Taking proactive step: CBN okays takeover of Diamond Bank by Access Bank

…Move triggered by Diamond Bank directors’ approach to Access Bank for intervention …Not true, we will send statement to media Monday morning -Diamond Bank Indications are rife that the Central Bank of Nigeria (CBN) has approved Access Bank to acquire Diamond Bank. Just recently, rumours emerged that there is a possible merger between the two banks. The shock reverberated through the financial services sector until both banks issued independent statements denying any merger. However, a highly placed source in the bank on Sunday revealed to The Daily Times that the CBN has approved the acquisition because of the financial and managerial strength of Access Bank, and also being one of the top five Deposit Money Banks (DMBs) operating in the country. Although, the source did not disclose the financial terms of the deal but just said, “It’s a good deal and a positive one for customers of Diamond Bank.” Recently, there have been talks on the acquisition but this seems to have put to rest several insinuations about the fusion. When contacted on the issue, the CBN Director of Communications, Mr. Isaac Okorafor, did respond to text messages sent to him but a staff in the apex bank simply asked told one of our Correspondents that he can’t confirm the story but should wait for a formal communication from the CBN. But in our fact findings, we gathered that both financial institutions have reached an agreement in broad terms on the acquisition. According to the sources, this issue has been concluded over a month, what was left was the valuation of assets, to determine the level of compensation and systems integration. The development that led to the 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 have led 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 agreement for the acquisition by Access Bank will not alter the name of Access Bank nor its management structure, the source said. Speaking further, the source said: “It is a complete acquisition and not a merger, one of the major considerations that swayed Access Bank’s directors to acquire the bank is the large branch network of the lender.” While responding to our inquiry through text messages, the Head, Corporate Communications, Diamond Bank Plc, Chioma Afe, denied this development. “Not true, we will be sending a statement to the media in the morning on this matter. Thank you for calling”, she responded. Last week, Diamond Bank had announced its decision to drop its international operating licence to focus on national operations following capitalisation issues. Uzoma Dozie, the bank’s chief executive officer, confirmed the development in a statement released to the newsmen. “With this approval, the bank will cease to operate as an international bank,” Dozie had said. “The re-licencing as a national bank supports Diamond Bank’s objective of streamlining its operations to focus resources on the significant opportunities in the Nigerian retail banking market, and the economy as a whole. “The move follows Diamond Bank’s decision to sell its international operations, which included the disposal of its West African Subsidiary in 2017 and Diamond Bank UK, the sale of which is currently in its final stages. “The change to national bank status also enables the bank to maintain a lower minimum capital requirement of 10 per cent, as against 15 per cent required for international banks,” Dozie added. The bank recorded its worst month on record in November with share plunging to 0.61k per unit on November 30, 2018. Commenting on this, the former General Secretary of Independent Shareholders Association of Nigeria (ISAN), Mr. Adebayo Adeleke, said survival of Diamond Bank is vital to shareholders who invested in the bank. He said: “The question we supposed to be asking is that, does CBN have the power to give bank licence to operate international licence? “Does CBN have the power to override banking policies in Egypt or Ghana? The approval of a national licence by CBN should not be an issue but the survival of the bank is very important. “As far as I am concerned, there is no big deal CBN granting Diamond Bank a national banking licence. Let the management of Diamond Bank find core investors and transform the bank’s strategy regarding business operations. The survival of Diamond Bank is much more important to shareholders.” Meanwhile, more headwinds lie ahead for both banks as they still require shareholders’ approval to consummate the transaction. For this deal to be consummated, shareholders of both banks will have to approve it with the sponsors of the merger abstaining. Sources suggest there might be push back on the Diamond Bank side of the deal as its majority shareholder, Carlyle investment, may have felt shortchanged. Carlyle had offered to bail out the bank but the Dozie family rejected this request after they requested for the resignation of Uzoma Dozie, the CEO of Diamond Bank. While a potential Access Bank acquisition/merger with Diamond Bank could still lead to the resignation of Uzoma Dozie, we understand the Dozies will keep a significant portion of their shareholding of the bank giving them a seat on the board of the bank. Motolani Oseni, Lagos and Mathew Dadiya, Abuja