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Diamond Bank Annual Report 2009


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Diamond Bank Annual Report 2009

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Diamond Bank Annual Report 2009

  1. 1. A strong financial services institution with effective presence in Nigeria, Africa and indeed all the key financial centres of the world. vision To create a unique international bank focused on providing creative solutions to customers' business problems, with an absolute commitment to quality. mission
  2. 2. contents Mission and Vision 03 Results at a Glance 05 Notice of AGM 06 Chairman's Statement 08 GMD/CEO's Review 13 Frequency of Board Meetings 45 Report of the Independent Auditors 46 Statement of Significant Accounting Policies 47 Consolidated Profit and Loss Account 57 Consolidated Balance Sheet 58 Consolidated Cash Flow Statement 59 Notes to the Consolidated Financial Statements 60 Statement ofValue Added 88 FiveYear Financial Summary Group 89 FiveYear Financial Summary Bank 91 Financial Risk Analysis 92 Corporate Directory 109 Proxy Form 115 e-dividend form 117 Unclaimed Dividend 118 Report of External Consultant on the Board Appraisal 20 Report of Audit Committee 21 Board of Directors 22 Management Team 23 Financials Director's Report 26 Responsibility for Annual Financial Statement 30 Corporate Governance 31 4
  3. 3. 5 Result at a Glance GROSS EARNINGS N(’000) PROFIT BEFORE TAX N(’000) TOTAL ASSETS N(’000) TOTAL DEPOSITS N(’000) GROSS EARNINGS N(’000) PROFIT BEFORE TAX N(’000) TOTAL ASSETS N(’000) TOTAL DEPOSITS N(’000) 2006 2007 2008 Apr’ 2009 Dec’ 2009 2006 2007 2008 Apr’ 2009 Dec’ 2009 2006 2007 2008 Apr’ 2009 Dec’ 2009 2006 2007 2008 Apr’ 2009 Dec’ 2009 2006 2007 2008 Apr’ 2009 Dec’ 2009 2006 2007 2008 Apr’ 2009 Dec’ 2009 2006 2007 2008 Apr’ 2009 Dec’ 2009 2006 2007 2008 Apr’ 2009 Dec’ 2009 22,713,742 39,873,714 67,735,694 60,437,641 108,979,476 1,379,451 16,213,791 5,901,951 -12,374,154 7,640,882 223,651,484 320,950,167 625,669,618 682,077,914 650,757,117 148,562,796 217,737,408 419,707,636 466,889,851 482,056,310 21,730,220 38,524,708 56,612,235 101,659,260 64,667,401 1,110,524 8,792,775 15,059,114 8,343,738 -9,055,793 218,866,192 312,249,722 603,326,540 650,891,836 604,361,884 144,569,685 211,634,824 403,710,120 444,815,118 449,020,259 BANK GROUP
  4. 4. NOTICE IS HEREBYGIVEN that the 19thAnnualGeneral Meeting of DIAMOND BANK PLC will be held at Le Méridien Ibom Hotel & Golf Resort, Uyo,Akwa Ibom State of Nigeria on the3rddayofJune2010at9:00a.m.prompt,totransactthefollowingbusiness: AGENDA OrdinaryBusiness 1. To receive the Report of the Directors, the Audited Financial Statements for the period ended 31st December 2009, and the ReportsoftheAuditorsandAuditCommitteethereon. 2. Toelect/re-electDirectors. 3. ToauthorisetheDirectorstofixtheremunerationoftheAuditors. 4. ToelectthemembersoftheAuditCommittee. SpecialBusiness 5. Toconsiderandifthoughtfittopassthefollowingasanordinaryresolution: “That the Directors' fees shall until reviewed by the Company in Annual General Meeting be and is hereby fixed at N100,000,000.00foreachfinancialyear.” 6. Toconsiderandifthoughtfittopassthefollowingasaspecialresolution: “That the Board of Directors be and are hereby authorised to convert the outstanding International FinanceCorporation (IFC) loan amount of $24,545,463.80 (Twenty Four Million, Five Hundred and Forty Five Thousand, Four Hundred and Sixty Three Dollars Eighty cents) into ordinary shares of theCompany at a price to be determined,and to allot such shares to IFC.” 7. To consider and if thought fit to pass the following as a special resolution: “That approval is hereby given for Diamond Bank Plc to enter into a business combination with or transfer, assign or otherwise dispose of its shareholding in any of its subsidiaries as may be determined necessary by the Board of Directors for the purpose of optimizing the business of the Diamond BankGroup;and the Directors be and are hereby authorised to execute all documents and doallsuchthingsasarenecessaryorincidentalthereto.” Notes 1. Proxy A member of theCompany entitled to attend and vote at anyAnnualGeneral Meeting is entitled to appoint a proxy to attend and vote on his behalf.A proxy need not be a member of theCompany.For the appointment to be valid,a completed and duly stamped proxy form must be deposited at the office of the Registrar of the Company, Diamond Registrars Limited, 59, Ogunlana Drive, Surulere,LagosStatenotlessthan48hoursbeforethetimefixedforthemeeting. 2. AuditCommittee In accordance with Section 359 (5) of the Companies andAllied MattersAct, 1990, any shareholder may nominate a shareholder for appointment to theAuditCommittee. Such nomination should be in writing and should reach the Company Secretary at least twentyone(21)daysbeforetheAnnualGeneralMeeting. Notice of Annual General Meeting 6
  5. 5. TheCentral Bank of Nigeria in itsCode ofCorporateGovernance for Banks stipulates that some members of theAuditCommittee should be knowledgeable in internal control process, accounting and financial matters. Consequently, we will require a detailed curriculumvitabesubmittedwitheachnomination. 3. Election/Re-electionofDirectors In line with the provisions of theArticles ofAssociation the directors to retire by rotation are Mr.ChrisOgbechie and Chief John D. Edozien.Beingeligibleforre-election,Mr.ChrisOgbechieandChiefJohnD.Edozienofferthemselvesforre-election. 4. ClosureofRegisterofMembers The Register of Members will be closed from 27th May 2010 till 28th May 2010 to enable the Registrar update the Register. Datedthis5thdayofMay2010 BYORDEROFTHEBOARD NkechiNwosu Company Secretary Notice of Annual General Meeting
  6. 6. 8
  7. 7. ore importantly, the AGM will review the Bank's Governments and central banks around the world took wide- performance during an extra-ordinarily challenging ranging policy actions to support their banking systems by Mperiod of major reforms introduced by the new providing liquidity, recapitalizing financial institutions, and Central Bank of Nigeria (CBN)Governor, Mallam Sanusi Lamido addressing decisively the problem of impaired assets. Despite Sanusi, since the second half of 2009. The reforms have these actions, financial strains remained acute in 2009, pulling significantly altered the industry structure and the down the real economy, with the international operating regulatory/supervisoryframeworkwithinaveryshortperiod. environment remaining very challenging. Unemployment and its spillover effects remained major challenges in many The impact of the global economic downturn hurt many of our advanced economies, and poverty a problem to many customers,putting corporate profitability under pressure and in developingeconomies. turn, led to deterioration in credit quality and diminution in the value of investments. The consequent high level of provision The unprecedented stimulus packages adopted at different resulted in an overall loss position for the Diamond Bank Group. times by various governments of the world and the coordinated The financial results were very disappointing notwithstanding efforts by international bodies such as G-20, IMF and World that they reflect the impact of a weak economy.However,steps Bank started to have impact from the third quarter of 2009, as are being taken by both the Board and Management to ensure most economies showed signs of improvement.This was largely that we do not find ourselves in this unfortunate position going driven by increasing demand as well as lowered uncertainty and forward, irrespective of the vagaries of the economy.With this systemic risk in financial markets supported by huge and wide- resolve and the strategic actions we have taken so far,theGroup ranging publicintervention,rising commoditiesprices,returning has returned to the path of profitability in the first quarter of consumer confidence,and reboundin manufacturingsector and this year. I have no doubt that we will sustain satisfactory stabilizing retail sales.Indeed,the world economy is expected to performancehenceforth. sustain a recovery track from 2010. The IMF in April 2010 projected that the global economic growth will rise to 4.2 To properly situate the Bank's performance, it is pertinent that I percentin2010. first review the key developments that shaped the operating environment during the period so that we all can appreciate the The Domestic Economy - ExtremeVolatility Giving Way circumstancesthatourBankfaced. toRecovery Global Economy - Contraction in 2009 Despite Huge The Nigerian economy had a mixed performance in 2009 as the country felt the second round effects of the global economicStimulus Packages meltdown,especially in the later part of 2008 and 2009. As the global economy began recovery, Nigeria recorded significantThe world output was estimated to have declined by 0.6 percent growth in the second half of the year, although there were stillin 2009,the lowest level sinceWorldWar II,due to the effects of challenges. Data from the National Bureau of Statistics (NBS)the financial and economic crisis, which started in the United indicated that real Gross Domestic Product (GDP) grew by 6.9States in 2006/7 and spread worldwide in 2008. Unrelenting percent which is significantly higher than the 6.0 percentfinancial turmoil caused asset values to fall sharply across recorded in 2008.The non-oil sector remained the major driveradvanced and emerging economies, decreasing household of growth although this was complemented by the sharpwealth and putting downward pressure on consumer demand. increase in oil revenue following relative peace in the NigerProduction and trade were constrained as a consequence. Delta region. Distinguished Shareholders,Ladies andGentlemen I welcome you all to the 19thAnnual General Meeting (AGM) of our Bank.This AGM is special in many respects. It is the first following the adoption of December 31st common year-end in the banking industry, bringing the period underreviewtoeightmonthsfromMaytoDecember2009. Chairman's Statement 9
  8. 8. Statistics from NBS showed that inflation fluctuated during the Prior to June 2009, the CBN tried to address the challenges by year before settling at 12.0 percent at the end of 2009.The huge adopting various options like the Expanded Discount Windows liquidity in the financial system coming from the quantitative (EDW) and the initial postponement of provisioning for bad easing measures of the CBN, fiscal expansion and rising global margin loans. However, following the appointment of a new commodity prices made a single digit inflation rate target CBN governor, the apex bank conducted a special audit on all unattainable in 2009.In addition,the significant depreciation of banks withfocus onthequality ofriskassets. the Naira during the year impaired the performance of the real sector and the ability of the operators to meet their credit By October 2009, eight banks that failed the stress test went obligations. into CBN administration under new executive managements and had additional capital injection by theCBN. In addition, the The money market ended 2009 on a relatively liquid note in CBN gave two other banks up to June 2010 to recapitalize. It is contrast to the tightness that dominated the first half of the pleasing to note that our Bank was among the first five banks to year as well as 2008. This was due to quantitative easing beclearedbytheCentral BankofNigeria. strategies and other measures adopted by the CBN and the government to ensure stability in the Nigerian financial system. Analysts believed that the CBN intervention saved the banking Average Prime Lending Rate to the economy stood at 18.7 industry from systemic distress and risk,considering the market percent in 2009, up from 17.4 percent in 2008. The average share of loans and deposits of several of the distressed banks. interest rate on savings account stood at 3.4 percent in 2009, The CBN action also helped to protect all depositors and marginallydownfrom3.5 percent in 2008. creditors and removed the probable cause of financial instability from the banking system. This action possibly It is comforting to note that, on the strength of the last quarter supported the implementation of common year-end by banks, growth in 2009, there is considerable optimism about the without the unnecessary spike in interest rates that was nation's economic growth in 2010 with projections hovering responsibleforthereversalofthepolicythepreviousyear. around 7-8 percent. There is an expectation that the absolute growth in oil production and prices in the third quarter of 2009 The CBN intervention has the potential of altering industry will continue in 2010. External reserves will likely improve structure in terms of ownership,number of banks in the industry further and help in stabilizing the value of the naira. Consumer and market share.The directives from the apex bank on loan loss confidence is returning as the capital market crash seems to provisioning saw most banks' announcing huge losses, which havebottomedout. eroded their capital bases.Six of the rescued banks that released their results as at the end of September 2009, reported a The growth expectation may however be moderated by combined loss of over N1.5 trillion ($11 billion) and persistent credit crunch,the likelihood of inflation escalating on provisioning for impaired assets in excess of N2.2 trillion.In a bid account of 2011 election spending and accommodative to address the situation, banks became risk-averse thereby monetary policies of the government, infrastructural rigidities, accentuating credit crunch in the system. However, it is andshortageofhumancapital. expected that when the CBN's proposed Asset Management Company (AMC) comes on stream, it will absorb some of the toxic assets thereby stabilizing the banking industry and easingBankingIndustryReview creditflow. Following the conclusion of the 2004/2005 consolidation FinancialResultsexercise and with billions of naira in banks' vault,Nigerian banks grew loan volumes across the board, particularly to the oil and gas sector, capital market and real estate businesses. As at the Distinguished Shareholders, as I said at the beginning, the end of 2008 credit volumes to private borrowers was already difficult macro-economic environment during the period under more than two and half times the N3.1 trillion federal budget for review adversely affected the performance of our Diamond 2009.Lacking in many instances the risk management expertise BankGroupinthelastfinancialyear. and corporate governance structures to effectively contain these new exposures, many banks were mid way confronted The impact of the weak operating environment on the quality of with the sudden change in macroeconomic conditions in our credit portfolio was severe. Notwithstanding the effect on second half of 2008 through 2009 caused by the global credit profit, we were determined to ensure that the Banks' non- crisis. performing loans are adequately provisioned. Accordingly, the Group made additional provisions of N24.7 billion during the Chairman's Statement 10
