First Bank

Friday, May 1, 2015

Inside Diamond Bank’s Battle To Recoup Loans, Stay Afloat!

There is an intense battle going inside financial institution, Diamond Bank.

Here are the details

If truly a bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain, then Diamond Bank might be getting drenched in torrential doses of the proverbial bank’s poison. As you read, the sweet simplicity of the steep per cents has deserted Diamond Bank like a spent era of prosperity and pliant luck. Diamond Bank, presumably one of Nigeria’s leading banks, has suffered a devastating blow that rankles to its foundations; due to bad debt.

The Capital investigations revealed that bank has stopped granting loans to customers and has embarked on a vigorous debt recovery campaign. This comes in the wake of billions of naira non-performing loans granted out under former Managing Director of the bank, Alex Otti. Inability to recover the loans is currently threatening the bank’s operations. Diamond Bank continues to experience huge credit losses in the current financial year and this is undermining profit performance. Net profit dropped by over 15% in the first quarter against a moderate improvement in gross earnings.

 Rising provisions for risk asset losses accounted mainly for the profit drop, claiming 16% of interest income compared to 13% in the same period last year. The bank has been making huge provisions for loan losses in recent years, about N23.30 billion in 2013 to N26.37 billion in 2014. At the end of the first quarter of the current year, impairment for credit losses grew further by about 30% to N6.49 billion. The bank carries a net lending portfolio of over N1.08 trillion, slightly down from the closing figure for last year. The portfolio quality problem facing the bank clearly warrants discontinuation of further growth in credit volume and a step up of asset recovery effort.

Predictably, the crisis has generated a lot of tension within the bank as several members of staff are currently engaged in a mad race to recover loans facilitated by them from their clients as quickly as possible to avoid being sacked.

More worrisomely, the bank plans to lay off many members of staff in a move that promises to be unprecedented in the bank’s history. The bank’s new management intends to sack as many people as possible in order to deflate enormous overhead costs and the bank’s huge loan portfolio. The move as usual, will be cloaked as a ‘rationalisation exercise.’

This no doubt elicits feelings of resentment among the bank’s junior staff; many of them claim that it was the bank’s management that granted the non-performing loans to their friends and partners without collateral. They are angry that the management is desperate to make them suffer for crimes they were no part of. Consequently, they have vowed to blow the whistle and reveal several other skeletons in Diamond Bank’s closet. This is certainly the worst of times for Diamond Bank

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