Diamond Banks Plc has sacked over
1,000 workers, and www.odogwublog.com
reports that it may not be unconnected with the economic downturn in the
country,
coupled with the difficult regulatory climate taking its toll on the
financial sector.
www.odogwublog.com
findings revealed that the latest
disengagement by the bank had to do with the need to realign its operations for
a tougher 2015, especially as the monetary policy environment continues to get
tighter.
Some of the regulatory measures
introduced by the Central Bank of Nigeria aimed at protecting the economy,
according to findings, have started affecting the banks’ profitability.
It was learnt that apart from job
cuts, the bank is also planning to reduce the number of new branches to be
opened this year.
A source within the bank told our
correspondent that major projects and sponsorship programmes for third-party
companies, which may not readily add to the bottom line, are also due to be
axed by the bank.
According to the source, the affected
workers cut across all branches of the bank.
The fortunes of Diamond Bank has
recently not been on the positive side as its 2015 first-quarter pre-tax profit
fell 9.5 per cent to 8.36 billion naira ($42 million) from a year earlier.
The bank did not disclose why profit
for the period end-March fell but said in a statement that revenue climbed 5.8
per cent during the period to 40.48 billion naira.
The banks profit after tax also fell
by 10.72 per cent to N25.48 billion in 2014, compared with N28.54 billion in
2013 as regulatory induced costs continue to suppress profit.
Its operating expenses also
increased by 19.89 per cent to N92.86 billion in 2014 from N77.40 billion in
2013.
Cost-to-income ratio, which measures
the ability of a bank in cutting costs while boosting profit, reduced to 72.30
per cent in 2014 as against 66.57 per cent in 2013.
The banks corporate communications
unit could not immediately be reached for comment on the development.
P.M.NEWS Business however learnt that more financial institutions are
planning to cut their staff strength in the following months, while others are
already outsourcing a number of job functions, a development that has seen some
of them transfer a significant number of their employees to third-party
companies.
One of the banks, Skye Bank Plc,
earlier in the year announced that it had transferred its tellers, drivers,
security personnel and other support staff members to three outsourcing firms,
a move that will affect hundreds of the bank’s workers.
The decision, led to the
disengagement of the affected employees from the bank and their subsequent
transfer to third-party firms.
Skye Bank, however, said in a
statement that the move was part of the initiatives to strengthen all cadres of
its workforce.
According to the statement, the
outsourcing companies appointed to take over the employees are Optimum
Continental Services, Strategic Outsourcing Limited and Integrated Corporate
Services Limited.
The bank gave the assurance that the
outsourcing firms would engage the affected employees under the same terms and
conditions as they were employed by the financial institution.
Global rating agency, Fitch Ratings,
and other international and local research firms had late last year predicted
that Nigerian banks would witness a fall in profitability this year.
On November 25, 2014, the CBN’s
Monetary Policy Committee devalued the naira by eight per cent; raised Monetary
Policy Rate from 12 to 13 per cent; and also increased the private sector Cash
Reserve Requirement from 15 to 20 per cent.
The development, which led to the
immediate withdrawal of about N500bn from the banking system, was said to have
affected the banks adversely.
Also, in a bid to halt the sliding
naira, the CBN had in December stopped the banks from keeping any of their
funds in foreign currencies. It also said dollars bought from it must be
utilised within 48 hours, adding that the actions were aimed at stopping the
banks from speculating on the exchange rate.
Experts said the recent regulatory
measures would have major negative effects on the banks this year, adding that
they were already feeling the effects of previous actions by the CBN,
especially the increase in public sector CRR, the Asset Management Corporation
of Nigeria’s levy increase, and the gradual removal of certain bank charges.
Fitch, in a report released on
October 8, 2014, said actions aimed at protecting the economy and the banking
system by the CBN would make the profits of the Deposit Money Banks for this
year drop.
While recalling that some of the
previous regulatory headwinds had led to weaker profitability and “stemmed
credit growth” in the first half of 2014, the rating agency said Nigerian
banks’ assets growth and earnings would experience further fall over the next
18 months.
Tension, confusion as Diamond Bank sacks 1,000 workers
Reviewed by Unknown
on
Tuesday, April 14, 2015
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