Cheap valuation justified by capital concerns. We rate Diamond Bank a Hold with a TP of NGN0.9/share, reaffirmed by the net losses posted in Q3 17. In our assessment, the bank has minimal internal capital generation capacity given its heightened asset quality deterioration. On our base case FY17 estimates, CAR at 13.4% falls below the regulatory minimum of 15.0%, and at 10% the NPL ratio remains well above the regulatory limit of 5%. While the bank has initiated the sale of some of its subsidiaries to shore up capital, we believe management still needs a long-standing solution to address its weak earnings base - such as a Tier 1 capital raise. We believe uncertainties around timing and execution of both asset disposal and capital raise warrant a Hold recommendation despite the cheap valuation of the stock, trading on 0.10x FY18f BVPS.