Providus Bank said a merger with Unity Bank, which has received preliminary approval from the Central Bank, will give the post-merger entity a balance sheet of up to ₦3 Trillion ($1.8 billion). Providus, which has built a reputation for its banking-as-a-service offering, is the healthier of the two entities.
“The proposed business combination of both institutions will create one of Nigeria’s leading financial institutions,” Providus Bank told customers in an email seen by TechCabal.
Unity Bank, the product of a 2006 merger between nine banks, has struggled since 2007, racking up losses and bad loans. It will need a loan from the Central Bank to make this merger happen. A letter seen by TechCabal showed it asked for a ₦700 billion loan.
Despite its massive debts and a history of distressed banks being complex businesses to buy, Providus is looking to expand its retail footprint, said one banker who asked not to be named. Unity Bank has 240 branches, ten times the number of Providus branches.
“The business combination will ensure that Providus Bank has footprints in major cities around Nigeria,” Providus claimed.
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.
For Unity Bank, it marks another fortunate escape for an institution that has often seemed on the brink. It missed a 2010 deadline for recapitalisation after billions in losses driven by bad loans eroded shareholder capital.
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.
Its precarious cash position will make this seem like an acquisition, but in the end, Providus will get a partner with a retail footprint and will congratulate itself for not taking on Unity Bank’s liabilities in the short term.
