Grace Ashiru
Providus Bank has announced that its merger with Unity Bank, which has received preliminary approval from the Central Bank, is expected to result in a combined balance sheet of up to ₦3 trillion ($1.8 billion). Known for its banking-as-a-service model, Providus is considered the more stable of the two institutions.
In an email to customers, which was reviewed by TechCabal, Providus Bank stated, “The proposed business combination of both institutions will create one of Nigeria’s leading financial institutions.”
Unity Bank, formed from the merger of nine banks in 2006, has faced challenges since 2007, accumulating losses and high levels of bad loans. To facilitate this merger, Unity Bank is seeking a loan from the Central Bank, having requested ₦700 billion, as indicated in a letter obtained by TechCabal.
Despite its substantial debts and the complexities involved in acquiring distressed banks, Providus is aiming to broaden its retail presence, according to a banker who requested anonymity. In comparison, Unity Bank operates 240 branches, which is ten times the number of branches Providus has.
Providus stated that “the business combination will ensure that Providus Bank has footprints in major cities across Nigeria.”
While numerous commentators on social media have raised doubts about the deal, one finance analyst suggested that the Central Bank of Nigeria (CBN) may be reluctant to permit another bank failure after the revocation of Heritage Bank’s license in June 2024.
For Unity Bank, this represents yet another fortunate escape for an institution that has frequently appeared on the verge of collapse. It failed to meet a 2010 deadline for recapitalization after billions in losses, primarily due to bad loans, depleted shareholder capital.
Although the bank eventually raised capital in 2011 and recovered approximately ₦53 billion in bad loans, it soon found itself in the red once more. By 2018, Unity Bank had accumulated losses of ₦338 billion, and by 2023, its shareholder capital had once again been wiped out, leading to speculation about the potential revocation of its license.
Given its precarious cash position, this situation may resemble an acquisition; however, Providus will ultimately gain a partner with a retail presence and will likely commend itself for avoiding Unity Bank’s liabilities in the short term.
