Stakeholders have said that the merger between Providus Bank and Unity Bank would intensify competition in the banking sector and commended it for being a better deal for minority shareholders.
This assertion followed the ratification of the merger by the shareholders of the Unity Bank at the court-ordered meeting of the lender held in Abeokuta, Ogun State, on Friday.
Ahead of the meeting, the Nigerian Exchange Limited had lifted the suspension on the trading of Unity Bank’s shares, enabling the Asset Management Corporation of Nigeria to sell its 34 per cent holding in the lender to a current shareholder of Unity Bank.
Speaking on the development, the Head of Financial Institutions at Agusto & Co, Ayotunde Olubunmi, said, “The merger has been long coming. As we all know, Unity Bank has been in the market for over a decade, and for additional capital, so this is a way of finally resolving its negative capital issue. Secondly, for Providus Bank, it’s also a positive development. They are relatively new in the market; this will give them a bigger footprint, right? By the time they actually receive Unity Bank branches, they will have more branches. It will also give them exposure to different parts of the country, particularly in the North, where Unity Bank is more prominent. I doubt if Providus Bank has any branches in the North, given that they are a regional bank, and they only have a presence in the South.
“For the banking industry, it also intensifies competitiveness. Because of this merger, Providus Bank now has a bigger footprint. They can easily compete more with the big boys in the markets, and that will also help them. That will increase competition.”
On the recapitalisation, Olubunmi anticipates that the Central Bank of Nigeria may have a special arrangement to enable it to meet the new capital threshold of N200bn for a national bank.
The financial analyst said, “In terms of capitalisation, because automatically Providus Bank now becomes a national bank, maybe the CBN will give them some sort of waiver on when to meet the N200bn capitalisation. Also, some part of the facility that CBN will give them will qualify.”
When the merger between the lenders was announced in August 2024, the Central Bank of Nigeria okayed financial support totalling N700bn to the new entity to be repaid with an interest rate of six per cent. The CBN said the support, structured as a 20-year term loan, will begin repayment after a five-year moratorium without giving further indication of the source of funds.
A stockbroker and Vice Chairman of Highcap Securities, David Adonri, in a chat with The PUNCH, noted that the merger aligned with the motive for the recapitalisation mandate of the CBN, which was to create stronger banks.
“At the end of the day, there will be no weak bank within the banking system. Apparently, Unity Bank has been a laggard. The acquisition or merger with Providus Bank is like a lifeline to the bank. It is a welcome development for the shareholders of Unity Bank. Otherwise, if the bank had failed, we would have lost the investment just like everybody did in Skye Bank. For the depositors, if the bank had failed, the NDIC would just settle the depositors with meagre sums of money. So, it is a welcome development for all the stakeholders,” he said.
Adonri, however, wondered whether Providus Bank would return to the market as a replacement for Unity Bank.
“The next thing, however, is whether Providus Bank will come to the market to list its shares. So, it will be like a replacement for Unity Bank, which is very weak, and then a stronger bank is coming into the market. So, we are therefore waiting for the announcement from Providus Bank to know whether they are going to be listed or not,” he stated.
The 59th president of the Institute of Chartered Accountants of Nigeria, Innocent Okwuosa, echoed similar sentiments about the merger fulfilling the objective of the CBN’s recapitalisation directive.
Okwuosa, who is also the chairman of the Nigerian Integrated Reporting Committee, said, “The first implication in the banking industry is that of the ability of the merged bank to withstand the macroeconomic challenges and headwinds occasioned by external and domestic shocks, making it more resilient. I expect the solvency and capacity of the merged bank to improve, thereby contributing to the stability of the banking industry and its ability to contribute to the economy.
