Recapitalisation: ProvidusBank in Pole Position to Acquire Unity Bank

James Emejo in Abuja

There are strong indications that ProvidusBank Limited is in talks to acquire a majority stake in Unity Bank Plc.

The move comes amid the new recapitalisation hurdles imposed on banks by the Central Bank of Nigeria (CBN).

THISDAY gathered that the development was part of ProvidusBank’s expansion plan, and importantly a bold initiative to further shore-up its capital base amid the current recapitalisation challenge.

Sources said the odds are in favour of the bank, adding that the deal appeared to have been officially approved recently.

However, it was not yet clear whether the deal would involve an outright purchase or merger of the two entities as Providus remains the only candidate in the bid. 

The apex bank recently announced new minimum capital requirements of N500 billion and N200 billion for commercial banks with international and national authorisation respectively. This included a new capital base of N50 billion for banks with regional licenses.

The fresh capital hurdles were disclosed in a statement issued by CBN acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali, adding that all fresh capital requirements are to be satisfied by March 31, 2026.

The central bank also pegged the new minimum capital for merchant banks at N50 Billion, while non-interest banks with national and regional authorisations are mandated to raise their capital thresholds to N20 billion and N10 billion, respectively.

The development came days after the CBN urged the financial institutions to expedite action on the recapitalisation to strengthen the financial system.

In November 2023, ProvidusBank Limited, a commercial bank founded in 2016, had taken bold steps to acquire Unity Bank as part of the former’s business expansion plan.

THISDAY gathered from a reliable industry source that the arrangement which Unity Bank that had been struggling to beef up its minimum capital requirement since 2017, has termed a business combination, was being monitored by the Central Bank of Nigeria (CBN).

“This has been in the works since June this year and they have been updating the CBN on it. Part of the deal is that Providus must have asked for the isolation of Unity Bank’s bad loans. Unity Bank which is big in agriculture financing has been struggling for years,” the source who pleaded to remain anonymous said.

Unity Bank commenced operations in January 2006, following the merger of nine banks with competences in investment, corporate and retail banking. It is one of Nigeria’s leading retail banks with 213 business offices spread across the 36 States and Federal Capital Territory.

In 2018, there was a botched move by Milost Global Inc., a New York-based private equity firm to invest $1billion in the bank and since then the bank has been seeking a preferred suitor.

It recently posted negative results in its recently released financials for the 9-month (9M) period ended September 30, 2023.

Precisely, the bank’s financial results released on the Nigerian Exchange Limited (NGX) had shown loss after tax of N47.917billion, down by 2,461 per cent from profit after tax (PAT) of N2.029billion in same nine months period of 2022.

It had also reported Foreign Exchange (FX) revaluation loss of N38.162 billion, an increase by 70,565 percent from N54.005 million FX revaluation loss it recorded in nine months to September 2022.

Its gross income in the nine month period was also N38.183 billion, which was a decrease by 10 per cent, from N42.292 billion gross income recorded in the comparable period of 2022.

Commenting on the results, the Managing Director/CEO of Unity Bank Plc, Mrs. Tomi Somefun, had said the bank was focusing on its efforts to recapitalise the institution, aggressively drive asset creation and innovate with products to compete favourably in new markets.

“The bank enjoys market confidence which will enable the institution to thrive better in the months ahead with increased business conversion, profitability and growth needed to achieve sustainable returns,” she had revealed.

On the other hand, ProvidusBank founded by Walter Akpani, was licenced by the CBN during the tenure of the immediate past Governor, Godwin Emefiele.

The financial institution has strong IT infrastructure and digital channels which it deploys to provide service to its customers.

ProvidusBank is an innovative financial institution that provides personal, private, corporate, commercial and digital banking products and solutions. Its tailored financial services delivery includes: business advisory, portfolio management, personalised relationship management, fast-tracked service delivery and self-service solutions.