  9. 9. period,resulting in a loss before taxation of N12.4 billion for the dropped by 57.1 percent and further 42.8 percent in 2008 and 8-month financial year ended December 31st 2009 compared 2009 respectively compared to 45.8 percent and 33.8 percent to N5.9 billion profit made for full year endedApril 30,2009.We dip in NSE All-Share Index.This was due to a number of factors, are aware of the responsibility this performance has imposed on including concerns over the impact of global economic usatboththeBoardandManagementlevels. downturn, CBN reforms, and huge losses resulting from steep provisioning in 2009. Our Bank's share price lost 57.5 percent in Luckily, we have the opportunity to quickly return the Bank to 2008andonly0.8percentin2009toclosetheyearatN7.40. profitability as our national economy is already in recovery mode, thanks to the recovery momentum in the global Fortunately,we can see further recovery of the capital market in economy and the positive effect on international crude oil price. 2010 over the gains of the second half of 2009.The benign steps Consequently, it appears that the worst is over and we expect a taken by the government and the CBN to reform the banking turnaround in the fortunes of business organizations in a industry as well as stimulate the local economy, and the global manner that will impact positively on our earnings and economic turnaround will strengthen market confidence this recoveries. It will also have a positive effect on the trend in our year. In spite of the loss made during the last financial year, overallcreditportfolioqualityfromthis year. Diamond Bank's fundamentals remain strong and its capability for improved and sustainable earnings has been significantly Although the Group's balance sheet remained very strong with enhanced. I am therefore optimistic that the share price will capital adequacy and liquidity ratios at 19.5 percent and 37.6 rideonthemarkettideas2010quarterlyresultsarereleased. percent respectively, we know the importance of profitability in sustaining the confidence and trust of our esteemed customers, FutureOutlook employees,shareholders,regulators and other stakeholders.The Bank has since commenced the implementation of the Looking ahead in 2010, I expect that our nation's economic appropriate structures and strategies to improve the Group's growth will be underpinned by the upturn in crude oil prices and resilience to vagaries in the operating environment, particularly production levels, growth of non oil sectors, growing level of with regard to risk management, operating efficiency and investment in agriculture and infrastructure, strong private organizationalproductivity. consumption, and returning confidence in the banking industry and capital market. Nigeria's future banking growth will be The effectiveness of our strategy in improving the Group's driven not only by growth in the national economy but also by performance is borne out by a return to profitability in the first the consequent growth of the middle class and boom in quarter of 2010. Our target is to move progressively to personallending,mortgages,andcreditcards. becoming one of the top 3 Nigerian banks within 5 years in terms of ROE, operational efficiency, and championship in Diamond Bank is still in a position of strength to take advantage customer experience.It is my sincere belief that we will achieve of the opportunities arising from the expected economic theseobjectives. growth. With the support of international financial services consulting firms, the Bank is executing initiatives that will SharePricePerformance transform our business. In this direction, we have strengthened our credit risk policies to facilitate the identification of Diamond Bank's Share performance, measured by the market expansion areas to drive revenue growth and, at the same time, capitalization, was N108.0 billion at the end of December 2009 improve our loan portfolio quality. Besides, the Bank has made signaling a rise almost to its 2008 level from N72.38 billion as at giant strides in the drive for cost efficiencies and improved the end of May 2009. The share performance is gradually productivity. improving following investors' apathy since the stock market crash in late-2008/early 2009. Even with the improvement in The successful execution of these strategies in the short and share price in the period under review, I recognize and feel the medium terms will help position our Bank for improved and pain of shareholders as their investment eroded in value over sustainable performance from 2010.We are committed to the the last two years.Nevertheless,I am comforted by the fact that effective implementation of the strategies towards elevating the strategic actions we have taken in recent times should our Bank to the desired industry leadership position in the restore sustainable shareholder value for all. medium term. Indeed,share prices in the banking sector as a whole were highly depressed during this period. The Banking Industry Index 11 Chairman's Statement
  10. 10. BoardofDirectors Conclusion We are mindful of the concerns of our shareholders over ourDuring the year, two non-executive directors resigned from the performance in 2009. I want to assure you that we areBank's Board.Dr.Nkosana Moyo,one of the two Board members committed to sustaining the quick return of Diamond Banknominated by Actis Capital, resigned with effect from 25th Group to profitability in 2010 and we will do everything withinSeptember 2009, following his resignation from Actis Capital. ourcontrolinthisregard.OurmoderateprofitbeforetaxofAlso, RetiredAirVice Marshal (AVM) Ishaya A. Shekarri resigned N2 billion for the first quarter of 2010 will serve as a springboardfromtheBoardeffective1stOctober2009forpersonalreasons. to much higher profitability as we progress through the remaining quarters of this year. We believe that ourOn behalf of the entire Board of Directors and fellow repositioning initiatives to ensure profitable and quality growthshareholders of our Bank, I wish to extend my profound will see the Bank emerge an industry champion in the cominggratitude to the two directors for their invaluable contributions the growth and development of our Bank throughout their tenure.I wish them all the best in their future endeavour. Indeed, I look forward to 2010 with reasonable optimism especially in view of the fast improving international businessFurthermore, let me use this opportunity to thank all my environment, favourable domestic economic climate, andcolleagues on the Board for their contributions to building a expected positive outcome of the ongoing banking industrystrong Bank that will endure the test of time. I have no doubt, reforms. I am optimistic because I know that we have in placethat with such a Board, our Bank is positioned for the next level the right business strategy and the required human capacity toof leadership in the industry. effectively exploit the emerging business opportunities and deliver commendable stakeholder value. As growth beckons, IManagementandStaff enjoin all stakeholders to remain steadfast, supportive and committed.On behalf of the Board members, I extend my appreciation to the Management team and staff of our Bank for their hard work, On behalf of the entire Board of Directors and fellowingenuity and commitment to duty that enabled our Bank to shareholders of our Bank, I thank our valued customers for theirsurvive the harsh operating environment during the period unwavering support and patronage especially in this difficultunder review. Their efforts, resilience and continued time. I sincerely hope that we can continue to count on yourdetermination to move the Bank forward against all odds have patronage in the interest of our mutually beneficialstarted paying off. relationships. We will continue to support the attainment of your business aspirations through our ever improving customerIndeed, the operating environment in the last twelve months value-added propositions. Let me also use this opportunity tohas continued to witness developments which have stretched express my sincere gratitude to all other stakeholders includingthe entire banking sector to its limits. Luckily, we are blessed the CBN, NDIC, NSE, SEC and EFCC for their continued supportwith talented, experienced and determined management team and guidance.and staff working with a clear strategic focus managing the business prudently.Without doubt,our management's ability to Thankyouallforyourattention.respond positively and flexibly to fast changing business landscape will ensure remarkable improvement in stakeholder value within a short period of time. Our strength remains our people. Having one of the strongest HRM,NnaemekaAlfredUgochukwuAchebe,ObiofOnitshateams of professionals, driven by a collaborative work culture Chairmanand accountability is an important feature that will continue to drive our Bank's success in the years ahead. Accordingly, the development of Management team and staff will continue to be a top priority for the Board towards ensuring continued improvement in our Bank's performance. Chairman's Statement 12
  11. 11. istinguished Stakeholders, as you all know, 2009 was a Already, we have put in place all the necessary building blocks very difficult and challenging year for businesses required to quickly and decisively return the bank to profitabil- Daround the world. In Nigeria, the economy suffered ity and they are already yielding fruits as reflected in the profit significantly from the second round effect of the global we recorded in the first quarter of 2010. We are very much economic crisis particularly from the third quarter of 2008 to committed to ensuring that the Bank remains safe, stable and the greater part of 2009.The resultant deterioration of the risk profitable. Our customer centric credentials remain intact and assets of banks led to increasedprovisioningfor non-performing we will build on all of these in the coming months to restore real loans following the initiatives taken by the CBN to reform the growth to stakeholders' value. Our values, our brand identity industry. The huge provisions brought corporate profitability and our people, which are our invaluable assets, are still very under severe pressure as banks shut down credit completely and much intact to help us navigate and maximally take advantage focused on bad loanrecovery. of the improving business environment. In fact, we entered 2010 with a lot of confidence and renewed vigour to quickly Indeed for the period of over a year to end-December 2009, I movetheGroupon the path profitability. have the opportunity to manage Diamond Bank Group through the most difficult circumstances in its history. I must confess GroupFinancialPerformance that the business environment under which we operated during the period under review was one of the most difficult in the The period under review has been challenging for the entire history of banking in this country. The consequent loss we Nigerian banking sector. Diamond Bank's results before recorded during the period regrettably is an aberration in our exceptional provisions have proved resilient in the face of these Bank's history which we must put aside quickly. challenging conditions with the Group continuing to grow deposits at a sensible rate and with operating income holding up It is important to note that we have assessed the challenges that well. However, our profits have been impacted by large one-off led to the Group's performance under review, identified the provisions which we have provided for in accordance with the learning points and more importantly, set out the roadmap to CBN'sguidelinesfortheperiod. recovery and profitable growth. We are mindful of the enor- mous investments made in the Bank by all stakeholders and the Our operations for the 8-month period resulted in a loss before level of expectations in terms of shareholders value.As a result, tax of N12.4 billion due mainly to the high provisioning of we are positioning for strong performance in the aftermath of N24.7 billion, which resulted from increase in one-off large theeconomiccrisis. provisions which have been taken care of. Really, six high value loan accounts were responsible for N15.7 billion of the We are committed to the implementation of initiatives that we provision figure while two accounts that recorded major have identified to be critical to our success. The business operational losses contributed N3.7 billion to it. The capital optimization initiatives will very soon lead to significant and market and downstream petroleum sectors have undergone sustainable improvement in organisational efficiency, produc- turbulent phase in the past months and expectedly contributed tivity and profitability. In addition to defending our leading significantlytothespikeinloanlossprovision. position in our core middle market business, we are also focusing more on theexecution of strategies that will drive rapid We are optimistic that the challenges of the macroeconomic penetration and market share growth in sectors that present environment have eased significantly and indeed, a substantial huge business potentials. We are also open to mergers and increase in economic activities has become apparent. acquisitions that offer opportunity for a good strategic fit with Accordingly, we expect a turnaround in the fortunes of the valuable synergic benefits as a means to leapfrogging our companies that account for the loan loss provisions in a manner penetration of the growth market segments. that will impact positively on earnings and recoveries. Group Chief Executive Officer's Review 13 Positioning for strong performance - committed implementation of initiatives to improve organisational efficiency, productivity and profitability; as well as driving rapid penetration and market share growth in sectors with huge potentials.
