Monday, 4 June 2012

Diamond Bank cleans book, seeks to grow risk assets

Diamond Bank Plc on Friday, at its annual general meeting made public its audited figures for the period ended December 31, 2011, revealing an N11.254 billion Loss after tax.
To post the Loss, Diamond Banks profit After Tax (PAT) dipped from a positive N1, 323 billion in year 2010 end to a negative N11.254 billion; indicating a dip of 947.4 percent (947.4%) in the review period.
Also, Profit Before Tax (PBT) moved from a positive N4.772 billion in 2010 to a negative N16.261 billion in the Audited Period of year 2011; representing a Loss of 440.8% percent
However, Gross Earnings increased slightly from N91.022 billion in year 2010 compared to N96.340 billion in year 2011 end; showing an increase of 5.8 percent.
The bank made provisions of N44.148 billion for bad loans during the year, 93.1 per cent more that what it made in previous year, while N23.946 billion of the amount was made during Q4
The banks net interest income at N15.789 billion in Q4 was 19.6 per cent better than that of the previuos year, so also the full year N55.650 billion was 13.6 per cent better.
According to analysts at FBN Capital, the market had already been prepared for a sizeable loss in Q4 anyway but the full year PBT of N16.3bn is worse than managements guidance of N5bn to N10bn. The fact that Diamond is not paying a dividend should not have come as a surprise, the analysts said.
Throughout 2011, Diamond Banks (new) management team revised its 2011 guidance down each consecutive quarter, citing a more conservative view on its expectations of potential losses from the sale of assets and/or provision charges amongst others. The N5bn to N10bn PBT guidance was meant to represent a worst-case scenario but this too turned out to be aggressive. We believe that judging by the Q4 results of a number of banks which have reported in the last 2-3 weeks, it would not have come as a complete surprise to the market that Diamonds PBT loss came in wider than projected, given that estimated losses/charges resulting from the sale of loans to AMCON in Q4
turned out to be optimistic. AMCON proved to be a much tougher negotiator.
We do not think that the market will pay much attention to any of the positive trends in Diamond Banks financials. We note for example that profit before provisions (and opex) grew consistently between 10-15% y/y in 2011; the Q4 growth rate was 13.8% y/y. Instead, we think the debate will move very quickly to the markets confidence or lack of it in managements outlook for 2012. We still subscribe to the view that the light at the end of the tunnel for Diamond is near, on the basis that 2011 was a clean-up year for the bank.
Management could have guided market expectations better throughout the year. As we alluded to already, the underlying performance of the bank ex-provisions (for which legacy loans dominated) was robust through 2011. We expect this performance to be carried into 2012. However, one area of concern is Diamond Banks opex which grew 11percent quarter on quarter ( 28 percent year on year). We appreciate that branch expansion probably had an impact but the magnitude is surprising nonetheless. Opex of N15.4bn came in 16 percent higher than we were expecting. It may well be that some one-off items impacted the result but we await managements comments/clarification.
Diamond shares have turned in an impressive 25 per cent gain vs a flattish ASI on Thursday, but that is off the back of a -74% sell-off (ASI: -16%) in 2011. The next few days are likely to be volatile for the stock but, ultimately, we expect the outlook on 2012 (and the extent to which the market buys into managements comments) to begin to drive the shares. Our view is that this will be positive and that the initial rally at the start of this year also reflects that expectation.
Commenting on the banks performance, Alex Otti, MD/CEO, of the bank said, we made an unprecedented provision of N43 billion for non performing loans and recorded losses from sale of investment, which in our opinion was the best course of action and this led to the bank invariably recording a loss.
The quality of our loan book as at December 2011, indicates that such a massive write off is not expected to recur in the future, we are going to be growing our risk assets and recreate our loan book, the quality stays premium. Despite the write-offs, we are unrelenting in ongoing management of the delinquent loans.
Also worthy of mention, is that Diamond Bank recovered N4.3 billion from the accounts earlier written off in line with prudential guidelines and our NPL ratio(including technical write- off ) stood at 9.8 percent in 2011, which is still higher than the regulatory minimum of 5 percent.

Investment: Nigeria woos Luxemburg

Vıce-Presıdent Namadı Sambo has urged Luxemburg to take advantage of the numerous opportunities in Nigeria to invest in the country. A statement by the Senior Special Assistant to the Vice President on Media, Umar Sani, said Sambo made the call at a bilateral meeting with the Deputy Prime Minister of Luxemburg, Assel Bom, in Istanbul, Turkey, on Saturday.

Sambo told the deputy prime minister that Nigeria had potential for rapid returns on investments.

