Inside Tatum Bank’s plan to build Nigeria’s next SME banking powerhouse

In an industry where scale often determines survival, Tatum Bank is pursuing a different path. Rather than competing head-on with Nigeria’s largest lenders for mass-market customers, the one-year-old regional bank is building what it repeatedly describes as a “defensible” banking model, one anchored on digital delivery, disciplined lending, strong governance, and deep relationships with SMEs, corporates, and sub-national institutions.

The strategy appears to be gaining traction. Having achieved profitability in its first year of operations and strengthened its capital base, the bank is now entering a new phase focused on expanding its loan book, deepening transaction flows within key business ecosystems, and proving that rapid growth can coexist with prudent risk management.

In this exclusive interview, Niyi Adeseun, managing director of Tatum Bank, discusses the market gap the bank identified, its plans for growth over the next three years, how it intends to compete with larger banks and fintechs, and why maintaining credit discipline remains central to its ambitions. BusinessDay’s Chinwe Michael brings excerpts.

Many new banks struggle to establish a clear identity. What market gap did Tatum Bank identify, and has the first year validated that thesis?

Our central thesis was that SMEs and mid-sized corporates wanted faster, more digital, and less relationship-dependent banking services.

The first year has largely validated that assumption.

We have established strategic relationships with several SME operators and sub-national entities, and those relationships have begun generating meaningful transaction flows.

The larger question now is scalability. Moving from a handful of anchor customers to over 500+ active SME relationships while maintaining service quality is a very different challenge.

Likewise, maintaining credit quality as the loan book expands 2-3x by year three will be a major test. Years two and three will therefore be focused on scaling responsibly while preserving operational excellence.

Is Tatum Bank’s long-term ambition purely domestic, or are you already considering regional and international expansion, particularly within Africa’s cross-border payments and trade finance ecosystem?

Our priority for the next two to three years is proving that the domestic model works at scale.

If we successfully grow assets to between N250 billion and N450 billion while maintaining strong asset quality, then an upgrade to a national banking licence and selective African partnerships may become realistic possibilities within four to five years.

For now, our ambition is focused squarely on building market share within Nigeria.

Tatum Bank has completed the N50 billion recapitalisation threshold within just a year of launching operations. What gave investors the confidence to back a new entrant in Nigeria’s highly competitive banking sector at this scale?

Investor confidence was built around four key pillars: governance, regulatory compliance, strategic focus, and leadership credibility.

From inception, we positioned Tatum Bank as a governance-led institution with strong compliance structures and a clear strategic focus on digital banking, SME financing, and corporate banking. Our board composition also played an important role in strengthening market confidence.

Having a Senior Advocate of Nigeria serving as chairman of the board signalled our commitment to corporate governance and institutional discipline. More importantly, achieving the regulatory capital threshold in less than a year after launching operations in May 2025 demonstrated execution capacity.

Investors wanted evidence that management could not only raise capital but also preserve and deploy it responsibly. Reaching the N50 billion threshold quickly provided that assurance.

It is important to note that most of those funds went to large banks seeking between N200 billion and N500 billion in additional capital.

As a newly established regional bank, we had to convince investors that we would not be squeezed out by larger competitors. We needed to demonstrate that our market niche was defensible, our strategy was differentiated, and our leadership team had the capability to execute.

The speed at which we achieved the capital raise suggests that investors bought into that proposition.

Capital adequacy is one thing, deploying capital effectively is another. How does Tatum Bank plan to utilise the N50 billion fresh capital?

The recapitalisation exercise was ultimately designed to strengthen banks’ ability to support productive sectors of the economy, including agriculture, manufacturing, infrastructure and SMEs.

Our deployment strategy aligns with that broader objective.

We are not pursuing a mass-retail banking model, nor are we planning aggressive nationwide branch expansion. Instead, we are building a digital-first institution focused on SME and corporate lending, supported by strong governance and risk management.

Capital deployment will therefore be concentrated in four major areas.

The first is lending growth, particularly to SMEs and corporate customers operating within sectors where we possess strong underwriting capabilities.

The second is investment in digital infrastructure to support customer acquisition, transaction processing, and service delivery.

The third is strengthening risk management, compliance systems, and operational resilience.

The fourth is measured regional expansion within our core operating markets in South-West, South-South, and North-West Nigeria.

We believe this approach allows us to grow efficiently without carrying the heavy cost burden associated with large-scale branch expansion.

The bank posted N1.7 billion in profit in its first year. What were the major drivers of profitability?

Profitability in the first year is encouraging, but it is important to understand where the earnings came from.

Like most new banks, our income profile was diversified across several sources. While we generated revenue from core lending activities, a significant portion of earnings came from treasury operations and the placement of excess capital.

This is fairly typical for a young bank whose loan book is still developing.

In the early stages, institutions often deploy excess liquidity into treasury instruments and placements while gradually building their lending portfolios. That provides income generation without exposing the bank to excessive credit risk before underwriting systems are fully established.