  12. 12. Group Chief Executive Officer's Review
  13. 13. Additionally, the strategic steps that we have taken to signifi- always depended on cash management and collections to cantly improve the profitability of our operations over time will accumulate deposits required to fund assets. Lower disposable yield substantial results this year (highlights under “Optimisa- income however affected liability generation both at the retail tionandGrowth”below). andcorporatebusinesssegments. Our gross earnings of N67.7 billion and operating income of In all, the Bank remained very strong as both Liquidity and N42.5 billion compares favourably with N67.8 billion and N45.5 Capital Adequacy ratios at 38.0 percent and 19.4 percent were billion respectively for the corresponding period of 2008. The well above regulatory minimum of 25 percent and 10 percent relative stability in gross earnings was due to the fact that respectively.In the current year,we have projected stronger and Commercial Papers which were off-balance sheet in 2008 had more rewarding balance sheet and income targets for the Bank. been brought on-balance sheet by end-2009, implying that the We will intensify the implementation of a number of initiatives drop in loans was actually higher than the 8.5 percent apparent which is expected to help us in achieving our 2010 targets.These from the financial statement.The drop in loans was one of our include: precautionary measures against the risk implications of the ! Focus on low-cost deposit mobilization and balance sheet uncertainties about economic outlook during the period. management. Significant decline in non-interest income was responsible for ! Loan recovery, given the level of provision for non- the6.6percentdeclineinoperatingincome. performingloansin2009. ! Improve our credit monitoring activities with special The Group's Total Assets closed at N650.8 billion, an increased emphasis on high risk areas as well as strengthen our by 9 percent from N594.5 billion as at December 31, 2008.This enterprise-wide riskmanagementframework. growth was supported by customer deposits which grew by 33 ! Boost cash management services to key clients with a view percent to N482.1 billion from N363.3 billion during the period, to deepening our share of their businesses and aligning which is a reflection of customers' confidence in Diamond Bank. resourcedeploymentwith opportunities/potentials. It also points to the success of our retail banking strategy, ! Improve our organizational efficiency and productivity making the business segment the major driver of deposit through committed implementation of the initiatives growthduringtheperiod. currentlyongoingintheBank. A review of the performances of our subsidiaries shows that theTheConsolidatedEntities overall economic climate and operating environment remained very challenging for them. The following subsidiaries recordedThe harsh operating environment and credit crunch in the losses for their financial year ended December 31, 2009 -country which was further aggravated by the outcomes of the Diamond Capital (N2.0 billion), ADIC Insurance (N0.78 billion)CBN's stress tests of banks affected all the Bank's business and Diamond Mortgages (N0.48 billion). The very high losssectors, including the downstream oil, manufacturing, trading, recorded by Diamond Capital was as a result of the mark-to-construction and services sectors. Growth was constrained market approach adopted in the valuation of its subsidiary'sprincipally by the global economic meltdown which negatively (Diamond Securities) share-related assets.Two of our subsidiar-affected liquidity in the system and our appetite for increasing ies made profit before tax namely, Diamond Bank Benin S.A -credit. Consequently, the Bank's risk assets declined by 6.0 N0.34 billion and Diamond Pension Fund Custodian - N0.72percent to N323.8 billion from N344.3 billion as at December billion.31,2008.However,our total deposits increased by 31.7 percent to N449.0 billion from N341.0 billion as at December 31, 2008 Management however remains upbeat in the quick turnaroundmore as a result of flight to safety following the outcome ofCBN in the fortunes of the subsidiaries especially in view of thespecial audit of banks in 2009 and the pull of our retail banking positive economic outlook from 2010.Strategies have also beenpropositions than increased liquidity in the system. Money formulated to reposition the subsidiaries in the light of thesupplyincreasedbyonly15.8percentduringtheyear. lessons learnt from the recent challenges.The management of the subsidiaries are working assiduously on the implementationThe Bank'sCorporate Bank SBU sought to de-risk in most part of of the performance improvement and turnaround strategies2009 as well as concentrate on protecting existing assets. This thathadearlierbeenapprovedbytheBoard.resulted in a conscious decision to manage existing assets, refrain from the creation of new risk assets until the economic outlook is clearer while making aggressive and proactive provision for losses.Traditionally,the corporate banking SBU had Group Chief Executive Officer's Review 15
  14. 14. environment.We strongly believe in our people as the engine ofOptimisationandGrowth our growth.Thus in 2009,we continued with the transformation of our human capital management in order to position the bankIn order to realize optimal benefit of our growth strategy, we as a performance-driven institution.We embarked on series ofhave focused on the development of competencies that will initiatives towards building a strong, resilient, agile andgive us competitive advantage in the development of identified motivated workforce across the entire DiamondGroup.and promising business opportunities. Incidentally, the quick wins of our business transformation initiatives will contribute We have also put in place a new performance managementsignificantly to returning our Bank to rapid profit growth path system that will strategically link corporate strategy, resourcesthis year. The initiatives which commenced in late-2008, is and processes with a view to achieving organizational goals andtransforming the Bank's business fundamentally.They span the objectives. Communication and training of staff on the newentire value chain covering risk management, financial performance management framework has been concluded inplanning, sales management, operations optimization, and our determination to build a world class performance drivenInformationTechnology (IT) architecture and governance. environment. Indeed, the resilient performance of the Bank especially in this turbulent times and our consistent superiorIn the first instance, we have actively reviewed our risk customer value addition over the years is largely driven by themanagement strategy in line with changing market conditions quality of our human resource.We will continue to invest in ourand the Bank's strategy. We have introduced improved risk people and adopt the best HR practices towards building amanagement methodology to facilitate the identification of winning organization that will consistently deliver stakeholdersexpansion areas within the set risk appetite. We have also value.continued with the implementation of best practice enterprise risk management framework that is process driven and IT The deployment of the state of the art IT infrastructure andenabled. Policies are integral to the bank's risk management Architecture will improve overall IT resilience and responsive-process, spanning risk identification, measurement, mitigation, ness to the business while reducing “run” risk and supportingmonitoring and reporting in the various risk areas to ensure that automated processes, thereby contributing materially to costinherent risks in the business are effectively managed. reduction and sales optimization.The initiatives are helping us to set up efficient and scalable processes that will enable veryOverall levels of financial performance will, no doubt, be profitable future growth,organically or inorganically.affected by our ability to improve operating efficiency and productivity against the background of a lesser growth We are also working on some strategic opportunities that canenvironment, with significantly lower levels of growth in net create significant value and fast-track the achievement of ourinterest and non-interest income. We have re-engineered our Bank's strategic intent of rapidly growing retail banking,financial planning and expense management process to realize remaining a major player in middle market, and positioning as aexpense reduction and reliable planning data as well as niche player in Corporate/Public Sector Banking. The strategicredefined our strategic metric system to set a good foundation move will leap-frog the growth of our Bank's branch networkfor effective sales performance system.This improved planning and customer base, and the utilisation of our technologicaland expense management process has high cost reduction capabilities in the mobile and electronic banking market.potential and will significantly increase efficiency in the allocation of capital to business units, thus supporting overall bank strategy. IncreasedFocusonRetailBanking The retail space remains largely untapped in Nigeria with aboutOur sales efficiency has been enhanced by freeing up time for 74 percent of the population unbanked, which will requiresales and driving an industrialization approach. In addition, we banking services as systematic framework and infrastructureare introducing a systematic sales approach (customer improves.The retail sector is therefore unanimously viewed assegmentation and sales process) thereby increasing sales the next big opportunity for Nigerian banks as itbrings asset andeffectiveness and customer satisfaction. It will also become a deposit growth while diversifying risk and making balance sheetgood springboard for future growth in high values business sustainable.We are implementing a clear retail banking strategysegments,especiallyintheretailsector. in order to claim a leading position in the very big space. We are committed to strengthening and developing the 2009 saw us making a remarkable progress towards establishingcapacity and competencies of our workforce, rewarding Diamond Bank as the retail bank of choice in Nigeria.The retailperformance and creating a holistic employee-friendly work Group Chief Executive Officer's Review 16
