CBN Approves Providus and Unity Bank Merger
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The Central Bank of Nigeria (CBN) has given the green light for the merger between Providus Bank and Unity Bank, marking the first such approval following the CBN’s mandate for banks to increase their minimum capital base. The approval is pending final consent from the Securities and Exchange Commission (SEC).
This development follows the CBN’s recapitalisation directive, which requires commercial banks with international authorisation to boost their capital base to N500bn, national banks to N200bn, and regional banks to N50bn.
In a letter dated July 22, 2024, addressed to the Managing Director of Unity Bank Plc and signed by the Acting Director of the Banking Supervision Department, Adetona Adedeji, the CBN confirmed the merger’s approval. The letter, titled “Re: Request for Merger Approval and Financial Support,” responded to a June 19, 2024, request from Unity Bank seeking permission for the merger and financial assistance.
As part of the merger approval, the CBN has also sanctioned a N700bn financial support package for the new entity. This support will be provided as a 20-year term loan with a five-year moratorium and an interest rate of six per cent. The source of these funds was not disclosed.
The letter detailed the terms of the financial support: “A financial accommodation totalling N700bn to the new entity, structured as a 20-year term loan, will be priced at an interest rate of MPR minus 11 per cent, subject to a minimum of six per cent. Payments are to be made semi-annually, with a principal moratorium of five years. Beginning in the sixth year, the new entity will commence repayment in 15 equal instalments until maturity.”
Unity Bank’s existing obligations totalling N303.7bn will be deducted from this financial package. The remaining N396.3bn will be invested in a 20-year Federal Government bond, which will qualify as a Tier 2 capital instrument and a component of the shareholders’ fund.
The letter also noted that Unity Bank’s current Cash Reserve Ratio shortfall of N117.9bn would be waived, with Providus Bank’s CRR balance serving as the opening balance for the new entity.
Confirming the letter, the CBN’s acting Director of Corporate Communications, Hakama Sidi, stated that the apex bank’s approval was aimed at bolstering the stability of Nigeria’s financial system and averting potential systemic risks. He emphasised that this move was necessary to prevent situations similar to the recent liquidation of Heritage Bank.
Sidi’s statement read: “The Central Bank of Nigeria has granted approval for a pivotal financial accommodation to support the proposed merger between Unity Bank Plc and Providus Bank Limited. This strategic move is designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks.”
Both Providus and Unity Bank, in a joint statement, expressed their satisfaction with the CBN’s approval, describing the merger as a significant milestone in their evolution. They highlighted the strategic and complementary nature of their union, which aims to leverage their combined strengths to create a leading financial institution in the industry.
“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,” the statement read.
“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.”
The joint statement further noted that the merger was driven by a shared vision to provide an unparalleled banking experience to customers, combining Unity Bank’s extensive branch network and deep-rooted customer relationships with Providus’s digital prowess and innovative spirit.
“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 they embark on this new journey, both banks reiterated their commitment to maintaining the highest standards of corporate governance, financial stability, and customer satisfaction.
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