The statement quoted the vice-president as saying that areas of investment included power, transportation, agriculture, health, education, finance, mine and steel, and housing.

Sambo used the opportunity to explain the efforts the government was making in each of the sectors.

The vice-president stressed the need for Luxemburg to establish an embassy in Abuja to speed up cooperation efforts.

Sambo also informed the deputy prime minister of the several bilateral agreements Nigeria signed with other countries.

The statement quoted Sambo as saying that a committee charged with looking critically at local refining had been inaugurated to increase the country
s refining and gas production capacity.

The deputy prime minister said he visited the country in 2007, adding:
Nigeria has the potential to lead other African countries and ensure rapid development of the region.’’

He promised to hold consultation with his country
s economic department to find ways of developing cooperation with Nigeria.

After more than one decade of neglect, the Federal Government has approved a sum of N380 million for the rehabilitation of Ikorodu-Shagamu boundary road, which has been appropriated for in the 2012 Appropriation Act.

Vice Chairman of the Senate Committee on Lands, Housing and Urban Development, Sen. Gbenga Ashafa disclosed the approval at the weekend while giving his 365-day account of stewardship held at his Ketu constituency office.

The lawmaker also listed other federal projects, which he attracted to Lagos State, to include construction of primary health care centre at Oke Ode in Ibeju-Lekki, construction of accident and emergence centre at Agbowa and construction of four ambulance points in Kosofe, Ikorodu, Epe and Ibeju-Lekki.

He cited procurement of ambulances and mobile intensive care unit for Lagos East Senatorial District and asphalt surfacing of Oba Elemoro Road in Ibeju-Lekki and Agbede-Ita-Oluwo in Ikorodu as parts of federal projects, which the lawmaker said he attracted to the state under one year he assumed office.

Ashafa, who is currently representing Lagos East senatorial district in the National Assembly, explained that he succeeded in influencing the Federal Government
to approve a sum of N380 million for the rehabilitation of the Ikorodu-Shagamu boundary road with the support of Sen. Adegbenga Kaka from Ogun State.

The Ikorodu-Shagamu boundary road project has been appropriated for in the 2012 Appropriation Act, though execution is yet to take off. But I shall stop at nothing to ensure judicious application of resources and speedy execution of the projects. I shall also continue to identify and leverage the senatorial might to improve the lots of residents in Lagos East senatorial district and that of Lagos State in general, he stated.

The lawmaker also mentioned different areas he had been collaborating with the Government of Lagos State to include the youth energy career training program from which 15 graduate benefited, grading of 15 inner-city roads in Ikorodu North Local Council Development Area (LCDA) and a free monthly health care programme, which he said, had benefitted about 2000 people across 6 local councils.
He said he
has been complementing the efforts of the state government at rehabilitating and maintaining our infrastructure. I have personally graded some major roads under my district. The grading exercise is still ongoing and would be extended to other local governments and local council development areas in our senatorial district.
We have been getting proofs of performance from the district. Some of the road include Association Avenue, Joshou Alabi Street, Kareem Olatunji Street, Bayo Omotosho Street, Wunmi Oshikoya Street, Chief Deji Olasehinde Street, Omotayo Street, Niyi Taiwo Street, Alafia Street and Aderemi Street.
Others also include Freedom Street, Prince Oshinusi Street, Victory Christ Apostolic Church Street, Famoritade Street, Olosugbo and Agbede road linking Ita-Oluwo all in Ikorodu North Local Council Development Area (LCDA).

Crude oil exports from Nigeria to the United States rose to $34 billion in the year 2011; from $31 billion and $19 billion in 2010 and 2009 respectively.

Within the same period, the figures for non-oil export rose from $101 million in 2009 to $115 million and $150 million in 2010 and 2011 respectively.

These figures were presented by the Economic Counsellor of the US Embassy, Mr. Perry Ball, at a recent media briefing held in Abuja.
He also added that the success of the amnesty programme of late President Yar
Adua was responsible for the rise after production dropped due to the restiveness in the Niger Delta region.

He added that the global economic downturn accompanied by drop in oil prices caused the oil export figures to drop from $35 billion in 2008 to $19 billion in 2009.

Briefing on the benefits of African Growth and Opportunity Act (AGOA) for Nigerian businesses, Ball advocated that small and medium business owners can liaise with big companies in Nigeria or in the US to participate in exports to the US especially for non oil exports.
The benefits of AGOA, he outlined, include the provision of duty free treatment for 1,800 products in addition to the standard 4,600 products available to non-AGOA countries.

Exports from sub-Saharan Africa in 2011 amounted to $74.2 billion, he said with Nigeria topping the list with $33.7 billion mainly from crude oil sales and Chad at the bottom of the list with $3.1 billion also from crude oil sales.

