holds the Treasurer

-

37

,Pennsylvania) and Columbia Business School, New York.

.class Advanced Management Programme at INSEAD,Paris.

Documents

Diamond Bank Investor Call Presentation FY10 1Q11 Results