Following the recent CBN directives through its “Circular on the Review of the Universal Banking Model”, the Board of Directors of Diamond Bank Plc has approved the Bank’s plans to divest from its non-bank subsidiaries and focus on International Commercial Banking.
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”. In pursuit of this vision, Diamond Bank in 2001 established a subsidiary in Benin Republic. This 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.
Based on the regulations released for commercial banking, the Bank resolved to divest from the following subsidiaries: ADIC Insurance Limited; Diamond Capital & Financial Markets Limited ; Diamond Securities Limited; Diamond Registrars Limited; and Diamond Pension Fund Custodian Limited. In addition, the Bank resolved to integrate the operations of our mortgage subsidiary – Diamond Mortgages Limited – into the Bank.
The divestment decision is not expected to have any significant impact on the Bank’s performance going forward as the non-bank subsidiaries contribute less than 5 percent to the Group’s earnings. From the contribution of the subsidiaries to the Group earnings and profit, it is the bank subsidiary across the border, Diamond Bank Benin S.A. (DBB) that has been a consistent leader.
The Bank’s Management and Board were already critically reviewing the performances of the non-bank subsidiaries with the objective of maximizing 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; ….”. Consequently, compliance with CBN directive is well situated within this context.
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.
With 210 banking offices strategically located across the six geo-political zones of the country, the expanding network of alternative e-channels, the increasing bouquet of life changing products and the Bank’s optimization and growth strategies, the Board strongly believes that stakeholders of Diamond Bank Plc will reap better rewards going forward. Already, the Bank has focused on the development of competencies that will give it competitive advantage in the development of identified and promising business opportunities in its chosen market.
No doubt, the Bank’s overall financial performance will be positively impacted by this decision which should improve operational efficiency and productivity. The re-engineering process commenced in the Bank in early 2009 which cut across the entire value chain is not only transforming the Bank fundamentally but will also help in the realization of the corporate objectives of the Bank under the new banking regime.