It also provides an additional preference in the form of duty free/quota free access for apparel made from fabric originating anywhere in the world under a special rule for lesser developed beneficiary countries with per capita GNP of under $1,500.

Ball disclosed that over 300,000 jobs have been created in Africa since the creation of AGOA in 2000; many of these jobs for women in the textile industry. It has also encouraged the export of non mineral products to the US, he added.

Since its enactment, two-way trade under AGOA has grown to $82.1 billion in 2010 and AGOA exports to United States have increased to $44.3 billion.

The official annual AGOA Forum which would hold in Washington in June, 2012 would bring together senior US administration officials, African government ministers as well as US and African businesses and civil society stakeholders from AGOA eligible countries.

Trustfund Pensions Plc said it has paid a total of N13.99 billion to 37,536 pensioners under the new contributory pension scheme. The amount, according to the company, covers the period between July 2004 and April 2012.

Acting Managing Directing, Trustfund Pensions, Mrs. Helen Da-Souza, gave the figures at an interactive session with the National Union of Textile, Garment and Tailoring Workers of Nigeria (NUGTWN) in Lagos.

Da-Souza reaffirmed the company
s commitment to effective pension fund administration and said at a time when the industry is largely grasping with the rudiments of the business, Trustfund has over 10,000 retirees on its payroll who access their benefits promptly every month in their bank accounts at various locations across the country.

She said the company
s focus was the welfare and comfort of Nigerian workers who deserve peace of mind and financial security on retirement noting that the company has introduced numerous services and products to guarantee a smooth transition for retiring workers.

The Trustfund boss applauded the introduction of the contributory pension scheme as a veritable tool to addressing the age-long trauma associated with pension payments in the country.

She, however, faulted the case in some states, where governments have taken over the selection of PFAs for workers without adequate consultation and input from labour, saying
this does not speak well of the organised labour movement.

According to her, as major stakeholders and beneficiaries of pension schemes, labour should take the driving seat in the entire process of transformation to the new pension scheme in the states.

Da Souza, who also faulted deductions from workers
salaries without remitting to the PFAs by some employers, said the practice was unacceptable in view of the long term negative impact on affected workers.

As some of us are aware, there are many instances where employers make deductions without remitting. The implication of this is that upon retirement, the affected workers may not have the correct amount that is due to them.

To this end, labour has a vital role to play in ensuring that the contributions of its members are safe and secured as those of us present as workers of today are the pensioners of tomorrow, she said.

She noted with regrets the challenges being faced by some contributors in the textile industry as a result of the impasse in the country where most factories had shut down leading to non-funding of RSA accounts of the affected workers.

She prayed that the current efforts of the present administration to revamp the sector would yield the desired results so that most of the accounts could be funded to enable the workers earn their pensions at retirement.

Speaking also at the event, General Secretary of the textile workers union, Comrade Issa Aremu, commended the management of the union for presenting workers with detailed update of its operations.

The union scribe solicited the support of Trustfund in the campaign to revive the textile industry adding that the struggle for the re industrialisation is a collective responsibility.

Aremu, who assured that workers in the textile industry would stick to Trustfund Pensions because of its reliability and value added services, also advocated higher payments by employers in the contributory pension scheme.

Trustfund operates with authorised share capital of N2 billion, and a customer base of 543,860 as at April 2012.

The Pension Fund Administrator currently manages over N164.6 billion pension funds, offering services in the following areas: retirement savings account (RSA) administration, pension funds investment management, pension advisory services, pre-retirement and post retirement pension seminar services and pension & benefit processing and payment services.

Hopes of a positive growth in the Nigerian stock market this year are still alive as the market recorded a growth of 6.4 per cent between January and May 2012.

The Nigerian Stock Exchange (NSE) All-Share Index, which is the major gauge for measuring the aggregate growth in the market, rose from 20,730.63 at the beginning of the year to 22,066.40 at the end of May.

On the other hand, the market capitalisation of equities gained N504 billion to rise from N6.533 trillion to N7.037 trillion. Although the index had peaked at 22,665.99 during the month of May, profit taking cut short the positive run.

However, when the growth in five months of 2012 is compared to the performance of the market in the same period of 2011, the growth in the current year is higher.

The index had appreciated by 5.95 per cent between January and May 2011 as against the growth of 6.4 per cent in the same period of the current year. While market capitalisation of equities added N357 billion last year, it has added N504 billion this year.

Market operators said the market needed the support of the Federal Government to achieve total recovery, saying the efforts by the management of the NSE and Securities and Exchange Commission (SEC) alone were not enough to lift the market.

