News Column

Diamond Bank - Grappling With Huge Operating Expenses

January 26, 2014

Obinna Chima

Despite various cost-cutting measures adopted by deposit money banks (DMBs) amidst the tough banking environment, Diamond Bank Plc seems to be finding it difficult to deal with its high operating expenses. The banks latest financial results for the nine-month period ended September 2013 showed that its operating expenses climbed by 24 per cent to N38.664 billion, compared to the N31.190 billion it stood in the comparable period of 2012. Diamond Bank's interest and similar expense also increased to N27.979 billion as at the end of September last year, compared to the N16.038 trillion it was a year earlier. But its fees and commission income jumped to N20.853 billion as at the period under review, as against the N17.021 billion it attained at the end of September 2012 . However, the bank explained that the huge operating expense was driven by an increase in its business activities, branch expansion and also the increase of staff members' remuneration. Also, Diamond Bank's third quarter 2013 profit before tax grew by 10.2 per cent to N25.588 billion as at September last year, from N23.216 billion as at the comparable period of 2012, while its profit after tax stood at N20.050 billion, reflecting an increase over the N18.170 billion it was a year earlier. "The bank's operating expenses is slightly running ahead of our full year estimates. We partly attribute the marginal quarter-on-quarter growth in interest income (despite expectations of strained interest income in the second half of the year) to the nine per cent growth in loans and advances quarter-on-quarter. "We believe the bank may have begun to feel the pinch of the Central Bank of Nigeria's tariff reductions. Despite having a significant percentage of public sector deposits (less than 15% as at H1 according to management), Diamond Bank's interest income remained stable," a report by CSL Stockbrokers Limited, a division of First City Monument Bank Limited , United Kingdom stated. Diamond Bank's loans and advances to customers increased by 16 per cent to N681.816 billion as at September last year, compared to the N585.200 billion it stood as at December 2012 . Also, the bank's total deposits from customers as at the period under review was N1.062 trillion , from the N910 billion it was as at December 2012 . Similarly, its total assets climbed to N1.376 trillion, from N1.178 trillion as at the end of 2012. Its gross earnings recorded 19 per cent year-on-year growth to N131 billion. This was driven by the growth in balance sheet and other transactional activities. "Notwithstanding the effect of the 50% CRR for public sector funds and the attendant increase in cost of deposits, we are confident that our projections for the full year 2013 will be achieved, albeit at the lower end of the profitability guidance," the Chief Executive Officer, Diamond Bank , Mr. Alex Otti had said. Diamond Bank last year suspended a planned seven-year $550 million bond issuance due to pricing turbulence in the international debt market.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: AllAfrica

Story Tools