  15. 15. segment of our business, comprising personal and Micro, Small supporting the growth of their businesses, thereby contributing and Medium enterprises (MSMEs) customers,is really becoming toGDPgrowthandhigheremployment. increasingly important to the Bank and Group. During last quarter of 2008,we revised and re-packaged our whole range of We are conscious of the fact that pivotal to winning in the retail savings products, taking the best features from a large number space is the delivery of excellent customer experience to of products and incorporating them into our very popular prospective and existing clients consistently. We know that SavingsXtra account. It offers the opportunity for everyone to ultimately, no matter how good our products and propositions, bank with us with a minimum balance of only N5,000 and customers will only bank with us if we are able to satisfy their quickly became customers' favorite banking product with over 1 needs and deliver consistent total quality service. In 2009, million accounts in 2009. We also re-packaged our Diamond through an independent external partner, we carried out a wide Kiddies account for youngsters and introduced a new higher ranging customer satisfaction survey, involving mystery interest deposit account called Diamond HIDA where balances shopping at 150 branches, one-on-one discussions with havegrowntoN5billioninonly6months. corporate clients and telephone interviews of over 3,000 business and personal customers. The result was an average Barely one year after its launch into the Nigerian consumer satisfaction level of 71 percent, which was reasonable and market, DiamondVisa Credit Card, the first naira denominated, placed us easily in the top quartile of banks in Nigeria.However, real credit card in the country, recorded well over 250,000 we know that is not good enough and we must constantly strive successful transactions valued at over N6 billion. Remarkably, for improvement. We will carry out similar surveys twice in 30 percent of all the transactions have been outside Nigeria, 2010 and will share the results with our shareholders in our while 70 percent were for payments within the country. Our annual report.We are confident of delivering a higher satisfac- credit card package remains unequalled in the country and we tion level in 2010 for it is only through the recognition of our are planning further enhancements in 2010, including the shortcomings that we can improve. We seek to deliver market- addition of more partners for our rewards scheme. Feedback beating customer experience whilst creating superior value from customers remains very positive, based on convenience addition toourcustomers. and reliability the same card can be used with confidence to facilitate payment across this country as well as in all countries During the 8-month period,retail banking deposits increased by aroundtheworld whereVisaCardisaccepted. 22 percent. The Bank was able to continue to attract retail deposits due to our strong distribution network and deliberate As we continued to look for creative solutions to help our focus on attracting a larger percentage of low cost deposits, customers solve the challenges of managing small businesses, rather than more expensive term deposits.This resulted in retail we launched a new proposition for Micro, Small and Small banking average weighted cost of funds falling from 6 percent to Enterprises (MSMEs) in October 2009 which proved to be so under 4 percent. With the launch of our new Business Express popular and successful that the number of customers had Account in December 2009, the really exciting part of retail doubled by the end of the year. The proposition comprises deposit collections is still to come in 2010. By scrapping modification to our Diamond BusinessXpress Account (DBXA), commissions on transactions for small business accounts and recognizing that one size does not fit all. We therefore intro- replacing them with a fixed fee structure, we expect to see SME duced 3 variants,all priced differently aimed at Starter,Growing customers concentrate their deposits with Diamond Bank in the and Established businesses. Through this proposition, we year ahead.This, coupled with the recently launched consumer significantly reduced the cost of banking for MSMEs, thereby finance products in vehicle asset finance, personal loans and removingthebarrierstotheirbankingwithus. mortgages,bolstersouroutlookfor2010. We also incorporated many added value features to DBXA Our increased focus on the retail sector does not translate into entrepreneurs guide, inexpensive ownership of their own abandoning other business segments. We will continue to website and most importantly, enterprise educational seminars consolidate our position in these segments by investing in the which have been embraced enthusiastically by hundreds of our development of propositions and services that will continue to customers.Our partnership with IFC was further enhanced with endear the Bank to the clients. This way, we will continually the launch of an additional lending product for MSME custom- sharpen our arsenal of weapons to retain our competitive edge ers and during a time when many banks stopped lending in the affected sectors. In topmost corporate sector, there are altogether, we lent in excess of N3 billion to this vitally high growth segments that offer opportunity to profitably important segment of the economy.We remain committed to expand the business notwithstanding that recent lending boom delivering support and finance to deserving MSME customers, is now taking its toll as reflected in non-performing assets and Group Chief Executive Officer's Review 17
  16. 16. provisions. Lending to the sector has become slow as corporate the review of implementation of the Pension Reform by governance standard increases and margin pressure is increas- partnering with the National Pension Commission so as to ing due to high competition. We will focus on proactively alleviate the suffering of pensioners. To help combat poverty identifying the growth segments of the corporate sector and and support agriculture development, the Bank spent over N3 becominganicheplayerinthem. million supporting the workshop titled “Boosting Nigerian Agricultural Sector through Financing, Processing, Capacity CorporateSocialResponsibility Building, Capital Equipment and Market Access” hosted by the American Embassy in Nigeria and the Bank of Industry Ltd (BOI). Our Group is committed to building a sustainable business that LookingAheadis trusted for upholding high standards of corporate governance and social responsibility. Thus, as part of our strategy in encouraging healthy and quality living among Nigerians, we In its April 2010, the IMF revised 2010 global growth forecast spent N15 million in sponsoring the 34th Annual upwards to 4.2 percent on account of the successes of theglobal Congress/Scientific Conference of the Ophthalmological “rescue operations” for the financial system and the economy. Society of Nigeria (OSN) held in Lagos in September 2009.We Nonetheless,there are still some challenges ahead,especially in seized the opportunity of sponsoring the conference to respect of high unemployment in most economies; fears that demonstrate our corporate responsibility drive in giving back to some countries may tighten their economies too quickly; and the society and to lend our weight on the fight to reduce the the growth effect of dwindling external demand, foreign direct rate of blindness among Nigerians and in the Sub-Saharan investmentandweakcrediton emergingeconomies. African. On the local scene, the upturn in the last two quarters of 2009 In a survey carried out by the Nigerian Federal Ministry of allows for considerable optimism about the nation's economic Health, more than a million Nigerians are blind and more than growth in 2010, with a convergence of projections centering on three million others are visually impaired. Overall, two out of 5 -7 percent growth for the year. Increase in crude oil price and every three blind Nigerians are blind from causes which could be the Amnesty Program in the Niger Delta should continue to avoided.The Bank is determined to help alleviate this problem.It impact positively on oil sector performance.There are however is a way of showing the public that their welfare is of paramount concerns that could threaten this positive outlook and some of importance to the Bank. It will be recalled that Diamond Bank these are: was the sole sponsor of the Third Edition of the International Council of Ophthalmology (ICO) hosted in Nigeria by the Eye ! The impact of credit squeeze heightened by the CBN's Foundation Center in 2008. Between 1999 and 2005, Diamond intervention in the banking sector in 2009, which may be Bank also sponsored the Annual Diamond Bank/Eye Expedition mitigated by the establishment of the proposed Asset Hospital freeeyeexpeditionprogramme. Management Company and the continuous loosening of monetarypolicies. We also identified with Lagos State government in hosting the ! Another major area of concern is the way and manner the Lagos Infrastructure forum on the need to improve sustainable CBN will address inflation concerns in the face of a loose infrastructure such as Intermodal passenger transport, monetary policy, expansionary budget 2010, and 2011 Affordable housing,Waste management, Power Solutions, Lekki election-inducedspending. free trade zones, etc. As part of our youth development initiative, our Bank set up a resource centre within the Niger Nigeria's future banking growth is set to be driven not only by a Delta University campus for the school community. The growth in national oil revenue but also through the growth of resource centre consist of cybercafe, computerized library, the middle class and boom in personal lending, mortgages, and viewing center and server room spending over N9 million in the credit cards.While the short-term outlook remains challenging, process with an additional sum of N11.6 million for furniture we are confident of an improvement in the second half of 2010. and additional work-stations. In the area of sports, the Bank In the longer term, government's public infrastructure invest- partnered with Sande Sports & Entertainment Ltd to organize ment programme will gain momentum and it should be a Best of Fans football tournament, which is a fusion of football catalystforgrowththroughouttheeconomy. and entertainment to help galvanize the youths into more fruitfulendeavours. We are actively re-calibrating and refining our businesses to ensure that we are optimally positioned to benefit from the The Bank spent over N5 million on the National Conference on economic recovery. The management team is committed to Group Chief Executive Officer's Review 18
  17. 17. optimizing the growth opportunities through the implementa- confident that we have the resilience and drive to thrive in the tion of initiatives that drive revenue growth while minimizing long term, notwithstanding that there will always be chal- costandrisks. lenges. Finally, on behalf of the Management and staff of the entireConclusion Diamond Bank Group, I wish to thank all our customers and shareholders for their understanding, patronage and commit-2009 was a tumultuous year for the Nigerian banking industry ment.Your unwavering support has helped us to negotiate theand consequently, the competitive landscape is changing bend successfully and maintain our strategic momentum infundamentally with the regulatory framework being radically 2010.altered. Our challenge is to ensure we remain focused on returning to acceptable level of profitability very quickly and Thankyouforyourattention.continue to deliver on a consistent basis by leveraging on strategic opportunities in the medium term towards elevating the Bank to the desired industry leadership position. We are committedtoachievingthesegoals. Our strategy is simple and its concepts are well tested in the EmekaOnwukabanking and other industries. The successful execution of our Group Managing Director/Chief ExecutiveOfficerstrategies at both short and medium term horizons should position us for high and sustainable performance.We are also 19 Group Chief Executive Officer's Review
