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Chairman’s StatementProf. Chris OgbechieLeadership focus16 Diamond Bank Annual Report 2016

“From constrained foreign exchangeinflows to strict regulatory policies,the operating environmentpresented a very hostile front”Against this backdrop, I present the Annual Report andFinancial Statements for the year ended December 31,2016. Our performance showed that we weatheredunfavorable economic headwinds and remainedunyielding in our ambition to take our services “BeyondBanking”.Global Macroeconomic EnvironmentEstimates from the World Bank indicates a globaleconomic growth of about 2.3% for 2016 indicating amarginal decline from about 2.4% recorded in 2015.Advanced economies struggled with restrained growth andlow inflation in the context of increased uncertainty aboutpolicy direction, tepid investment, and sluggishproductivity.Activity levels lost steam in major economies including theUnited States with growth estimates reduced to 1.6% inWorld3.33.22.73.13.11.52.01.61.5United Euro 0142016e1.2As a Bank, we pride ourselves as innovative trailblazers, aswell as being adaptable to new trends and these translatedto our ability to efficiently navigate the constantlychanging interplay between foreign and domestic socioeconomic concerns. We remained tenacious and resolutetowards achieving our set objectives and emerging stronglike the Diamond we are.Real GDP of Select Economies (%)2.42.61.62.22016 was filled with many challenges stemming fromactivities both on the world stage and the domestic front.From constrained foreign exchange inflows to strictregulatory policies, the operating environment presented avery hostile front.2016, a downward revision of 0.1 percentage point. Thedeceleration in growth reflected renewed policyuncertainties associated with proposals of the newadministration in the United States and with the UnitedKingdom's decision to leave the European Union (Brexit),weak external demand, and subdued productivity growth.Anemic growth in advanced economies was accompaniedby a further weakening of global trade in 2016.2.72.72.32.7Distinguished shareholders, esteemedladies and gentlemen, it is with profoundpleasure that I welcome you to the 26thAnnual General Meeting and State of theUnion of our illustrious Bank for the2016 financial year.ChinaBRICSSSAMENAOvercoming these conditions, commodity prices havestabilized with projected moderate growth during 2017-19,providing support for commodity-exporting emergingmarket and developing economies (EMDEs).Increase in U.S. yields since early November led to notabletightening of financing conditions for EMDEs, in somecases resulting in significant currency depreciation andportfolio outflows. Despite this tightening, financingconditions still remain generally benign, as major CentralBanks maintained accommodative monetary policies.Nigerian Economic LandscapeBeing one of the largest oil exporter in the continent, andindeed the world, low oil prices - averaging 43 per barrelin 2016 and down 15% from 2015 - was compounded by adecline in production levels. Activities of militants in theNiger Delta created further unrest and contributed to thedeterioration of the security situation in the area.Diamond Bank Annual Report 2016 17

