Providus Bank stated that the Central Bank of Nigeria (CBN) has granted preliminary approval for the merger with Unity Bank, resulting in a post-merger business with a balance sheet of up to ₦3 trillion ($1.8 billion).
In comparison to the other companies, Providus is in a better financial position because of the reputation it has earned for its banking-as-a-service product.
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It was reported that Providus Bank emailed its customers to inform them that the proposed merger would produce one of Nigeria’s top financial institutions. According to the media source, Nine Banks combined to become Unity Firms in 2006 and has since incurred losses and bad debts.
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This merger requires Central Bank financing. It was revealed that a loan of ₦700 billion was demanded.
Providus Bank merges Unity Bank to boost expansion
According to an anonymous banker, despite its high debt and the difficulty of purchasing troubled banks, Providus Bank is set to expand its retail presence.
This ambitious expansion plan is particularly noteworthy given the stark contrast between Providus’ current branch network and Unity Bank, which boasts an impressive 240 branches, a staggering tenfold increase over Providus’ existing footprint.
As Providus navigates this bold growth strategy, it will be crucial to address its debt challenges and successfully integrate Unity Bank’s extensive branch network to create a more robust and competitive retail banking operation.
Providus claimed that the business combination would ensure that the bank had footprints in major cities around Nigeria.
While many social media commentators have questioned the deal, one finance analyst speculated that the CBN may have been unwilling to allow a second bank failure following the revocation of Heritage Bank’s licence in June 2024.
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Unity Bank’s stormy past precedes Providus Bank’s acquisition
Unity Bank’s exit represents another lucky escape for a company that has frequently appeared in danger. Its billion-dollar losses stemming from subprime loans reduced shareholder capital and missed the 2010 recapitalisation deadline.
Despite eventually raising capital in 2011 and recovering around ₦53 billion in bad loans, Unity Bank was soon in the red again. By 2018, it had accumulated losses of ₦338 billion, and by 2023, shareholder capital was again wiped out, prompting speculation that its licence would also be revoked.
Providus will ultimately acquire a partner with a retail presence and can feel good about not taking on Unity Bank’s short-term liabilities, even though Unity Bank’s unstable liquidity position will make this appear like an acquisition.