GCR Affirms Providus Bank BBB-/A3 Ratings, Outlook Evolving
GCR ratings have affirmed Providus Bank Limited’s national scale long and short-term issuer ratings of BBB-(NG) and A3(NG) respectively; outlook maintained as Evolving.
According to GCR, the ratings are underpinned by a stable funding and liquidity profile and moderate risk but remain pressured by weaker capital adequacy, as the growth in risk assets has significantly outpaced internal capital generation.
The Evolving outlook is maintained because the proposed merger of Providus Bank Limited and Unity Bank Plc has yet to materialise, and uncertainty remains regarding its timing and impact.
Providus Bank’s total asset base expanded by 57.3% to NGN4.0 trillion as of the financial year 2025, which ended 31 December 2025, and further to NGN4.1 trillion in the three-month period to March 2026.
However, the bank’s competitive position assessment remains constrained by a modest market share of approximately 2.1% of industry assets.
GCR said the proposed merger with Unity Bank Plc, announced in August 2024, may support Providus Bank’s efforts to tap into its relatively underpenetrated retail and SME segments by leveraging Unity Bank’s established branch network and customer base, particularly in Northern Nigeria, and a potential licence upgrade; however, the impact remains uncertain pending completion and integration.
Over the last two years, risk asset growth significantly outpaced core capital growth, putting increased pressure on capital adequacy. In 2025, the bank’s risk asset growth moderated to 34.6%, reflecting a shift in asset allocation toward less risky short-term instruments.
Still, the GCR Core Capital ratio (GCR CAR) declined to 11.5% in 2025 from 14.6% in 2024. Subsequently, the ratio increased to 15.5% as of March 2026, supported by an additional equity injection of NGN14.8 billion from the NGN26.3 billion rights issue.
Looking ahead, ratings analysts expect the GCR core capital ratio to improve, subject to regulatory approval for the recognition of the remaining right issue proceeds as equity.
“Therefore, we expect the GCR core capital ratio to remain around 15.0% over the next 12-18 months, if loan book growth is modest. A further decline in capitalisation metrics below current levels would place downward pressure on the ratings”.
The bank’s asset quality metrics have improved slightly, with the non-performing loan (NPL) ratio declining to 5.7% as of 31 March 2026 from 7.4%, although above the 5% regulatory benchmark.
The improvement is due mainly to recoveries; however, the 77.3% increase in Stage 2 loans is credit negative and suggests likely adverse migrations over the outlook period.
Furthermore, loan loss reserve coverage of Stage 3 loans is only 54.6% in March 2026, up from 27.0% in 2025, and this implies that sudden unexpected losses can impair future earnings due to low provisioning.
GCR said the bank’s funding and liquidity is slightly positive to the ratings, reflecting a stable funding base and a liquid balance sheet. Deposits accounted for 64.0% of the funding base as of 31 December 2025, from 71.8% in 2024.
The GCR stable and long-term funding ratios were 52.8% and 68.2%, respectively, in 2025 (2024: 61.6% and 77.7%, respectively). Liquidity is sound, with GCR liquid assets coverage of customer deposits and wholesale funding improving to 98.8% and 1.8x, respectively in 2025 (2024: 60.8% and 1.5x).
Sustainability assessment is neutral to the ratings; however, GCR analysts said they noted weaknesses in aspects of execution of internal controls and financial reporting processes per the auditor’s management letter for 2025, which may weigh negatively on the assessment if not remedied.
Otherwise, the board and management team are adequately constituted and aligned with minimum corporate governance standards.
The level of transparency and disclosure in the financial statements and other related documents is adequate. Providus bank received an unqualified audit opinion from PricewaterhouseCoopers for the 2025 financial year.
The Evolving Outlook reflects GCR’s expectations that, following the anticipated merger with Unity Bank, the bank’s ratings may be raised, lowered, or unchanged depending on GCR assessment of the impact of the business combination on the corporate and financial profile of Providus Bank. Oil Tops $119 as US Plans to Extend Iran Blockade