Providus Bank has announced a strategic merger with Unity Bank, a move that has received preliminary approval from the Central Bank of Nigeria (CBN). This merger is set to create one of Nigeria’s leading financial institutions, with a combined balance sheet estimated at ₦3 trillion ($1.8 billion). The merger is expected to significantly enhance Providus Bank’s market presence, particularly in retail banking.
Providus Bank, known for its innovative banking-as-a-service offerings, is the healthier of the two entities involved in this merger. In an email sent to its customers, Providus Bank highlighted that the proposed business combination would expand its footprint across major cities in Nigeria, thanks to Unity Bank’s extensive branch network. Unity Bank currently operates 240 branches, which is ten times the number of branches Providus Bank currently has.
Unity Bank, on the other hand, has had a turbulent history since its formation in 2006 from the merger of nine smaller banks. The bank has struggled with bad loans and has posted significant losses over the years. By 2023, Unity Bank’s shareholder capital was completely eroded, leading to widespread speculation that the CBN might revoke its license. However, this merger seems to be a lifeline for Unity Bank, allowing it to avoid the fate that befell Heritage Bank, whose license was revoked by the CBN in June 2024.
To facilitate the merger, Unity Bank has sought a ₦700 billion loan from the Central Bank. This loan is essential for the merger to proceed, given Unity Bank’s precarious financial situation. Despite the significant debts and the risks associated with acquiring a distressed bank, Providus Bank sees this merger as an opportunity to expand its retail banking operations. The merger will provide Providus with a broader customer base and a strong retail footprint across Nigeria.
Social media reactions to the merger have been mixed, with many questioning the wisdom of merging with a financially troubled institution like Unity Bank. However, some financial analysts believe that the CBN may have played a key role in facilitating the merger to prevent another bank failure in the Nigerian banking sector.
In summary, this merger represents a significant shift in Nigeria’s banking landscape, with Providus Bank poised to become a major player in the industry. While the merger presents risks, it also offers Providus Bank an opportunity to expand its operations and solidify its position in the Nigerian market.