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Expect lower earnings – Diamond Bank tells stakeholders

By on March 15, 2016

The number of companies envisaging lower performances for the 2015 financial year swelled last Friday with Diamond Bank Plc sending a profit warning to capital market operators.

FCMB Group Plc and FBH Holdings Plc had sent similar profit warnings to the market due the challenging operating environment. Also, Computer Warehouse Group (CWG) Plc last Tuesday said it would record loss for 2015 financial year.

While investors were still coming to terms with the reality of those profit warnings, Diamond Bank said on Friday that the continuing deterioration in Nigeria’s macro-economic conditions has resulted in the bank recognising higher than expected impairment charges on loans made to the energy and commercial business sectors.

“In light of these deteriorating conditions, and subsequent review of Diamond Bank Plc’s management accounts for the financial year ended December 31, 2015, preliminary indications are that earnings will be lower than in 2014,” the bank said.

According to the bank, in recent years, it has deployed considerable resources in building a dependable risk management framework, and the quality of its loan portfolio in general, remains high.

Diamond Bank added that it remained determined to deliver on its stated strategy of creating Nigeria’s leading technology-led retail bank.

“Already, in 2016 the business has made significant changes to its operating structure that will result in reductions in operating costs. Further investment has been made to improve customer relationships and revenue in our core business segments. These actions aim to deliver improved earnings and lower operating costs from 2016 onward. Overall, despite the headwinds and the fact that 2016 presents a tough operating environment for the industry, we remain optimistic on the fundamentals underpinning our long term retail-led business strategy,” the bank said.

Similarly, CWG had said stakeholders should expect loss for the full year that will be driven by foreign exchange losses, inventory and bad debt write-offs.

“Foreign exchange losses – principally driven by significant exchange rate volatility. The exchange rate, which had been largely stable within a narrow band suddenly plummeted and remained uncertain from the first quarter of 2015, following the significant drop in Oil prices. Inventory write-offs – following technology and business model changes which made some previous investments, such as the investments in VSAT and MPLS network obsolete. Bad debt write-offs – due to a significant amount of income reversal from the previous year as a result of the cancellation of earlier agreed contracts, for which cancellation penalties are yet to be secured,” the company explained.

According to the company, apart from the loss from the above write-offs, it expects to report an operational loss stemming from a combination of a reduction in margins in her erstwhile traditional reseller business, and inability to transfer increased cost of doing business to customers due to already existing contracts.

“This performance occurred on the back of a challenging and .uncertain macroeconomic environment including the general elections of 2015 and the subsequent takeover by a new administration which caused significant delays in investments by our traditional customers,” CWG said.

 

[ThisDay]