  18. 18. 20 e conducted the appraisal of the Board of Directors (“the Board”) of Diamond Bank Plc (“the Bank”) for the period ended 31 December, 2009 in accordance with the standards set by the Central Bank of Nigeria (CBN) Code of WCorporateGovernance for Banks in NigeriaPostConsolidation (“theCBNCode”). Corporate governance is the system by which business corporations are directed and controlled to enhance performance and long-termshareholdervalue. We reviewed the Bank’s corporate governance report included on pages 31 to 45 of theAnnual Report for the period ended 31 December2009,aspreparedbytheBoard,andassessedthelevelofcomplianceoftheBoardwiththeCBNCode. The principal recommendations from our appraisal of the Board of the Bank, in accordance with the CBN Code, were in the followingareas:Directors’remunerationandtheappointmentofindependentDirectors. However, subsequent to 31 December 2009, the Board has appointed two (2) independent Non-executive Directors, subject totheapprovaloftheCBNandtheratificationoftheshareholders. DimejiSalaudeen Partner,KPMGProfessionalServices Lagos,Nigeria 12May2010 Report of External Consultant on the Board Appraisal
  19. 19. Report of Audit Committee n accordance with the provisions of Section 359 (6) of the companies and Allied Matters Act, Cap.C20 Laws of the Federation of Nigeria,2004,we the Members of theAuditCommittee of the Board of Directors of Diamond Bank Plc,having Icarriedout our statutory functions under theAct with the co-operation of management and staff,hereby report that : 1. The accounting and reporting policies of the Bank andGroup are in accordance with legal requirements and agreed ethical practices; 2. The scope and planning of both the external and internal audit programmes for the period ended 31 December,2009 were satisfactory and reinforce theGroup's internal control system; 3. Having reviewed the external auditor's findings and recommendations on the management matters,we are satisfied with the management responses thereon. In addition to the foregoing,we have complied with the provisions of theCentral Bank of NigeriaCircular BSD/1/2006 dated 18 February,2004 on“Disclosure of the insider- related credits in the financial statements of banks”,and thereby confirm that an aggregate amount of N2.3billion was outstanding as at 31 December,2009. Nnamdi Nwakwesi Chairman,AuditCommittee 12April,2010 Members of theAuditCommittee are: Mr Nnamdi Nwakwesi Chairman Lt.Gen J.T Useni (RTD) Member Dr.Olubola Hassan Member MrChrisOgbechie Member Sir Enoch Iwueze Member MrKabirAlkali Mohammed (mni) Member In attendance Nkechi Nwosu Secretary 21
  20. 20. Board Of Directors 22 8. Dr. Olubola Adekunle Hassan - Director 9. Lieutenant General Jeremaih Timbut Useni (RTD) - Director 10. AVM Ishaya Aboi Shekarri (RTD) - Director (Resigned w.e.f.1st Oct.2009) 11. Chris Ogbechie - Director 12. Chief John Edozien - Director 13. Dr Nkosana Moyo - Director - Director (Resigned w.e.f.24th Sept.2009) 14. Mr Simon Harford - Director 1. HRM Igwe Nnaemeka Alfred Ugochukwu Achebe - Chairman 2. Emeka Onwuka - Group Managing Director/CEO 3. Ohis Ohiwerei - Executive Director - Chief Financial Officer 4. U.K. Eke - Executive Director - Regional Businesses,Lagos/West 5. Uzoma Dozie - Executive Director - Corporate Banking 6. Oladele Akinyemi - Executive Director - Customer Services &Technology 7. Mazi Clement I. Owunna - Director 1 32 4 5 6 7 8 9 10 11 12 13 14
  23. 23. Directors' report Compliance with Code of Corporate Governance Directors' responsibility and approval Auditors' report Statement of significant accounting policies Profit and loss accounts Balance sheets Cash flow statements Notes to the financial statements Statement of value added Five-year financial summary 25
  24. 24. The directors present their annual report on the affairs of Diamond Bank Plc (“the Bank”) and its subsidiaries ("theGroup"),together with the financialstatementsandauditors'reportfortheeightmonthsended31December,2009. a. LegalForm The Bank was incorporated in Nigeria under the Companies and Allied Matters Act 1990 as a private limited liability company on 20 December 1990.It was granted license on the 15 March 1991 to carry on the business of commercial banking and commenced business on 21 March 1991.The Bank converted into a Public Limited LiabilityCompany on 28 February 2005.The Bank's shares were listed on 27 May2005ontheflooroftheNigerianStockExchangebywayofintroduction. b. PrincipalActivityandBusinessReview The principal activity of the Group continues to be the provision of banking and other financial services to corporate and individual customers. Suchservicesincludegrantingofloansandadvances,corporatefinanceandmoneymarketactivities. The Bank has seven operating subsidiaries including Diamond Bank Benin S.A (95.38%),DiamondCapital and Financial Markets Limited (DCL) (100%), Diamond Pension Fund Custodian Limited (100%), Diamond Mortgages Limited (100%) and ADIC Insurance Limited (95%).TheBank'sconsolidatedfinancialstatementsincludetheresultsofalloperatingsubsidiaries. The indirectly wholly owned subsidiaries (via DCL) are Diamond Securities Limited (DSL) and Diamond Registrars Limited (DRL).DSL has awhollyownedsubsidiary-DBLSInsuranceBrokersLimited. c. OperatingResults GrossearningsoftheGroupreducedbyN41.2billionandprofitbeforetaxreducedbyN18.3billion. HighlightsoftheGroup'soperatingresultsfortheperiodunderreviewareasfollows: 8monthsto 12monthsto Dec.'2009 Apr.'2009 N'000 N'000 Grossearnings 67,735,694 108,979,476 Profitbeforetaxation (12,374,154) 5,901,951 Taxation 4,199,741 (730,195) Profitaftertaxation (8,174,413) 5,171,756 Non-controllinginterest 32,402 (27,637) Profitattributabletogroupshareholders (8,142,011) 5,144,119 Appropriations: Transfertostatutoryreserves - 1,052,017 TransfertoSMEreserves - 342,556 Bonusissue - - Transfertocontingencyreserve 70,365 75,339 Transfertoretainedearningsreserve (8,212,376) 3,670,207 (8,142,011) 5,144,119 Directors' Report For period ended 31 December 2009 26
  25. 25. d. Directorsandtheirinterests The direct and indirect interests of directors in the issued share capital of the Bank as recorded in the register of directors shareholding and/or as notified by the directors for the purposes of sections 275 and 276 of the Companies and Allied Matters Act and the listing requirementsoftheNigerianStockExchangeisnoted: DirectShareholding IndirectShareholding Dec2009 April2009 Dec2009 April2009 HRMIgweNnaemekaAlfredAchebe(Chairman) 3,547,637 3,547,637 - - Mr.EmekaOnwuka (Managing) 20,000,000 30,484,873 - - Mr.OhisOhiwerei (Executive) 16,445,952 20,294,783 - - Mr.UrumKaluEke(Executive) 3,422,311 14,954,006 - - Mr.UzomaDozie (Executive) 20,630,610 21,719,491 735,627,169 735,627,169 Mr.OladeleAkinyemi(Executive) 8,503,293 3,439,426 - MaziClementOwunnaMFR 33,000 33,000 267,412,498 269,212,498 Mr.ChrisOgbechie 10,163,959 12,933,959 - Lt.GeneralJeremiahTimbutUseni(Rtd) 6,672,306 6,672,306 176,720,019 176,865,355 AVMIshayaAboiShekarri(Rtd),OON (Resigned-01/10/09) 71,669,961 71,669,961 174,495,514 174,495,514 Dr.OlubolaAdekunleHassan 6,601,500 5,101,500 - - Mr.SimonHarford - - - 1,975,935,789 Dr.NkosanaMoyo(Resigned-25/9/09) - - - 1,975,935,789 ChiefJohnD.Edozien 4,614,700 2,165,000 - 2,449,700 In line with the provisions of the Articles of Association the directors to retire by rotation are Mazi Clement Owunna and Chief John D. Edozienwhobeingeligibleforre-electionofferthemselvesforre-election. e. Directorsinterestsincontracts For the purpose of section 277 of theCompanies andAllied MattersAct 1990,except as stated herein none of the directors had direct or indirectinterestincontractsorproposedcontractswiththecompanyduringtheyear. f. Property,PlantandEquipment Information relating to changes in property, plant and equipment is given in Note 25 to the financial statements. In directors' opinion, themarketvalueoftheGroup'spropertiesisnotlessthanthevalueshowninthefinancialstatements. Number of 50k Ordinary Shares Held Number of 50k Ordinary Shares Held Number of 50k Ordinary Shares Held Number of 50k Ordinary Shares Held Directors' Report For period ended 31 December 2009 27
  26. 26. g. ShareholdingAnalysis The shareholding pattern of the Bank as at 31 December 2009 is as stated below: ShareRange No.Of Percentageof No.of Percentage Shareholders Shareholders(%) Holdings Holdings 1 -10,000 94,686 75.38 209,891,025 1.45 10,001 - 50,000 20,288 16.15 389,384,040 2.69 50,001 - 100,000 5,801 4.62 361,829,341 2.50 100,001 - 500,000 3,869 3.08 707,839,388 4.89 500,001 - 1,000,000 383 0.30 254,764,279 1.79 1,000,001-5,000,000 385 0.31 770,193,572 5.32 5,000,001-10,000,000 80 0.06 559,360,218 3.86 10,000,001-50,000,000 88 0.07 2,031,183,738 14.03 50,000,001-100,000,000 16 0.01 1,033,939,089 7.14 100,000,001-500,000,000 17 0.01 2,859,314,959 19.75 500,000,001-1,000,000,000 3 0.00 1,693,022,644 11.70 1,000,000,001-10,000,000,000 2 0.00 3,604,520,813 24.90 TOTAL 125,618 14,475,243,105 100.00 Actis DB Holdings Limited holds 14.79% of the Bank's ordinary shares while the balance is held by other individual and institutional investors. h. Substantialinterestinshares According to the register of members as at 31 December 2009,no shareholder held more than 5% of the issued share capital of the Bank exceptthefollowing: PercentageOf Shareholder Numberofsharesheld Shareholding(%) ActisDBHoldingsLimited 2,140,888,455 14.79% i. ShareCapitalHistory YEAR AUTHORISEDSHARECAPITAL(?) TOTALNUMBEROFSHARES 1991 25,000,000 25,000,000 1991 50,000,000 50,000,000 1992 100,000,000 100,000,000 1993 200,000,000 200,000,000 1996 500,000,000 500,000,000 1997 1,000,000,000 1,000,000,000 2002 2,000,000,000 2,000,000,000 2004 3,500,000,000 7,000,000,000 2005 5,000,000,000 10,000,000,000 2007 7,000,000,000 14,000,000,000 2008 10,000,000,000 20,000,000,000 J. CharitableContributions The Bank made contributions to charitable and non-political organizations amounting to N89 million (Apr.2009:N325 million) during theperiod. Directors' Report For period ended 31 December 2009 28
  27. 27. k. PostBalanceSheetEvents Therewerenosignificanteventsafterthebalancesheetdate. l. HumanResources EmploymentofDisabledPersons The Bank operates a non-discriminatory policy on recruitment.Applications by disabled persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicants concerned.In the event of members of staff becoming disabled,every effort is made to ensure that their employment with the Bank continues and that appropriate training is provided. It is the policy of the Bank that the training, career development and promotion of disabled persons should as far as possible, be identical with those of other employees. Health,SafetyandWelfareatWork The Bank enforces strict health and safety rules and practice at the work environment,which are reviewed and tested regularly.The Bank retainstop-classprivatehospitalswheremedicalfacilitiesareprovidedforstaffandtheirimmediatefamiliesattheBank'sexpense. Firepreventionandfire-fightingequipmentareinstalledinstrategiclocationswithintheBank'spremises. The Bank operates both aGroup PersonalAccident and theWorkmen'sCompensation Insurance covers for the benefit of its employees. ItalsooperatesacontributorypensionplaninlinewiththePensionReformAct2004,foritsemployees m. EmployeeInvolvementandTraining The Bank places considerable value on the involvement of its employees and has continued its practice of keeping them informed on matters affecting them as employees and the various factors affecting the performance of the Bank.This is achieved through regular meetingsbetweenmanagementandstaff. In accordance with the Bank's policy of continuous development, training facilities are provided in the Bank's well-equipped Training School. In addition, employees of the Bank nominated to attend both locally and internationally organized courses. These are complementedbyon-the-jobtraining. n. Auditors PricewaterhouseCoopers have indicated their willingness to continue in office in accordance with Section 357 (2) of theCompanies and Allied Matters Act. A resolution will be proposed at the Annual General Meeting to authorize the directors to determine their remuneration. BYORDEROFTHEBOARD NkechiNwosu CompanySecretary Plot1261,AdeolaHopewellStreet VictoriaIsland Lagos 15April2010 Directors' Report For period ended 31 December 2009 29
