Unity Bank’s financial woes turn Providus merger into a high-stakes rescue (1)

UNITY Bank was teetering on the edge of collapse when it began merger discussions with Providus Bank. Insiders close to both institutions may shy away from publicly admitting it, but available data reviewed by Economy Post reveal that Unity Bank represents a significant gamble for Providus.

The merger remains unfinished because it is less a conventional deal and more a rescue operation. Financial records indicate that Unity Bank’s leadership was acutely aware of its precarious position and needed a lifeline. Providus Bank has effectively stepped in as the ‘financial firefighter’ for the struggling lender.

Technical insolvency

At the close of 2023 – the year before merger discussions commenced – Unity Bank was technically insolvent. Its total assets were N472.585 billion, while its liabilities were estimated at N799.458 billion. Put simply, the bank held roughly N472.585 billion in assets but owed nearly N800 billion to creditors.

Senior Accounts Head at Qatar-based Luxury Group, Mr. Naslin Akthar, explained that technical insolvency occurs when a company’s total liabilities exceed its total assets.

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“The organization may continue daily operations, but it is financially weak and unable to meet long-term obligations. In straightforward terms, debts outstrip assets—a clear warning of financial distress,” he noted.

This imbalance left Unity Bank with total equity of negative N326.87 billion. Rather than generating profits in 2023, the bank’s shareholders theoretically owed N326.87 billion to creditors, a glaring red flag for investors and analysts. The only realistic solution for 2024 was a capital injection from Providus to cover the bank’s obligations. If the bank had failed to curry Providus, it could have completely lost the confidence of investors.

Weak capital adequacy

Unity Bank’s directors were also fully aware of the bank’s deteriorating capital adequacy. The Capital Adequacy Ratio (CAR) or capital-to-risk weighted assets ratio (CRAR) measures a bank’s capital against its risk-weighted assets and is closely monitored by regulators to assess potential failure. It serves as a protective measure for depositors and helps maintain financial system stability, according to Investopedia.

“A minimum CAR ensures banks have a sufficient buffer to absorb losses before becoming insolvent and putting depositors’ funds at risk,” the Investopedia experts said.

For national banks in Nigeria, the Central Bank of Nigeria (CBN) mandates a minimum CAR of 10 percent. Unity Bank’s CAR was negative 76.14 percent in 2023 and negative 89.69 percent in 2022. A negative CAR confirms the bank is critically undercapitalised. For institutions in this situation, mergers or acquisitions become one of the few viable options, hence CBN’s push for Providus to step in. Without the merger, Unity Bank faced the possibility of being placed under administrative control.

Internal reports highlighted ongoing poor corporate governance, including loans whose costs outpaced earnings.

“The Bank made a loss after tax of N62.6 billion for the year ended 31 December 2023 (2022: Profit after tax N0.94 billion). As at that date, total liabilities exceeded total assets by N326.9 billion (2022: N274.9 billion) and the capital adequacy stood at -76.14% (2022: -89.69%). The Bank therefore did not meet the minimum capital requirement and CAR as stipulated by the Central Bank of Nigeria (CBN) for a bank with a national banking license, which is 10%. This gives rise to a material uncertainty on the ability of the Bank to continue as a going concern,” the 2023 annual report stated.

Insider loans

Another factor heightening the risk of the Providus-Unity merger is the extent of related-party or ‘insider’ loans. These loans are extended to directors, senior management, or their families.

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By the end of 2022, insider loans at Unity Bank totaled N17.323 billion, dropping to N7.064 billion in 2023.

The Cable reported that merger negotiations had stalled due to the size of these insider debts. A senior Unity Bank staffer said, “It is not less than N4.8 billion.” The report noted that while Unity’s directors sought to have the debts written off, Providus’s management opposed this for regulatory reasons, insisting the obligations be settled before the merger could proceed.

Available data, however, suggest that the N7.064 billion owed as of 2023 might not have been repaid during 2024 amid ongoing talks. Unity Bank has yet to release updated financial statements, leaving uncertainty over its current position.

Providus strong financial position

As of 2023, Providus Bank had a stronger financial position. It reported a profit of N43.55 billion, more than 4 times that N8.025 billion it posted the previous year. The bank’s assets stood at N1.57 trillion, while liabilities were reported at N1.475 trillion, leaving a total equity for its investors at N96.259 billion.

Providus Bank grew its total assets to N3.8 trillion as of March 31, 2025, primarily driven by the strategic expansion of risk assets, increased allocations to investible securities, and momentum gained from its digital platform, which supported customer acquisition and deposit inflows.

As of 31 December 2024, the balance sheet registered at N2.5 trillion, reflecting a 63.0 percent growth over the 2023 position.