The economic downturn in the country,
coupled with the difficult regulatory climate,
seems to be taking its toll on the financial
sector as one of the top financial institutions,
Diamond Banks Plc has sacked over 1,000
workers.
P.M.NEWS Business findings revealed that
the latest disengagement by the bank had to
do with the need to realign its operations for
a tougher 2015, especially as the monetary
policy environment continues to get tighter.
Some of the regulatory measures
introduced by the Central Bank of Nigeria
aimed at protecting the economy,
according to findings, have started affecting
the banks’ profitability.
It was learnt that apart from job cuts, the
bank is also planning to reduce the number
of new branches to be opened this year.
A source within the bank told our
correspondent that major projects and
sponsorship programmes for third-party
companies, which may not readily add to
the bottom line, are also due to be axed by
the bank.
According to the source, the affected
workers cut across all branches of the bank.
The fortunes of Diamond Bank has recently
not been on the positive side as its 2015
first-quarter pre-tax profit fell 9.5 per cent to
8.36 billion naira ($42 million) from a year
earlier.
The bank did not disclose why profit for the
period end-March fell but said in a statement
that revenue climbed 5.8 per cent during
the period to 40.48 billion naira.
The banks profit after tax also fell by 10.72
per cent to N25.48 billion in 2014, compared
with N28.54 billion in 2013 as regulatory
induced costs continue to suppress profit.
Its operating expenses also increased by
19.89 per cent to N92.86 billion in 2014
from N77.40 billion in 2013.
Cost-to-income ratio, which measures the
ability of a bank in cutting costs while
boosting profit, reduced to 72.30 per cent in
2014 as against 66.57 per cent in 2013.
The banks corporate communications unit
could not immediately be reached for
comment on the development.
P.M.NEWS Business however learnt that
more financial institutions are planning to
cut their staff strength in the following
months, while others are already
outsourcing a number of job functions, a
development that has seen some of them
transfer a significant number of their
employees to third-party companies.
One of the banks, Skye Bank Plc, earlier in
the year announced that it had transferred
its tellers, drivers, security personnel and
other support staff members to three
outsourcing firms, a move that will affect
hundreds of the bank’s workers.
The decision, led to the disengagement of
the affected employees from the bank and
their subsequent transfer to third-party
firms.
Skye Bank, however, said in a statement
that the move was part of the initiatives to
strengthen all cadres of its workforce.
According to the statement, the outsourcing
companies appointed to take over the
employees are Optimum Continental
Services, Strategic Outsourcing Limited and
Integrated Corporate Services Limited.
The bank gave the assurance that the
outsourcing firms would engage the
affected employees under the same terms
and conditions as they were employed by
the financial institution.
Global rating agency, Fitch Ratings, and
other international and local research firms
had late last year predicted that Nigerian
banks would witness a fall in profitability
this year.
On November 25, 2014, the CBN’s Monetary
Policy Committee devalued the naira by
eight per cent; raised Monetary Policy Rate
from 12 to 13 per cent; and also increased
the private sector Cash Reserve
Requirement from 15 to 20 per cent.
The development, which led to the
immediate withdrawal of about N500bn
from the banking system, was said to have
affected the banks adversely.
Also, in a bid to halt the sliding naira, the
CBN had in December stopped the banks
from keeping any of their funds in foreign
currencies. It also said dollars bought from
it must be utilised within 48 hours, adding
that the actions were aimed at stopping the
banks from speculating on the exchange
rate.
Experts said the recent regulatory measures
would have major negative effects on the
banks this year, adding that they were
already feeling the effects of previous
actions by the CBN, especially the increase
in public sector CRR, the Asset Management
Corporation of Nigeria’s levy increase, and
the gradual removal of certain bank
charges.
Fitch, in a report released on October 8,
2014, said actions aimed at protecting the
economy and the banking system by the
CBN would make the profits of the Deposit
Money Banks for this year drop.
While recalling that some of the previous
regulatory headwinds had led to weaker
profitability and “stemmed credit growth” in
the first half of 2014, the rating agency said
Nigerian banks’ assets growth and earnings
would experience further fall over the next
18 months.
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