According to them, the issue of liquidity is still a big challenge in the market, a development that has made many stakeholders to call on the government for direct injection of funds into the market.

The Chartered Institute of Stockbrokers (CIS), Association of Corporate Trustees, for instance, had made a case for the intervention of the government through funds injection.

The former Director-General of the NSE, Mrs. Ndi Okereke-Onyiuke, recently made a similar call while appearing before the House of Representatives Ad hoc committee that probed the near collapse of the capital market.

According to Okereke-Onyiuke, no amount of
workshops and discussions will revive the market without direct and cash injection.

Only direct physical injection of funds can change the direction of the capital market just as Asset Management Corporation of Nigeria (AMCON) did for the money market. No amount of workshops and discussions will avail. A strong government bail-out as obtained in United States, Britain, Russia, Singapore among others is the magic wand needed, she said.

She said that the NSE and its stockbrokers worked assiduously in collaboration with the Central Bank of Nigeria to bring AMCON to life, lamenting that the corporation has concentrated its efforts on only banks.

AMCON was set up by CBN to buy these toxic assets (margin loans) with the hope of divesting when the market picks up. However, the modus operandi of AMCON in this respect seems unconcerned as far as market operators and shareholders are concerned. AMCON seems to concentrate only on banks, she said.

The African Development Bank (AfDB) has put infrastructure funding deficit in Nigeria and other African countries at $90 billion per year, and total commitment at $55.9 billion, last year.

s Director, Gilbert Mbesherubusa, said out of the $90 billion deficit, 70 per cent represented capital and the remaining 30 per cent, maintenance, noting that the share of the power in the whole funding deficit was 40 per cent.

Mbesherubusa, who spoke at a discussion on
Building Bridges between Africa and Emerging Countries: Challenges and opportunities, organised by BNP Paribas, however stated that last year, total commitment for infrastructure by emerging markets was $55.9 billion. The amount, he pointed out, represented 44 per cent over the figures of 2009.

Giving a breakdown of the commitment, he said, out of the $55.9 billion, Infrastructure Consortium for Africa (ICA) members - the traditional donors - accounted for $29.1 billion while the private sector represented $13.8 billion and China represented $9 billion. He added that Arab funds, India, African regional funds accounted for $4 billion of the total.

Mbesherubusa acknowledged that emerging economies were already playing their roles to bridge infrastructure funding gaps in Africa,
but the challenge is to make them participate more in infrastructure and other sectors because there are issues outside infrastructure, especially in natural resources and agriculture.

He said AfDB was ready to bridge the knowledge gap in negotiation with the emerging economies, adding that the development mandate from the African Union made it imperative for the bank to provide African governments
needed competencies.
The AfDB director disclosed that, in terms of paved road density, Africa had 31 kilometres of paved roads on 100 square kilometres; compared to other regions of the world with 134 kilometres.

He added that for power generation capacity, Africa produced 37 megawatts (mw) per one million population, while other regions of the world generated 326 mw. He also said for electricity coverage, the continent catered for 16 per cent of population, while in other regions had 41 per cent of population had access to electricity.

In his contribution, Ethiopian Finance Minister and Economic Development, Mr. Sufian Ahmed, cautioned that despite the collaboration, African countries needed to build strong institutions and strengthen internal revenue.
African countries, using the Ethiopian experience, must be responsible before seeking external loans, he insisted.

Ahmed argued that unlike in the recent past, emerging economies were showing increasing concerns in sharing their experiences toward sustainable African economic growth.

However, Special Adviser to Ghana
s Minister of Finance, Prof. Newman Kisi, lamented that the continents major challenge was dearth of manpower to manage the aggressive financing programmes of the emerging economies.

According to him,
The need to develop standards and intellectual capacity to effectively manage the issues relating to negotiations and protecting African interests are critical.

He said while the challenges and opportunities were country specific, Ghana successfully compelled the development partners to implement 30 per cent local content in all contracts.

The forum also had in attendance, Chief Representative of the People
s Bank of China, Mr. Gao Dingxin; Executive Director of the EXIM Bank of India; Senior Africa Adviser, BNP Paribas, Cheikh Ibrahim Diong, and Head of Middle East and Africa Region, BNP Paribas, amongst others.

The participants, including government and private sector leaders from Africa and emerging economies, collectively agreed that the sustained inflow of development funds from China, India, Brazil, amongst others have provided hope for the continent.

The consensus was that the new economic bridges between the economies were on a mutual and committed basis. The emerging economies defined the new development bridges with Africa as lowering cost of production and creating sustainable shared wealth.

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