Chairman’s StatementLeadership Focus“The Naira remained under thehammer in 2016 as demand for thegreenback outplayed foreigncurrency inflow”Reflecting the broad weakness in its economy, Nigeria'sGDP contracted by 1.7% in 2016. Per capita growth wasalso negative for the period as the slowdown in output ledto a fall in imports that helped to marginally offset thedecline in oil exports.Credit to the private sector also contracted. Unemployment rate reached 13.9% in the third quarter, up from10.4% in the fourth quarter of 2015.Capital importation dropped to 5.1bn in 2016, down by46.9% with respect to 9.6bn recorded in 2015. This wasdriven primarily by weak investor sentiment that characterized the domestic economy on account of weak macroeconomic fundamentals amid fiscal uncertainties. FDI fellsharply, reflecting low commodity prices and weakeninginvestor confidence. This in turn slowed the demand andissuance of sovereign bonds.Nigeria's foreign reserves account averaged 26.03bn in2016 from an average of 29.81bn in 2015, posting a dip of12.7% year-on-year as militant activities in the Niger Deltaweighed on domestic crude oil production bringing itdown to about 1.63mbpd (Q3 2016) from historical high of2.2mbpd. This impacted on the country's ability toleverage the rally in global crude oil prices which touchedthe 50pb mark towards the end of 2016.Headline inflation culminated in a 15.6% annual average in2016, with a peak of 18.6% y-o-y in December 2016following monthly increases in both the Food and Coresub-indices. Rising cost of operations of most businesses,recurrent FX scarcity, high electricity and petrol prices, andthe impact of insurgency on agriculture and distribution ofgoods and services were the core drivers of high consumer prices in 2016.Nigerian Banking IndustryThe Naira remained under the hammer in 2016 as demandfor the greenback outplayed foreign currency inflow. Thisweighed on the ability of the Central Bank of Nigeria (CBN)to continue to effectively support the Naira at the hithertoN197/ 1 peg forcing the Apex Bank to adopt a managedfloat FX policy in June 2016. Subsequently, the Naira fell40% against the dollar and it continued to face downwardpressures, reflected in the large disparity between theofficial and parallel market rates. The Naira closed atN305/ 1 and N485/ 1 at the official and parallel marketsrespectively at the end of 2016.Monthly AverageNairaExchangeRates in 2016Exchange Rate TrendInter-Bank (N/ )Inter-Bank (N/ )BDC (N/ )BDC (N/ )329.8329.8 320.9 320.7 309.7 305.2 305.2 305.2 305.2197.0231.8197.0 197.0 197.0 197.0 197.0Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-1618 Diamond Bank Annual Report 2016In 2016 Nigeria faced severe economic and financialstrains. Domestic demand weakened as low commodityrevenues forced deep cuts in public spending. Also,constrained household spending was aggravated by salaryarrears. Foreign exchange shortages, coupled withintermittent power outages, weighed heavily on themanufacturing sector with many operators closing shopand moving to friendlier climes.In June 2016, the CBN reintroduced the Flexible ExchangeRate Interbank Market to enforce a demand-drivenexchange rate in an attempt to bridge the gap betweenthe interbank and parallel markets.Restructuring of exposures to Oil & Gas and Energysectors helped to minimize the impact of credit impairments across board.Notwithstanding all these, we relied on our reputation asthe “Retail Bank of Choice” and leveraged on our businesspartnership with our customers to command a performance worthy of Diamonds.

“ your Bank was able to grow netfees and commission income by22% despite the macroeconomicand regulatory limitations”Financial PerformanceDespite a 2% dip in gross earnings to N212.4billion in 2016relative to N217.1billion recorded in 2015, your Bank wasable to grow net fees and commission income by 22%despite the macroeconomic and regulatory limitations.This was driven by innovative customer-oriented revenuegeneration schemes across our numerous touch points.Interest expense continued its downward trend from lastyear and dipped by just over 13% in 2016 on account ofstricter pricing of our liabilities.Consequently, the Bank achieved a Net Interest Income ofN107.2billion for the year. This signifies a 2% decline fromour 2015 position as encouraged by a dip in interestexpense as espoused above but subdued by an attendantdrop in interest income.Ladies and Gentlemen, the past year was a daunting onethat came with hurdles that appeared insurmountable. AtDiamond we have placed priority on driving our corestrategy which is built on the pillars of being a retailoriented and customer-centric organization that placesemphasis on technology-driven revenue generation. Wehave put in place numerous novel and established businessdrivers which will ensure sustainability of the Group andhelp us take our services Beyond Banking.Board focus for 2017The year 2017 is pivotal for the bank as we strive to benumber one in the Nigerian retail space by positioningDiamond as the retail bank of choice. To achieve this, wewill focus on these key areas in defining our performance:ŸTotal impairment cost for FY2016 stood at aboutN59.0billion in line with our bid to rid our books of nonperforming risk assets especially in sectors that have beenvery susceptible to the changing economic climate withrespect to FX volatility. Contraction in trade relatedrevenues for our key clients, worsened by FX scarcity,made it especially problematic for a number of them tomeet their obligations. Despite these, the bank wasunwavering in its pursuit for solid growth and sustainableprofitability.ŸŸŸŸŸŸBacked by robust growth in income through Fees andCommission the bank registered a Profit before Tax (PBT)and Profit after Tax (PAT) of N5.0billion and N3.5billionrespectively for the period ended December 31, 2016.A look at the operational ratios of the Bank shows that weremain on the path of viable development. Low costdeposit ratio continued its strong upward trend year-onyear moving to 86% from 78%. Cost to Income Ratioimprove to 60% in 2016 from 61% as at year end 2015.This outcome was predictable following a dip in operatingincome levels recorded last year, the reverse being thecase for operating expense.Develop a corporate culture that is driven by a strongsense of purpose, built on these three pillars: highperformance environment, passion to transform lives,and warm sense of employee cohesionOffer holistic, seamless customer experience throughall our delivery modelsIncrease depth of our retail penetration by doubling ouractive customer baseCapture growing SME/Emerging Business opportunitiesDrive low cost business modelStrive for low cost of risk to drive loans and efficiencyCapitalise on our first-mover advantage in the financialinclusion spaceBoard of DirectorsDuring the 2016 financial year, several changes occurred inthe composition of the Board of Directors. They are asfollows:ŸŸŸMr. Oladele Akinyemi, an Executive Director, retiredfrom the Bank effective July 31, 2016.Mr. Victor Ezenwoko was an Executive Director until hisdemise on March 25th 2016.Mr. Christopher Low functioned as a Non-ExecutiveDiamond Bank Annual Report 2016 19

