- We’re prioritising Nigerian market – Bank
One of Nigeria’s frontline banks, Diamond Bank Plc, has shut down its overseas subsidiaries, fuelling speculations that the bank may be under pressure to keep its books healthy.
The subsidiaries, which are no longer in operation, according to findings, include: Diamond Bank (United Kingdom) Plc, Diamond Bank du Benin SA, Diamond Bank Togo, Diamond Bank Senegal, and Diamond Bank Cote d’Ivoire.
A reliable source within the system, who asked not to be named, owing to the sensitivity of the issue, said the development could be linked to the bank’s increasing cases of non-performing loans and high operational cost, among others.
As at the end of the third quarter of 2017, the financial institution’s deposit base had dropped by about N30 billion, from N1.42trillion as at the same period in 2016, to N1.39trillion.
Experts have, however, attributed the drop in deposit base, which cuts across the major Deposit Money Banks, to unfriendly fiscal and monetary policies, which have put many of the banks under serious liquidity pressure.
A senior bank official, who also preferred to be anonymous, described the shutting down of offshore banking operations as a sign of distress.
He said aside from Diamond Bank, Access Bank Plc also had to shut down one of its West African branches (Accra, Ghana).
“The implementation of the Treasury Single Account, which prevented banks from having access to funds belonging to the Ministries, Departments and Agencies of government also contributed to the current liquidity crunch in the financial system,” he added.
An economist, Prof. Mathew Ajiboye, alleged that the President had indirectly labelled everybody in the country a thief and branded the country as corrupt, adding that this was affecting inflow of capital.
“Foreign investors have freighted billions of their cash investment from the country and from the banks. Government should learn to manage the nation’s image. That is a source of problem for the banks, which if not properly and carefully handled, can degenerate into another ‘Tsunami’,” he said.
The Managing Director, Nigeria Deposit Insurance Corporation, Alhaji Umaru Ibrahim, had admitted that a lot of banks would need to recapitalise to overcome the daunting challenges they faced.
“The banks are facing liquidity issues, dwindling revenues and profits, high expectation of quality services from depositors and high expectation from investors; but all these risks are manageable,” he said.
SHAREHOLDERS DEMAND BETTER ROI
The National President, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, reacting to the issue of banks shutting down offshore subsidiaries, noted that some of the banks were not strategic in their operations.
He said most of them opened offshore branches during the banking sector boom and failed to plan for unforeseen circumstances.
“Now, such monies are no longer there to throw about. If the banks want to close their overseas banking, let them go ahead. I encourage them to concentrate their financial muscle at home and give us better return on investment. When the opportunities come again, they can re-strategise for global banking,” he stated.
Okezie lamented that the policy directive by the CBN, “which short-circuits domestic investors’ paltry return on investments” remained a major setback and disincentive towards sustainable internal economic growth.
He, however, blamed the Securities and Exchange Commission, “for abandoning its corporate responsibilities to investors.”
Aside from the poor liquidity status of some banks, some investors have urged the financial institutions to be more transparent.
The National Coordinator, Pragmatic Shareholders Association, Mrs. Bisi Bakare, alleged that Diamond Bank had neither declared dividend nor released its annual result since 2016.
She added that Wema Bank had not also declared profit for two years, stressing that it would be difficult to expect dividend from the bank.
She said, “Some of them that did not possess the wherewithal to operate offshore banking were doing so due to undue competition; they started copying each other. This was not actually done because of profitability and it cost them a lot in terms of maintenance.
“It is good for them to close the overseas branches because it will save them cost. It will reduce their balance sheet and shareholders’ funds, which they have been dipping their hands into, for a long time. “
DIAMOND BANK EXPLAINS
Reacting to the development, a Media Relations Officer, Corporate Communications, Diamond Bank, Mr. Eze Anyanwu, told our correspondent that the bank decided to close its operations within the West Africa region and other parts of the country to minimise expenses with a view to focusing on a retail technology-driven strategy.
According to him, the time has come for the bank to fully apply its resources to Nigeria, after 18 years of building franchise in other markets.
“This is aligned with our strategic objective to be the fastest growing and most profitable technology-driven retail banking franchise in Nigeria. We are prioritising the Nigerian market because of its vast potential,” he said.
He noted that a large segment of the population was under-banked or even unbanked, and that the use of technology and mobile banking was rising exponentially.
“This provides Diamond Bank with the opportunity to reach millions of people, and facilitate financial inclusion on an exceptional scale. It has nothing to do with liquidity issues at all,” Anyanwu added.
Also, Head, Corporate Communications, Access Bank, Mr. Abdul Imoyo, said, “For one of our branches that was shut, the particular branch was not in a strategic area. What we did was to close down those branches that were not profitable, while we opened others in more profitable commercial centres. It is not a case of financial stress at all.”
Meanwhile, two members of the Monetary Policy Committee, Dr. Doyin Salami, and Prof. Balami Hassan, had explained that the financial sector stress tests had shown that the Capital Adequacy Ratio for the nation’s banking industry worsened, as it fell from 12.81 per cent to 11.51 per cent, as against a regulatory minimum of 15 per cent for banks with international licences.
A Director, Monetary Policy Department, CBN, Dr. Moses Tule, said the fiscal and monetary policies should lend a hand to fix the Nigerian economic crisis, noting that the crisis was causing stress for the banking sector.
“The current state of the nation’s economy is a clear picture of the health of the banking sector. The monetary policies alone cannot solve the problems and I expect the government to pay attention to confidence-building fiscal policies,” he explained.