  28. 28. ResponsibilityforAnnualFinancialStatements The Companies and Allied Matters Act and the Banks and Other Financial Institutions Act 1991, require the directors to prepare financial statements for each financial period that give a true and fair view of the state of financial affairs of the Bank at the end of the period and of its profitorloss. TheresponsibilitiesincludeensuringthattheBank: i. keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Bank and comply with the requirements of theCompanies andAllied MattersAct and the Banks andOther Financial InstitutionsAct 1991; ii. establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other irregularities;and iii. prepares its financial statements using suitable accounting policies supported by reasonable and prudent judgments and estimates,thatareconsistentlyapplied. The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supportedbyreasonableandprudentjudgmentsandestimates,inconformitywith, - NigerianAccountingStandards; - PrudentialGuidelinesforLicensedBank; - relevantcircularsissuedbytheCentralBankofNigeria; - therequirementsoftheBanksandOtherFinancialInstitutionsActof1991;and - therequirementsoftheCompaniesandAlliedMattersAct. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Bank and its subsidiary operations and of their profit for the period. The directors further accept responsibility for the maintenance of accounting records thatmayberelieduponinthepreparationoffinancialstatements,aswellasadequatesystemsofinternalfinancialcontrol. Nothing has come to the attention of the directors to indicate that the Bank will not remain a going concern for at least twelve months from thedateofapprovalofthefinancialstatements. __________________________________________ __________________________________ EmekaOnwuka UzomaDozie ManagingDirector ExecutiveDirector Statement of Directors’ Responsibilities 30
  29. 29. iamond Bank Plc was conceived with the vision of creating a“strong financial services institution with effective presence in Nigeria, Africa and indeed all the key financial centres of the world.” We are pleased to state that over the years, as our vision has been Dfulfilledwehavenotlostsightofourcorevaluesofintegrity,excellence,customerandstakeholdersatisfaction. Diamond Bank is managed in compliance with the Code of Corporate Governance for Banks in Nigeria Post Consolidation (“the CBN Code”) and theCode ofCorporateGovernance in Nigeria.In addition,the Bank also endeavours to as closely as possible adhere to International Best Practices. Further to this, the Bank and the Diamond Bank Group have adopted a Corporate Governance Framework established on the following principles: (1) Discipline; (2) Transparency: (3) Independence; (4) Accountability; (5) Responsibility; (6) Fairness; and (7) Social Responsibility. In accordance with the requirements of the relevant Corporate Governance Codes, the position of Chairman and Managing Director/Chief Executive Officer are held by different persons, the number of non-executive directors exceeds that of the executive directors, and the ChairmanoftheBoarddoesnotserveonanyotherCommittees. THEBOARD The Board has the key responsibility for corporate governance and is responsible for the review and update of the Corporate Governance Framework. Members of the Board are required to uphold good corporate governance practices when performing their fiduciary duties and responsibilities. The primary mission of the Board is to effectively represent and promote interest of shareholders and relevant stakeholders by adding value totheCompany'sperformance.TheBoardofDirectorsofDiamondBankPlcisconstitutedbytheunder-listedpersons: HRMIgweNnaemekaAlfredUgochukwuAchebe,CFR,MNI,TheObiofOnitsha-Chairman HRM Nnaemeka Achebe is a Chemistry graduate of the Stanford University, California USA. He holds Masters in Business Administration (MBA) fromColumbia University,NewYork amongst others.He is presently the traditional ruler (Obi) ofOnitsha,Anambra State.During the extensive period of his career in the Shell companies (both local and international), he held several top level managerial positions before he was appointed Executive Director at Shell Petroleum Development Company in 1988, a position he held till 1996 when he was appointed SeniorCorporateAdviser,ShellInternationalCo.Limited,London. He has held directorship positions in many multinationals and reputable organizations and is a patron of the MTN Foundation.In 2004,Igwe Achebe was honoured by the Federal Government of Nigeria with a national merit award,Commander of the order of the Federal Republic (CFR).He belongs to a number of international professional bodies such as the Nigeria Economic Society and theAcademy of Management, USA. MaziClementI.OwunnaMFR-Non-ExecutiveDirector An accomplished pharmacist and businessman, Mazi Owunna is a graduate of the Drake College of Pharmacy, Iowa, United States. He is a pioneer director of Diamond Bank.MaziOwunna is theChairman of several successful companies spanning pharmaceuticals,manufacturing, commerce,real estate,food and chemicals.He is also a Fellow of the Nigerian Institute of Management.MaziOwunna has been a Director of the Bank since 2000. Dr.OlubolaAdekunleHassan,M.B,B.S,D.O,FRCS,FRCOPH,FWACS-Non-ExecutiveDirector Dr. Hassan holds a Bachelor of Medicine, Bachelor of Surgery, M.BB.S and Diploma in Ophthalmology among other qualifications. He is the ChiefConsultantOphthalmic Surgeon and Medical Director,Eye Foundation Hospital,Lagos and also acts as a consultant ophthalmologist to a number of local and foreign hospitals.He has sixteen academic distinctions and awards and belongs to a host of professional and academic bodies locally and internationally.Dr.Hassan joined the Board of Diamond Bank Plc in 2005. Compliance with Code of Corporate Governance For period ended 31 December 2009 31
  30. 30. LieutenantGeneralJeremiahTimbutUseni(Rtd)DSS,PSC,MNI-Non-ExecutiveDirector Lt. General Useni (Rtd) is a graduate of the Indian Military Academy and holds a Diploma in Advance Military Transportation from the US Army.He passed through notable institutions including the BritishArmyApprenticesCollege,Chepstow andCommand and StaffCollege,Jaji. He is a fellow of the following institutions: the Nigerian Institute of Management (FNIM), the Chartered Institute of Transport (UK and Nigeria) and the NationalWarCollege (FNWC).During his many years of meritorious service in the NigerianArmy,Lt.Gen Useni held various top military and political appointments including Director of Supply and Transport, Director of Ordinance Services and Quartermaster General of the Nigerian Army. He was Chairman of the National Railway Corporation, Military Governor of the former Bendel State, and Minister of the Federal CapitalTerritory. He received many Military decorations including Forces Service Star, Long Service Medal, Defence Medal,and Independence Medal.As a nationalist LtGen Useni is bestowed with twelve (12) chieftaincy/traditional titles from various states of federation most notably the Sardauna of Plateau and Nasarawa States.He is currently theChairman of theArewaConsultative Forum. Lt. Gen.Useni was appointed as a director of Diamond Bank in 2005 ChrisIkeOgbechie -Non-ExecutiveDirector ChrisOgbechie has a FirstClass Honours degree in Mechanical Engineering from Manchester University and MBA from Manchester Business School. He has wide experience in marketing and strategy derived from his work as head of marketing/sales at Nestle Nigeria., Xerox and from his consulting work with Nigerian firms over the years.While in Nestle he had wide international exposure in Malaysia, Singapore and Switzerland.He has been involved with several start-ups and is on the board of several companies.Mr.Ogbechie is a faculty staff of the Lagos Business School,where he teaches Strategy andCorporateGovernance.Mr.Ogbechie has been a director of Diamond Bank since 2005. SimonHarford-Non-ExecutiveDirector Simon Harford holds an MBA from INSEAD, Fountainebleau, France and a BA (Hons) in Philosophy, Politics and Economics from Oxford University, UK. Prior to joining Actis as Head of Actis,West Africa, Simon was with theVirgin Group and was the Chief Executive Officer of Virgin Nigeria,after having held a number of senior management positions in various organizations.Mr.Harford is currently the Head ofActis Africa and SouthAmerica.He has been a director of Diamond Bank since 2007. ChiefJohnD.Edozien-Non-ExecutiveDirector Chief Edozien holds a B.Sc. (Hons) (Econs.) from the University of Ibadan and an M.A. Economics from the University ofWisconsin.As aCivil Servant, he rose to the position of Permanent Secretary of the Cabinet Office in 1987 and National Planning,Office of Planning and Budget both in The Presidency. Chief Edozien served as Deputy Governor of Bendel state and later Delta State. He was the Group Managing Director/CEO ofAfribank Nigeria Plc as well asChairman ofAfribank International Limited (Merchant Bankers) from 1993 to 1999.He is the chairman of a number of Nigerian companies such as Jenkyns Consult Nigeria Limited and Mercedes BenzAutomobile Services Limited. He also holds other directorate positions in several companies.Chief John D.Edozien became a director of Diamond Bank in 2008. EmekaOnwuka-ManagingDirector/ChiefExecutiveOfficer Prior to joining Diamond Bank, Emeka worked with Arthur Andersen and Co., where he was exposed to both local and offshore training in accounting and management consulting for the finance as well as oil and gas industries. Emeka joined the Bank in 1992, and has worked in the key areas of corporate and investment banking, branch banking, treasury and commercial banking, among others. He was Head of the Bank'sCommercial Banking Division before his appointment as the Managing Director in 2005. U.K.Eke-ExecutiveDirector,BusinessBanking,Lagos&West Mr. Eke started his working career with Deloitte Haskins Sells International in 1985, and majored as an accounting professional with specialisation in audit, taxation and management consulting. In 1992, he joined Diamond Bank after a year's stint atAbacus Merchant Bank Ltd. He has attended various business, leadership and professional courses both in Nigeria and overseas. He was the Bank's Head of Commercial Banking Division (Lagos/West) prior to his appointment as Executive Director (Commercial Banking) in 2005. OhisOhiwerei-ExecutiveDirector/ChiefFinancialOfficer Mr. Ohiwerei began his banking career in Guaranty Trust Bank Plc where he worked in Credit, Marketing and Treasury units. He moved to Compliance with Code of Corporate Governance For period ended 31 December 2009 32
