Diamond Bank stocks fell 9.38 per cent to N1.17 at the Nigeria Stock Exchange (NSE) yesterday.
Access Bank’s rose 1.30 per cent to close at N7.80. The entire banking industry index dropped by 1.06 per cent despite both lenders refuting the report that they were discussing a likely acquisition.
This newspaper yesterday reported plans by Access Bank to take over Diamond Bank within the first quarter of next year.
Diamond Bank Plc yesterday denied the report.
In a statement, the bank described the talks as a rumour.
Both lenders have notified the NSE and the public that they were not in any merger or acquisition talks.
But speaking on the development, a former General Manager at Diamond Bank Plc, Richard Obire, said although both lenders may have denied possible merger or acquisition plans, the possibility of it being true could not be foreclosed.
“It is possible. They can deny it because it is not time for it to be made public, but that does not foreclose the possibility of it happening. Diamond Bank used to be a leading commercial bank, competing favourably with Zenith Bank and GTBank. But today, its (Diamond Bank’s ) performance has dropped,” he said.
The banks, in separate statements to the exchange, denied the alleged merger or acquisition talks.
Diamond Bank’s Company Secretary Uzoma Uja said it was not in discussion with any financial institution at the moment on any form of merger or acquisition.
Uja said the attention of Diamond Bank had been drawn to the rumour in the media stating that the bank was purportedly in discussion with Access Bank to acquire the bank.
“We wish to state categorically that the bank is not in discussion with any financial institution at the moment on any form of merger or acquisition.
“We trust that the above clarifies the position of the bank with regards to the rumour on the various media platforms,” Uja said.
Also, Company Secretary, Access Bank, Sunday Ekwuochi said the bank had not entered into any such discussion with Diamond Bank or any other institution.
“As a publicly quoted company built on best practice, the bank is fully cognisant of its disclosure obligations in respect of any such corporate action and will always discharge its obligations in the most professional manner.
“Consequently, any statement regarding any such corporate action that is not issued by the bank should be disregarded,” Ekwuochi said.
The Nation learnt that the development leading to the impending acquisition was triggered by Diamond Bank directors who approached Access Bank for intervention in a bid to stave off a possible regulatory intervention that could lead to the withdrawal of the lender’s operating licence in the light of the bank’s depleting capital adequacy ratio on account of a huge Non Performing Loans (NPLs) portfolio put at over N150 billion.
The Nation gathered that Access Bank directors examined the proposal and, after series of meetings and evaluations, accepted to acquire the entity. However, the agreement so far reached, it was understood, will not alter the name of Access Bank nor its management structure.
“It’s a complete acquisition and not a merger,” a source, who asked not to be identified, but who is familiar with the transaction, said, adding that one of the major considerations that swayed Access Bank’s directors in accepting the offer was the large branch network of the lender. “ It’s burgeoning NPLs, however, was of serious concern to Access Bank and almost becoming a disincentive, but it has been addressed,” the source added.
Bloomberg reported that a major investor was in the process of injecting funds into Diamond Bank on condition that the CEO, Uzoma Dozie, exits his position. The report attributed to the Chairman, Seyi Bickersteth, has since been denied by the bank.
Diamond is one of a number of smaller Nigerian lenders struggling to maintain a regulatory requirement for banks with international operations to have reserves of capital that cover at least 15 per cent of outstanding loans. The company’s ratio stood at 16.3 per cent at the end of September, the lender has said.
Bloomberg report quoted Bickersteth saying the proposal was on condition that Chief Executive Officer Uzoma Dozie resigns, without naming the shareholder.
Diamond’s biggest investor is U.S. private equity firm Carlyle Group LP, which declined to comment.
The report further said the bank’s spokesman, Ezechinyere Anyanwu, declined to comment on whether there has been a recapitalization offer.
Diamond is one of a number of smaller Nigerian lenders struggling to maintain a regulatory requirement for banks with international operations to have reserves of capital that cover at least 15 percent of outstanding loans. The company’s ratio stood at 16.3 percent at the
end of September, the lender has said.
Capital requirements became a concern for many Nigerian banks in 2016 after a contraction in the economy caused by an oil-price slump triggered a surge in non-performing loans. Standard & Poor’s on Tuesday cut Diamond Bank’s rating to CCC+/C from B-/B, citing pressure on capital and foreign-currency liquidity.
Diamond has also discussed selling itself to a larger rival, but this plan was eventually rejected after a boardroom vote, Bickersteth said, declining to identify the potential acquirer.
“The majority of us voted against” the takeover, he said. “The bank cannot be pushed into the hands of one suitor,” if it intends to get the best value for shareholders.
