Diamond Bank chased retail leadership, hit 42% bad loans and was absorbed by Access Bank

In May 2019 Moody's published a post-mortem on Diamond Bank, which had just merged into Access Bank. Business Insider Africa reported that the bank went from a profit of N28.5 billion in 2013 to a loss of around N9 billion in 2017, after making less than N5 billion in 2016. Moody's said Diamond aimed to become Nigeria's leading retail bank and took on excessive risk as it pursued the goal.

Per Moody's, the bank lent heavily to businesses that could not repay, failed to attract enough corporate borrowers, and put 52% of its loans into oil and gas against a central-bank guideline of 20%, so the 2015 and 2016 oil price falls hit it hard. Non-performing loans reached 42% of gross loans in 2017 while provisions covered only 19% of them, weakening capital quality and eroding profit. Profit fell 78% in 2015 and deposits shrank 22% between year-end 2014 and 2017.

Moody's blamed governance for letting this run. By the end of 2017 only one of the board's 13 members met the Nigerian SEC's definition of independent. The founding family's representative was CEO from November 2014 to March 2019, and between 2009 and the merger Diamond had three CEOs and three chairmen. Moody's said the board failed to provide an effective check on management, and that new directors often lacked knowledge of the bank.

Management pursued the goal of being Nigeria's largest retail bank and, in Moody's view, took on excessive credit risk to do it.

Oil and gas made up 52% of lending against a 20% central-bank guideline, leaving the bank exposed when oil prices fell in 2015 and 2016.

The board lacked independence: only one of 13 directors qualified as independent under the Nigerian SEC definition at the end of 2017.

High turnover of directors and chairmen meant new appointees often lacked knowledge of the bank, undermining oversight.

Shareholders and management clashed over leadership; a former chairman's letter said a key shareholder demanded the CEO's immediate removal.

Growth ambitions need a board that can say no. With one independent director in thirteen and constant turnover, nobody stopped management's risk appetite from outrunning the bank.

Diamond Bank merged with Access Bank in March 2019 after a sharp rise in non-performing loans. Moody's said Access was strong enough to reduce default risk for former Diamond creditors.