Chairman’s StatementLeadership FocusDirector until his resignation from the Board, effectiveJanuary 31, 2016.ŸDr Olubola Hassan served as a Non-Executive Directorand retired from the board on December 21, 2016.ŸMr. Sunil Kaul, a Non-Executive Director, retired onJune 30, 2016.The Board of Directors welcomed three members into itsfold in 2016 in both Executive and Non-Executivecapacities. These are:Mr. Chiugo NdubisiExecutive Director/Chief Financial OfficerMr. Chiugo Ndubisi, functioned as the Acting ChiefFinancial Officer (CFO) until July 2016 when he wasappointed the substantive Chief Financial Officer. He waspreviously the Head, Financial Management Division andformerly the Financial Controller. He has worked in severalpositions since joining the organisation in 1996 as anExecutive Trainee. Chiugo graduated in 1994 with a FirstClass Honours degree in Engineering from the Universityof Nigeria, Nsukka and holds a Master of BusinessAdministration degree (MBA) from the University of Lagos,Akoka.A Fellow of both the Institute of Chartered Accountants ofNigeria and Chartered Institute of Bankers of Nigeria,Chiugo has attended various local and internationalcourses including the HSBC International Bankers' coursein London and the Citibank Foreign Exchange Workshop(Bourse Game). He is also an alumnus of the AdvancedManagement Programme (AMP) of the Wharton BusinessSchool and the Senior Management Programme (SMP) ofthe Lagos Business School. His appointment as anExecutive Director was approved by the Central Bank ofNigeria on November 16, 2016.Mrs. Chizoma OkoliExecutive Director, Business Development20 Diamond Bank Annual Report 2016Mrs. Okoli was Head, Business Development prior to herappointment as an Executive Director, BusinessDevelopment. She has served in several capacities in theBank since 1992 when she joined Diamond as anExecutive Trainee in the Operations Unit, amongst which isHead, of the Corporate Banking Directorate. She is also onthe Board of Diamond Bank, UK. An alumnus of theWharton Advanced Management Program of the Universityof Pennsylvania and the Senior Management Program ofthe Lagos Business School, Chizoma is a 1989 Lawgraduate from the University of Benin. She was called tothe Nigerian Bar in December 1990 and has an MBA fromthe Warwick Business School, Coventry, UK. Her appointment was approved by the Central Bank of Nigeria onNovember 16, 2016.Mr. Rotimi Olayiwola OyekanmiIndependent Non-Executive DirectorMr. Rotimi Olayiwola Oyekanmi is a Chartered Accountantand a Fellow of the Institute of Chartered Accountants ofNigeria. He holds a B.Sc. (Hons) in Economics from theUniversity of Ibadan and an M.Sc. from the London Schoolof Economics and Political Science, London.His career spans over 33 years in the Banking and investment sectors. He joined Arthur Andersen & Co (now KPMGProfessional Services) in 1983 from where he moved to theInternational Institute of Tropical Agriculture as ChiefInternal Auditor in 1988. He started his Banking career withPrime Merchant Bank Limited in 1991 as a Senior Manager.Between 2001 and 2009, he was Chairman, VentureCapital Association of Nigeria, a Director at African VentureAssociation and Chairman, African Venture CapitalAssociation.He was Group Head, Investment Banking at EcobankCapital Nigeria from 2012 to 2013. Mr. Oyekanmi iscurrently the Chairman of Rendeavour Group andRenMoney MFB Limited and a Partner in Apis Partners LLP,a private equity asset management firm that supportsgrowth stage financial services businesses in Africa andSouth Asia by providing them catalytic growth equity