As our loan portfolio expands over the coming years, we expect the contribution from core banking activities to increase substantially.

Profitability is one thing, sustainability is another. What should stakeholders expect over the next two to three years?

The next phase of our journey is fundamentally about proving that the model is scalable and defensible.

If execution proceeds according to plan, we believe the bank can grow its balance sheet to between N250 billion and N450 billion by the end of year three.

Within that period, we expect the loan book to expand to between N70 billion and N120 billion while return on equity stabilises around 15 percent.

Our objective is to consistently maintain ROE above 12.5 percent without compromising risk standards.

From an asset growth perspective, we anticipate annual balance sheet growth of between 40 percent and 70 percent over years two and three.

Year one was largely focused on compliance, licensing requirements and proving the viability of the business model. With the recapitalisation now completed, the full N50 billion capital base is available for deployment.

Growth will be driven primarily through digital lending to SMEs and corporates, payment gateway partnerships, and relationships with sub-national governments and private-sector organisations.

Because our model is asset-light and technology-driven, growth is not constrained by extensive physical infrastructure investments.

What are your expectations for loan book expansion?

We expect loans to account for approximately 20 to 30 percent of total assets in year two, rising to between 45 and 55 percent by year three.

The key drivers will include invoice discounting, working capital financing for SMEs and corporates, and retail lending delivered through digital channels.

Over time, we expect a gradual shift away from treasury assets and interbank placements toward higher-yielding lending opportunities.

However, credit quality remains paramount.

We are committed to maintaining robust enterprise risk management practices and intend to keep non-performing loans below 5 percent even as the portfolio grows.

We have no intention of pursuing volume growth at the expense of asset quality. Every risk asset created must be supported by sound cash flows, strong repayment capacity and disciplined underwriting standards.

What should investors expect in terms of return on equity?

ROE will likely follow a natural progression.

The first-year return appeared relatively strong because capital was raised late in the financial year while profits were generated against a comparatively smaller average equity base.

Year two may see some pressure on returns as the full N50 billion sits on the balance sheet and is deployed gradually. During this period, average equity increases while revenue generation takes time to catch up. Additional investments in technology, people, and systems will also increase operating costs.

This dynamic is common among growing financial institutions.

By year three, however, we expect stronger loan growth and expanding fee income streams to support ROE recovery into the 12 to 18 percent range.

For a regional bank, that represents a healthy level of profitability. We do not believe excessively high returns should be pursued if they require taking disproportionate risks.

Financial inclusion remains a national priority. What role does Tatum Bank see itself playing?

At this stage, we are not pursuing traditional financial inclusion initiatives such as agency banking, rural branch expansion or USSD-based services.

As a regional digital-first bank, our current operating model does not support those investments at scale.

Instead, our inclusion strategy focuses on embedding financial services within existing economic ecosystems.

We intend to reach underserved customers through digital platforms connected to tourism, marketplaces, SME networks and government programmes rather than expecting customers to visit physical branches.

Success will ultimately be measured through metrics such as SME account growth, transaction volumes and customer acquisition through strategic partnerships.

Credit risk remains one of the defining challenges for Nigerian banks. How do you balance growth and prudence?

The answer lies in discipline. Our loan portfolio is currently relatively small, carefully collateralised, and concentrated within ecosystems where cash flows are visible and predictable.

Many banks encounter problems when growth targets begin to drive lending decisions.

We do not intend to allow investor expectations or profitability targets to push us into riskier lending before our underwriting and collections systems have fully matured.

Maintaining non-performing loans below 5 percent remains a core objective, even as the loan book expands significantly over the next three years.

While fintechs are reshaping customer expectations. As a relatively new entrant, what is Tatum Bank’s competitive edge, and how do you intend to win market share?

We believe our competitive advantage rests on four pillars.

The first is speed. Customers increasingly expect rapid onboarding and faster decision-making, and our digital architecture is designed to deliver that.

The second is partnerships. We intend to build ecosystems around anchor SME and corporate customers, bringing suppliers, vendors, employees and customers into those networks.

The third is credibility. Our capital strength and governance framework provide confidence for corporates and sub-national governments seeking banking partners.

The fourth is product focus. We are concentrating on payments, lending and treasury solutions that directly address SME cash-flow challenges.

If we meet again in 12 months, what would success look like?

Success would be reflected in a balance sheet exceeding N250 billion, non-performing loans below 5 percent, return on equity above 12 percent and more than 10,000 active business accounts.

Those metrics would demonstrate that the bank is growing without sacrificing discipline.

The biggest risks remain credit quality and concentration risk. History shows that many young banks stumble after strong early performances because they chase growth too aggressively.

Our challenge is to avoid those mistakes. If we can maintain underwriting discipline, diversify our customer base and continue scaling our digital platform, we believe Tatum Bank will establish itself as one of Nigeria’s most credible emerging financial institutions.