October 26, 2018 / 2:52 PM / 21 days ago

UPDATE 4-Nigeria's Diamond Bank not looking for capital, shares fall

* Sources had said the bank was in talks with investors

* Shares fall more than 3 pct after bank’s denial

* CEO says bank not in any formal talks with any party (Adds comment from fund manager)

By Chijioke Ohuocha

ABUJA, Oct 26 (Reuters) - Shares in Nigeria’s Diamond Bank fell on Friday after the mid-tier lender denied it was talking to new investors to shore up its capital.

Nigerian banks have been trying to raise fresh capital after huge loan losses worsened by an economy that has just recovered from a recession.

“Diamond Bank is not in talks with any party, global or otherwise, for any capital injection,” the bank said on Friday.

“While previous communication from the bank has highlighted a need to shore up the bank’s capital adequacy ratio (CAR), the preferred option is an internal capital management programme.”

Two banking sources had told Reuters on Wednesday that Diamond Bank was in talks with new investors after the lender said chairman Oluseyi Bickersteth and three other directors had resigned with immediate effect.

The bank did not say why they resigned, but investors took the view that the bank, which has private equity firm Carlyle as a shareholder, would be able to raise capital more easily under new management.

Bickersteth told Reuters later on Friday he was still on the board of the bank. “We had a valid board meeting on Oct. 22 which I chaired,” he said.

Bickersteth said he favoured looking at all options for recapitalisation, including a rights issue or a takeover.

Diamond Bank has 61.9 percent free float while Carlyle owns a 17.75 percent stake, which it bought for $147 million in 2014 when the bank was trading at 0.6 times book value as against 0.15 times now.

Nigerian businessman Pascal Dozie, who founded the bank in 1990, holds 14.2 percent with his family.

Chief Executive Uzoma Dozie told Reuters on Friday that Diamond Bank was not in any formal talks with any party at the moment.

“The Dozie family, I suspect, will consider options when put on the table. At present there are none,” Dozie said.

Bickersteth said a possible shareholder meeting was in the works.

One investor, who owns shares in Diamond Bank, said his fund was pushing for a management change at the lender. The investor did not want to be identified.

Nigerian banks face stiff competition from rapidly growing financial technology firms that offer low-priced services in the payments market in the country. But despite the competitive conditions, several of Diamond Bank’s rivals have outperformed, the investor told Reuters.

Diamond shares closed down 3.4 percent at 1.44 naira on Friday, after rallying 24 percent this week to a four-month high on expectations the bank would raise fresh capital.

“Investors reacted negatively because the statement issued today was disappointing. Investors expected some kind of acquisition to come through,” one analyst said.

In 2016, Diamond said it was conducting a capital management plan and would ensure it met regulatory requirements, adding that it was considering raising fresh capital and selling some assets to strengthen its capital base.

The bank said it recognised the need to expand its short term options but that there was no new concrete development.

Analysts have noted that the bank has maintained a 16 percent capital adequacy ratio, the minimum required by the central bank, which has limited growth and profitability. (Additional reporting by Didi Akinyelure and Alexis Akwagyiram in Lagos Editing by Emelia Sithole-Matarise/Susan Fenton/Jane Merriman)

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