10 things to know about the Providus-Unity Bank merger

The Central Bank of Nigeria recently approved the merger of Unity Bank and Providus Bank but with the condition of N700 billion loan from the CBN to aid the new banking entity.

According to the circular by the CBN, the financial support would be necessary to “strengthen the stability of Nigeria’s financial system and avoid potential systemic risks”.

The coming together of Providus and Unity appears to be the most unlikely marriage. Still, multiple sources interviewed by BusinessDay provided inside details into the driving factors of the deal and how it is a “coincidence of desires.”

Read also: Providus Bank pays Unity price for national dreams

Here are ten things to know about the Unity Bank/Providus Bank merger.

1. This is the first Nigerian banking merger in five years.

This is the first merger in the Nigerian banking scene since the merger between Access Bank and Diamond Bank in 2019.

It also marks the second major banking consolidation move since the announcement of the recapitalisation exercise by the CBN, the first being the license revocation of Heritage Bank.

2. The new bank will have 243 branches

Unity Bank’s 220 branches plus Providus Bank’s 23 branches will give the new banking entity a branch network of 243 branches across Nigeria, ranking it among the top 10 largest Nigerian banks in terms of branch network.

The digital platforms of both banks are also expected to be synchronised. Unity Bank owns a mobile application, Unifi by Unity Bank and Providus Bank owns ProvidusPlus. It is expected that the merger will extend into both platforms.

3. CBN’s N700 billion loan

The CBN approved N700 billion in financial support for the merger in August.

The loan is a 20-year tenured loan with a floating interest rate, which will be the MPR minus 11%, with the minimum interest rate at 6%. There is a five-year moratorium on the loan. However, interest payments will be semi-annual, while the principal repayment will be over the remaining 15 years.

4. The loan will be used to pay off Unity Bank’s N303.7 billion obligations

It was noted that a significant sum of the support would be used to settle N303.7 billion of Unity Bank’s obligations, including its N92 billion liability owed to First Bank of Nigeria.

It will also be used to settle the bank’s N51.7 billion liability due to the CBN from the Anchor Borrower Scheme, and the N135 billion due to NIRSAL (Nigeria Incentive-Based Risk Sharing System for Agricultural Lending).

Read also: CBN approves financial accommodation for Unity, Providus Bank merger

5. The loan support will be tier-2 capital

The remaining N392.3 billion would be invested in a 20-year FGN bond and would qualify as tier-2 capital for the entity.

It would also shore up Unity Bank’s shareholders’ fund to N202.1 billion from N190.2 billion as of September 2023. With Providus Bank’s total shareholders’ fund of N45.25 billion, it will amount to N247.36 billion.

6. The merger will afford Providus Bank a Northern market reach

Unity Bank has one of the most extensive branch networks in Northern Nigeria, inherited from some of its legacy banks, particularly Bank of the North, Tropical Commercial Bank, Intercity Bank and New Africa Bank.

Despite its troubled legacy, Unity Bank held a unique position in Nigeria’s financial ecosystem, particularly in the northern regions. The bank was the lifeline for many communities, servicing states and local governments where access to financial services was limited.

7. This is the first bank merger under Yemi Cardoso

Unity-Providus Bank merger marks the first bank merger under the CBN leadership of Yemi Cardoso. It is also the first bank bailout under the current CBN governor confirming the CBN’s desire to maintain stability in the financial system.

The union of both banks is also important for financial inclusion, which is one of the key goals of the CBN in a country where 37 percent of rural Nigerians are financially excluded.

8. The new bank will have an asset size of about N2.43 trillion

With total assets of N1.5 trillion as of December 2023, Providus Bank has demonstrated robust growth and sound financial management. The bank has grown its assets by 189 percent in three years from N543 billion in 2021.

Combined with Unity Bank’s total assets of N423 billion, according to its unaudited accounts for the period ending September 2023, the new bank’s total assets will amount to about N2.43 trillion.

Read also: CBN N700bn bailout aids Unity, Providus Bank merger

9. Customers deposits will be N848.9 billion

Providus Bank’s customer deposits of N5o4.5 billion combined with Unity Bank’s N344.4 billion will amount to a total deposit of N848.9 billion in the new bank.

10. The new bank still requires N151.8 billion in recapitalisation funds

The paid-up share capital of the two banks will amount to N48.2 billion, requiring the bank to raise N151.8 billion to maintain the national banking license under the new capital requirements.