  31. 31. Ecobank in 1998 asTreasurer and in February 2000,joined Diamond Bank as Head of theTreasury Unit.His experience spans over 15 years in all the key areas of banking, much of this dominated by his stint in the area of treasury management. He was the Bank's Chief Financial Officer (CFO) before he was appointed Executive Director of the Bank/CFO. Mr.Ohiwerei has recently proceeded on terminal leave prior to hisresignationfromtheBoardoftheBank. UzomaDozie-ExecutiveDirector,CorporateBanking Mr. Dozie's banking career started in the Commercial Banking unit ofGuarantyTrust Bank Plc. He later moved toCitizens International Bank Limited where he was a part of the Oil and Gas Division. 1n 1998, he joined the Bank as Head of the Oil & Gas Unit. He was appointed as Executive Director in 2005. OladeleAkinyemi-ExecutiveDirector,CustomerServicesandTechnology Mr. Akinyemi first joined Diamond Bank from erstwhile Lead Merchant Bank in 1991 as head of Systems Unit. He later headed the Commercial & Consumer Banking and the Retail Banking units of the Bank before leaving for UBA in 1997. He left UBA to become an Executive Director of One-to-One Nigeria Limited and whilst there, he built the first database marketing service company in Nigeria and pioneered List Rental business in Nigeria.He then joinedCitibank Nigeria in 1999 as Head ofCards,Cash Management and e-SolutionsGroup. He rejoined Diamond Bank in 2002 as Head of the InformationTechnologyGroup.He was appointed to the Board in 2006. TRAININGANDEVALUATION: Diamond Bank has always placed emphasis on the performance of the Board as a whole as well as on the performance of individual members in relation to their contributions to the Board and the Bank. Evaluation of the Executive Directors is carried out by the Governance and PersonnelCommittee which is comprised entirely of Non-Executive Directors while the evaluation of the Non Executive Directors is done by externalconsultants. In order to further develop the skill levels of the Board,members attend courses and training programmes suited to enhancing their functions. If the situation necessitates it, the directors are entitled to seek independent professional advice on matters for which they require clarification. FUNCTIONSOFTHEBOARD: The Board meets regularly (at least once every quarter) to perform its stewardship and oversight functions,primary among which are: o Determination of the Diamond Bank Group's purpose and values, the strategy to achieve its purpose and to ensure that its values and strategyareimplemented. o Evaluation of present and future strengths, weaknesses and opportunities of the Bank. Comparisons with competitors, locally and internationally,andbestpracticeareImportantelementsofthisprocess. o ReviewandapprovaloftheBank'sfinancialobjectives,plansandactionsandsignificantallocationandexpenditure. o Approvaloftheannualbudget; o Approvaloftheannualandhalf-yearlyfinancialstatements,annualreportandreportstoshareholders; o Considerationandwhereappropriate,declarationorrecommendationofthepaymentofdividends. o ReviewingtheBank'sauditrequirements. o Reviewingtheperformanceof,necessityfor,andcompositionofBoardCommittees. o ApprovaloftheremunerationoftheChairman,Non-ExecutiveDirectorsandManagement o Reviewingriskmanagementpoliciesandcontrols,includingcompliancewithlegalandregulatoryrequirements. o ReviewingtheBank'scodeofconductandethicalstandards. o Reviewingshareholderandclientrelationships. The Board also performs certain of its functions through BoardCommittees and ManagementCommittees.The delegation of these functions doesnotinanywaymitigateordissipatethedischargebymembersoftheirdutiesandresponsibilities. Compliance with Code of Corporate Governance For period ended 31 December 2009 33
  32. 32. BOARDCOMMITTEES The BoardGovernance and PersonnelCommittee:The Governance and Personnel Committee is made up entirely of non executive directors. As the name suggests, this Committee is responsible for the overall governance and personnel function of the Board. Some functions of the Committee are as follows: To consider and make recommendations to the Board on its composition and that of the Committees and Subsidiaries; Review and recommend nomination of directors to the Board based on a proper selection process; Ensure adequate succession planning for Board of Directors and Chief Executive Officer; Ensure the orientation and continuous education of Directors; Monitor the procedures established for compliance with regulatory requirements for related party transactions; Monitor staff compliance with the Code of Ethics and Business Conduct of the Bank; Ensure compliance with regulatory standards of Corporate Governance and regularly identify international Best Practices of Corporate Governance and close any identified gaps; Recruitment or promotion staff toAssistantGeneral Manager level and above and to approval of the remuneration,benefits and other terms and conditions of the service contracts of such officers; Recommend to the Board the terms and conditions of the service contract, including remuneration packages of the Executive Directors with a view to ensuring that these officers are fairly rewarded for their effort;Review cases of infractions of the Bank's policies committed by staff of Assistant General Manager level and above and apply appropriate sanctions where necessary; Review and approval of policies on staff welfare and fringe benefits;Annual review of the BoardCharter;and Ensuring the annual review of the Board and BoardCommittees' performance. Members of the Board Governance and Personnel Committee are: Chief John D. Edozien (Chairman), Mazi Clement Owunna, Mr. Chris OgbechieandMr.SimonHarford The Board Audit and Risk Management Committee: The Board Audit and Risk Management Committee comprises non-executive directors and executive directors. The functions of this Committee include: Understanding the principal risks to achieving the Group's strategy; Establishing the Bank's risk appetite and ensuring that the business profile and plans are consistent with the risk appetite;Establish and communicate the risk management framework including responsibilities, authorities and key controls; Establishing key control processes and practices, including limit structures, impairment, allowance criteria and reporting requirements; Monitoring the operation of the controls and adherence to risk direction and limits; Interpret and report on risk exposures, concentrations and risk- taking outcomes as well as on sensitivities and key risk indicators;Reviewing and challenging all aspects of theGroup's risk profile;Review the financial reporting process with a view to ensuring the company's compliance with accounting and reporting standards, other financial matters and the applicablelawsandregulations;andReviewingandchallengingriskmanagementprocesses. Members of the BoardAudit and Risk ManagementCommittee are:Mr.Simon Harford (Chairman),Chief John D.Edozien,Lt.Gen.JeremiahT. Useni (rtd),Dr.Olubola Hassan,Mr.EmekaOnwuka,Mr.U.K.Eke and Mr.Uzoma Dozie. The BoardCreditCommittee:The CreditCommittee is made up of non-executive and executive directors.The primary function of this Committee is to consider all matters pertaining to the granting of credits by the Bank in accordance with approved policies and approval of credits in excess of the limits delegated to the ManagementCreditCommittee,significant revisions to credit policies,and establish portfolio distribution guidelines in conformity with government regulations.In achieving this objective,theCommittee ensures that the overall credit policies are aligned with the Bank's RiskTolerance level.In addition, theCommittee performs the following functions: Reviewing the policies and methodologies for assessing the Bank's credit risks and recommending appropriate exposure limits; and Reviewing large exposures and impairedassets. Members of the BoardCreditCommittee are:MaziClementOwunna (Chairman),Mr.ChrisOgbechie,Mr.Simon Harford,Mr.EmekaOnwuka, Mr.UzomaDozieandMr.OladeleAkinyemi. Audit Committee:This Committee is established in accordance with the provisions of section 359(3) to (6) of the Companies and Allied MattersAct and in compliance with the provisions of the CBN Code of Corporate Governance for Banks Post Consolidation.The Committee consists of three shareholder representatives and three non-executive directors. The Chairman of the Committee is a shareholder and a CharteredAccountant.All members of the Committee are independent of the Bank's management.The Committee's primary functions are, to review and ensure the effectiveness of accounting systems and internal controls; review the scope and planning of audit requirements; make recommendations to the Board regarding the appointment,removal and remuneration of the external auditors;and to ensure that the accountingpoliciesoftheBankareinaccordancewithlegalrequirementsandagreedethicalprinciples. Members of the statutory Audit Committee are Mr. Nnamdi Nwakwesi (Chairman) - Shareholder, Mr. Kabir Alkali Mohammed mni - Shareholder,Sir Enoch Iwueze - Shareholder,Lt.Gen.JeremiahT.Useni (rtd),Dr.Olubola Hassan and Mr.ChrisOgbechie. Compliance with Code of Corporate Governance For period ended 31 December 2009 34
  33. 33. MANAGEMENTCOMMITTEES Assets and Liabilities Committee (ALCO): The primary functions of this Committee are the creation of a balance sheet structure to allocate sources and utilization of funds in a manner that it improves the Bank's financial performance; maximizing the value of capital overtime whilst controlling risk exposures; and managing the Bank's liquidity with respect to the composition of portfolio of liquid assets, controlofcashflow,controlofshort-termborrowingcapacity,monitoringofundrawncommitments,andcontingencyfundingplans. ManagementCreditCommittee (MCC): Primarily, the Management Credit Committee approves credits in line with the Bank's credit policy. All credits exceeding the approval limit of the MCC are recommended to the Board Credit Committee for approval.The MCC also regularly assesses the Bank's risk asset portfolio to determine the optimum mix;the amount of exposures per customer and related group of customers;and approves the limits of inter bank placements.The MCC meets regularly to review watch-listed/non-performing accounts and approvespecificprovisionstobemadeonnon-performingaccounts. Personnel Management Committee(PMC): The Personnel Management Committee reviews and makes recommendations on policies regarding Manpower Planning andCareer Development; recruitment, selection and training of staff; performance management and staff appraisal;compensation,staff welfare and benefits schemes;Staff Movement andAudit;moderation of staff appraisal exercises and the implementation of the existing staff personnel policies and guidelines. The PMC reviews cases of infraction on the Bank's policies and procedures and applies adequate sanctions where necessary. Risk Management Committee (RMC): Diamond Bank's Group Risk Management Committee shall have oversight and responsibilities for all risk except credit, market and liquidity risks.Risk within the purview of the committee will include,but not be limited to,the following: Operational Risk; Strategic Risk;Accounting andTaxation Risk; Legal Risk;Compliance Risk; Reputational Risk; HumanCapital Risk; Insurance UnderwritingRisk;andInformationSecurityRisk. IT SteeringCommittee:TheCommittee serves as aThinkTank for all InformationTechnology (IT) matters and determines IT strategy and policiesandcoordinatestheimplementationofthesepolicies. Budget and Revenue Sharing Committee: This Committee prepares budget outlines for all the units of the Bank; carries out a half yearly review of the budget in order to prepare an updated budget for the remaining months of the year; and evaluates and approves extra budgetary expenditure. New Product Committee: Serves as a clearing house for new product proposals and in the process, determines and makes appropriate recommendations to Executive Management concerning product name and features; co-ordinates activities for the introduction of new products;and reviews existing products where necessary Cost ManagementCommittee:TheCommittee periodically reviews the costs/expenses of the Bank and recommends appropriate cost reduction/control measures; reviews and streamlines the acquisition of capital expenditure and bulk purchases of consumables with a view toreducingcostwithoutcomprisingquality;andgenerallyreviewstheprocurementproceduresoftheBank. Business Continuity and Security Committee: This Committee implements contingency response plans and strategies; and formulatesandreviewsstrategiesandplansgearedtowardssafeguardingtheBank'spropertiesandpersonnel. SHAREHOLDERRELATIONS In a constant effort to improve stakeholder relations Diamond Bank has dedicatedCompany Secretariat and Investor Relations Units on hand to resolve shareholders' issues. In addition to this, the entire staff of the Bank are available to resolve any issues which they can or appropriatelyescalatetotherelevantunitsforresolution. Stakeholders can readily obtain information on the Bank from our website and are also encouraged to express their opinions at General Meetings and stakeholders' forums which are organised by the Bank from time to time. 35 Compliance with Code of Corporate Governance For period ended 31 December 2009
