- The Central Bank of Nigeria has given approval for financial support towards the merger of Unity and Providus Banks
- The banks said the merger marks a significant milestone for both institutions
- With the poor form of Unity Bank’s financials and the recent recapitalisation policy of the CBN, the merger gives the lender a new lease
The approval, which is the banks’ strategy of achieving the recapitalisation requirement set by the Central Bank of Nigeria (CBN), is designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks, the CBN said.
In a statement on Tuesday, August 6, Mrs Hakama Sidi Ali, acting Director, Corporate Communications at CBN, noted that the arrangement is crucial for the financial health and operational stability of the post-merger organisation.
It added that the merger is contingent upon financial support from the CBN, adding that the fund will be instrumental in addressing Unity Bank’s total obligations to the CBN and other stakeholders.
The CBN said the approval is in accordance with the provisions of Section 42(2) of the CBN Act, 2007.
It said, “It is important to emphasise that no Nigerian bank currently faces a precarious situation comparable to that of Heritage Bank, which was recently liquidated.
“The CBN remains committed to safeguarding depositors’ interests and ensuring the smooth functioning of the banking sector through proactive measures and strategic interventions.
“The CBN’s decision underscores its dedication to maintaining financial stability and promoting confidence in the banking system during this transformative period.”
Merger marks significant milestone – Unity, Providus Banks
The management of Unity and Providus Banks, in a statement announcing the merger, said it marked a significant milestone in the evolution of the financial institutions.
They said the merger represents a strategic and complementary union that will leverage the strengths of both banks to create a leading financial institution in the industry with footprints in retail, corporate, commercial and digital banking.
The statement read, “Unity Bank Plc, with its rich legacy of over 18 years, has established a robust retail banking network, comprising more than 220 branches nationwide. With a strategic niche in the agricultural business, our commitment to delivering exceptional customer service and a comprehensive range of financial products has earned us the trust and loyalty of millions of customers.
“Providus Bank Limited, on the other hand, is renowned for its innovative approach to banking, boasting a strong digital footprint, innovative products, high quality service culture and strong focus on helping customers grow.
“As a fast-growing new-generation bank, ProvidusBank has consistently pushed the boundaries of technology to deliver cutting-edge financial solutions that cater to the evolving needs of modern consumers,” the statement noted.
The statement noted that the combination of the peculiarities of both banks is driven by a shared vision to provide an unparalleled banking experience to customers.
It said, “By combining Unity Bank’s extensive branch network and deep-rooted customer relationships with Providus’s digital prowess and innovative spirit, we aim to deliver a seamless blend of traditional and modern banking services.
“Our customers will benefit from an expanded suite of products and services, greater convenience and improved access to banking solutions across various channels. The integration of our digital platforms will offer enhanced security, faster transactions and a more personalised banking experience.
“As we embark on this journey together, we remain committed to maintaining the highest standards of corporate governance, financial stability and customer satisfaction. Our united team of dedicated professionals will work tirelessly to ensure a smooth transition and continued tradition of excellence in all our operations.
“We are confident that the combined strength of both entities will create a formidable force in the banking sector, driving innovation, growth and prosperity for our customers, employees and stakeholders.”
Unity Bank has battled dire financial straits
Unity Bank has been enmeshed in dire financial challenges in the last few years, leading to the lender recording losses to the tune of N38.8 billion in the first half of 2023.
The bank’s Chief Executive Officer, Tomi Somefun, attributed the losses and the bank’s overall financial performance to a challenging operating environment which affected the bank’s growth.
After independent auditors, KPMG, queried the bank’s full-year report for the year ended December 31, 2022, noting that the lender is a “growing concern,” the bank’s financial health have become worrisome.
In 2022, Unity Bank’s total liabilities exceeded its total assets by N274.9 billion, according to its 2022 financial statement. Although the lender later recorded a N1.04 billion profit in the first quarter of 2023, its total liabilities still exceeded total assets in the same quarter. The bank is yet to release its 2023 full-year reports.
Merger in line with CBN recapitalisation policy
Recall that the apex bank had on March 28, announced new guidelines for a 24-months recapitalisation exercise by banks in the country, keeping them on their toes as they scamper for funds.
The merger of Unity and Providus Banks is in line with the policy, as the CBN gave banks the options of injecting fresh equity capital through private placements, right issues and/or offers for subscription, mergers and acquisitions, and/or upgrading or downgrading licence authorisation to meet the minimum capital requirements.
The recapitalisation policy requires commercial banks with international authorisation to raise their capital base to a minimum of N500 billion from N50 billion previously; those with national authorisation will raise theirs to N200 billion from N25 billion, while those with regional authorisation are required to reach N50 billion threshold from N10 billion.
Merchant banks with national authorisation will have to increase their capital base to N50 billion from N15 billion previously, non-interest banks with national authorisation are expected to increase theirs to N20 billion from N10 billion, while non-interest banks with regional authorisation will raise their capital base to N10 billion from N5 billion.
Heritage Bank can no longer operate in Nigeria as CBN revokes its licence
Meanwhile, TheRadar reported that the Central Bank of Nigeria (CBN) revoked the operating licence of Heritage Bank Plc, one of the country’s commercial banks.
The CBN said it was acting in line with its mandate to support a stable financial system in Nigeria and the exercise of its authority under Section 12(11) of the Banks and Other Financial Institutions Act (BOFIA) 2020.
