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Initial View - Diamond Bank Plc 9M 2018 - Underlying pressures persist

• Diamond Bank PLC (DIAMONDBNK) released unaudited nine-month 2018 result alongside restated figures for nine-month 2017 following divestment from its West African business operation. The result was unimpressive with the bank struggling to make profit in Q3 standalone.
• Last week, the bank announced the resignation of four of its directors, a move which looked like an imminent investment in the bank from new investors. But, the bank later announced it is not in talk with any party for capital injection. The bank currently has capital issues with its CAR printing slightly above the minimum regulatory requirement.
• Underlying pressures persist. Over 9M 18, Diamond Bank reported 35.8% YoY decline in EPS to N0.11, largely underpinned by funding costs pressure (17.4% YoY to N40.9 billion), which more than outweighed higher non-interest revenue (+10.9% YoY to N27.7 billion) and gains from lower impairment charge (-24.2% YoY to N25.2 billion). On net interest income, despite expansion in assets yield by 227bps YoY to 10.5% – largely due to 24% YoY decline in interest earning assets coming from the discontinued operation – interest income came in lower by 4% YoY to N108 billion. This alongside an increase in interest expense (17.4% YoY to N40.9 billion), resulted to a decline in Net Interest Income (-13.7% YoY to N67.1 billion). In line with the performance over 9M 18, we are now more doubtful of management’s guidance of N6.0 billion PBT for FY 18.
• The stock is trading at a P/B of 0.15x, a discount to Fidelity (0.33x) and FCMB (0.17x). Our last communicated FVE on Diamond Bank is N1.39 which translates to a SELL rating on the stock.
• We will revisit our numbers after further analysis and discussion with management.
• The bank will be holding a teleconference call on Monday, November 5, 2018 at 3pm Lagos Time (2pm London/ 4pm Johannesburg/ 10am New York) with its senior management. Click for details.