”We have chosen to be the retailbank that is customer-centric andtechnology driven; and we mustendeavor to clinch and maintainthe number one spot in the retailspace”capital. His Appointment was approved by the CentralBank of Nigeria on December 1, 2016.unequalled customer experience and delivering superiorshareholder value”.Our PeopleAchieving this will entail continuous re-tuning of ouroperating strategy and business model in response to theopportunities and challenges in the system, and in line withinternational best practice. We are committed as a bank toattain this.Distinguished Shareholders, we understand that hiring theright people is pivotal to building any world classorganisation and Diamond Bank still remains the employerof choice in the Nigerian banking space despite thedifficult operating environment. We boast of a team ofprofessional and creative minds focused on providinginnovative customer centric solutions and deliveringsuperior customer experience.To position our workforce with the right structure andmindset needed to achieve the Bank's strategic objectiveof becoming the fastest growing retail bank, your Banksuccessfully embarked on an internal restructuringevaluation exercise to realign market facing job functionswith retail realities. We expect to see further gains as aBank as well as optimizing the best in our Diamonds as theBank heads into 2017.We have chosen to be the retail bank that is customercentric and technology driven; and we must endeavor toclinch and maintain the number one spot in the retailspace. This is achievable but it requires the appropriateculture to promote and ensure sustainable success.I appreciate the insight and cooperation of my fellowBoard members in steering the ship of our great Bank in2016 and I look forward to a more engaging 2017 financialyear. I equally thank all Diamonds for their commitment,contributions, and dedication in 2016 and I am sure ofthese and more as we make 2017 a better year for theBank.Let me close by acknowledging the various industryregulators for their thoroughness in ensuring the domesticBanking industry remains safe, sound, and trusted. I equallyapplaud the efforts of the government at revamping theeconomy for sustainable growth and development.In 2016, we continued to build capacity by focusing onleadership development and building a positive workenvironment. Our renowned Diamond Academy continuesto enrich our extensive and professional and leadershipofferings through convenient e-learning and webinars.I salute the courage of every Diamond in ensuring weremained profitable despite the daunting operatingenvironment in 2016.Distinguished Ladies and Gentlemen, thank you for yourattention and I wish you a rewarding 2017.ConclusionWarmest Regards,2017 is going to be another challenging year for thebanking industry. Most of the headwinds that prevailed in2016 are not expected to subside in the short to mediumterm; we must brace up for the challenges ahead.Nevertheless, Nigeria is still a compelling position despitethe challenges and headwinds. We must therefore playintelligently and smartly if we are to win in 2017.Diamond Bank is committed to the vision of becoming “aleading financial institution with the best people, providingProf. Chris OgbechieChairman, Board of DirectorsDiamond Bank Annual Report 2016 21

Chief Executive Officer’s statementUzoma DozieStrategy efficiency22 Diamond Bank Annual Report 2016

“We remodeled our operating structure tobe more responsive to specific needs of ourexpanding and well diversified customerbase, signifying the commencement of thenext phase of our medium term growthstrategy”.2016 was a milestone year for Diamond Bank. Notonly did it mark our 25th anniversary in servingconsumers, businesses and communities across thegeographical areas that we operate, we also remodelle

14 Diamond Bank Annual Report 2016 M. AGENDA Ordinary Business 1. To receive the Report of Directors, the Audited Financial Statements for the period ended December 31, 2016, and the Reports of the Board Appraiser, Auditors and Audit Committee thereon. 2. To elect/re-elect Directors 3. To authorize the Directors to fix the Remuneration of