  34. 34. FINANCIALREPORTINGANDACCOUNTING The audit for the period under review was conducted by the firm of PriceWaterhouseCoopers which is independent of the Bank, has no mutual business interest with the Bank and does not render non-audit services to the Bank. In keeping with the provisions of section 359 subsections (3) & (4) of the Companies and Allied Matters Act, the report of the Auditors is submitted to the Audit Committee which examinesthereportandmakesrecommendationstotheshareholdersateachAnnualGeneralMeeting. INTERNAL CONTROL AND COMPLIANCE The entire staff and Management of the Bank are responsible for protecting the Bank against fraudulent transactions. However, the Compliance &Audit Division is vested with internal control functions.This division is divided into three units,namely:Compliance,Corporate Audit,andSecurity. The Compliance unit is responsible for promoting compliance with statutory and regulatory requirements and the anti- money laundering program of the Bank among other things.The primary function of the CorporateAudit Unit is to review all operational transactions entered into by the Bank to ensure accuracy and avoid the processing of erroneous or fraudulent entries.The Security unit of the Bank is responsible fordeveloping,implementingandmonitoringtheBank'sSecurityandLossPreventionpolicies. In keeping with the Bank's strategy of strengthening its Corporate Governance structure and risk management capabilities through the implementation of its Enterprise-wide Risk Management framework, some strategies were adopted to effectively manage the risk of non- compliancewithlaiddownrules,regulationsandlaws.Theseincludethefollowing. ! Continuous identification and assessment of compliance risks presented by customers, products and services in the Bank, through a properly implemented compliance risk management assessment exercise and monitoring information system that provides managementwithtimely,informativereportsoncompliancewithlawsandregulationsatboththebusinessunitandtransactionlevels. ! Continuous training of the entire staff of the Bank onAnti-Money Laundering,Compliance andCorporateGovernance issues in line with the Bank's policy on professional development geared towards improving competence across board.Training has been a veritable tool that inculcates and synchronises the requisite compliance knowledge in staff on rules, laws and regulations across all levels and the knowledge is expressed as a guide in doing the Bank's business, thereby eradicating the problem of non-compliance. This clearly manifeststhecompliancecultureofthebankwhichstatesthatComplianceiseverybody'sbusiness. ! Disclosing and disseminating information required for regulatory compliance through monthly Newsletters that are broadcast on SharePoint(TheBank'sintranetportal). ! Harmonising the compliance culture in all the subsidiaries of the Bank with a view to identifying deficiencies in standards and formulating proposals for amendment where necessary to safeguard against losses arising from financial, operational, reputational, legalandregulatoryrisksinprocessingoftransactionsandrelationshipmanagement. ! Consistent implementation of the provisions of theCode ofCorporate Governance for Banks which have been embedded in the Bank's decisionmakingprocesses. The Bank has upgraded the InternalControl structures of the Bank in conformity with international best practices.The focus of the Bank in the new dispensation is on preventive control rather than detective control, emphasis is placed on processors owning the controls associated with their processes, with this we aim to build quality and effective control from inception to conclusion of transactions and thus reduce associated losses and costs.The Internal Control unit has unhindered access to all operations, records, property and personnel of the Bank. Our strength is in our people,trained and motivated to meet the emerging challenges in the global economy and InformationTechnology to ensuretheintegrityofourreportsandsafetyofinformationgenerated. RELATEDCOMPANIES/PERSONSENGAGEDASSERVICEPROVIDERS/SUPPLIERSTOTHEBANKASAT31STDECEMBER2009 S/N NameofServiceProvider Natureofservice/supplies RelationshipDirector NatureofRelationship 1. ElpinaAssociatesLimited OfficeEquipment UzomaDozie Son 2. Mr.PascalG.Dozie Consultancy UzomaDozie Son Compliance with Code of Corporate Governance For period ended 31 December 2009 36
  35. 35. Compliance with Code of Corporate Governance For period ended 31 December 2009 RISKMANAGEMENT The effective management of risk is indispensable to the business of the Diamond Bank Group (the Group). We consider risk as the quantifiable probability that the outcome of an action or event (internal or external) may result in adverse impacts that could severely hamper the achievement of our strategic objectives. The Group remains committed to the objective of increasing shareholder value by developing, continuously improving and fostering a sustainable business model that is consistent with its risk appetite and that will ensure long-termsustainableprofitability. EnterpriseRiskManagement(ERM)Vision DiamondBank'sERMVisionis: “Tobuildaworld-classriskmanagementculture” RiskManagementPhilosophy&Culture Diamond Bank undertakes all profitable transactions that it considers prudent and which meets its risk appetite and risk profile.The Bank continuously evaluates the risk and rewards inherent in its business endeavours,from strategy development and implementation,to its day- to-dayactivities. Thus,itsriskcultureisguidedbythefollowingkeyelements: ! DiamondBankGroupconsiderssoundriskmanagementasthebedrockforbuildingastrongfinancialinstitution; ! Riskofficersareempoweredtoperformtheirdutiesprofessionallyandindependentlywithinclearlydefinedauthority; ! BusinessunitsformallyinvolveandviewtheRiskManagementfunctionasathoughtpartner; ! TheGroup strives to maintain a balance between risk/opportunities & revenue considerations with theGroup's risk appetite.Thus, risk-relatedissuesareconsideredinallbusinessdecisions; ! TheBoardandManagementpromoteastrongcultureofadherencetolimitsandmanagingriskexposures; ! TheGroupavoidsproducts,marketsandbusinessesforwhichitcannotobjectivelymeasureandmanagetheirassociatedrisks; ! Thereisopenandfullreportingofriskstotheappropriatelevelsoncetheyareidentified;and ! TheGrouphaszerotoleranceforbreachofregulationsandlaws. RiskManagementObjectives ThefollowingarethekeyelementsofDiamondBank'sriskmanagementobjectives: i) ToidentifytheGroup'smaterialrisksandensurethatriskmanagementplansareconsistentwithriskappetite; ii) To optimise risk/return decisions by ensuring business units act as primary risk managers while establishing strong and independentreview/challengestructures; iii) Toprotectagainstunforeseenlossesandensurestabilityofearnings; iv) Tomaximiseopportunities,earningspotentialandultimatelystakeholdervalue;and v) To contribute to building a risk-smart workforce and environment that allows for innovation and responsible risk-taking by staff, whileensuringcosteffectiveandlegitimateprecautionsaretakentoprotectshareholders'interests. RiskManagementStrategy Our strategy for managing risks is to sustain a robust Enterprise-wide Risk Management framework (which is process driven and IT enabled), with emphasis on protecting theGroup from the adverse effects of risks while maintaining sustainable profitability and shareholder-value. ScopeofRisks Thescopeofriskswemanageincludesthefollowing: i) Creditrisk; ii) Operationalrisk; iii) Marketrisk; iv) Liquidityrisk; v) AccountingandTaxationrisk; vi) Legalrisk a. Litigationrisk; b. Contractrisk; 37
  36. 36. Compliance with Code of Corporate Governance For period ended 31 December 2009 c. RegulatoryCompliancerisk;and d. CollateralDefaultrisk; vii) Strategicrisk viii) HumanCapital risk; ix) Compliancerisk; x) Insuranceunderwritingrisk; xi) Informationrisk;and xii) Reputationalrisk The Risk Management &Control function provides central oversight of risk management across theGroup to ensure that the full spectrum of risks facing the Group are properly identified, measured, monitored and controlled to minimize adverse outcomes. Risk Management & Control is however complemented by other departments in the management of certain important risks as illustrated below: RISKAPPETITE TheGroup'sRiskAppetiteisthelevelofrisktheGroupispreparedtoaccepttoachieveitsbusinessstrategyandobjectives. TheBoardsetsandmonitorstheGroup'sRiskAppetiteandensuresthattheRiskAppetiteisfullyintegratedintostrategyandbusinessplans. Thus,our risk appetite is defined by the extent to which we tolerate risks as described by our performance indicators,operational parameters andprocesscontrols. Ourriskappetiteisguidedbythefollowingbroadconsiderations: ! CapitalAdequacy:Thelevelofexcesscapitalthatwemaintaintoprotectagainstinsolvencyinextremeadversescenarios; ! StableProfitabilityandGrowth:Theextentofvariabilityinearningsthatwearewillingtoacceptonbehalfofourinvestors; ! Liquidity:ThebuffersthatwemaintaintoprotecttheGroupfromshorttermfundingproblems;and ! StrategicFocus:Thelevelofvarioustypesofbusinessesthatwearewillingtopursueinexecutingourbusinessmodel; RISKMANAGEMENTGOVERNANCEFRAMEWORK Diamond Bank's risk management framework is based on the “three lines of defence” model for risk management. Under this model, responsibilities and accountabilities for risk management reside with all levels within the Group, from the Board of Directors down to the lowestlevels. BoardofDirectors The Board sets theGroup's overall risk appetite,approves risk management strategy and is ultimately responsible for the effectiveness of the riskmanagementprocessandsystemofinternalcontrols. The Board oversees the risk management of the Group through its committees namely the Board CreditCommittee, the BoardAudit & Risk Committee and the BoardGovernanceCommittee. 38