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DIAMOND BANK PLC H1'17 - Q1 run rate maintained PAT beats estimates

Q1 Run rate maintained, PAT beats estimates                                                

Diamond Bank released its H1’17 results, showing sustained earnings run rate in Q2’17 and posting a 3% y/y growth in PAT. Although bottom line growth is mild, we see the y/y growth as modestly impressive given that H1 had been a stronger half for the bank in 2016 and we had expected the y/y performance to be impacted by the prior year’s high base. Particularly, despite a 19% moderation in Non-Interest Income, Gross Earnings rose 14% y/y to ₦112 billion (Vetiva: ₦110 billion) – supported by an impressive 31% y/y growth in Interest Income to ₦89 billion (Vetiva: ₦86 billion). In line with the trend observed in Q1’17 and across the banks that have released so far in H1’17, the strong interest rate environment continues to support earnings.     

Weak top line growth and loan loss pressure have been the biggest concerns for us in the last year. With both line items coming in better than expected, we are more optimistic about FY’17 performance. Whilst we take a conservative approach and maintain our loan loss provision estimate for FY’17 at ₦44.1 billion (FY’16: ₦59.0 billion), we raise our top line estimate to ₦224.3 billion (Previous: ₦220.5 billion).  Also, we cut our loan growth expectation for FY’17 from our previous 5% to flat. However, we maintain our deposit growth expectation at a modest 2%.                                              

Diamond Bank PLC is the sixth largest bank within our coverage. The bank offers a wide range of corporate, investment, business and personal banking products and solutions across 250 branches, predominantly in Nigeria, with subsidiaries across other West African countries including Benin (19 branches), Togo (3 branches), Senegal (3 branches) and Cote D’Ivoire (2 branches).