Providus Bank’s assets swell to N3.8trn amid merger talks, NPL concerns

Onome Amuge

Nigerian regional commercial lender, Providus Bank, has seen its total assets rise to N3.8 trillion as of March 31, 2025, a substantial increase from N2.5 trillion recorded at the end of 2024. 

The growth, representing a 63.0 per cent expansion over the 2023 position, was primarily driven by an expansion of risk assets, increased allocations to investment securities, and momentum from its digital platform, which has supported customer acquisition and deposit inflows.

The bank’s rapid growth in 2024 coincided with a notable development in August 2024, when the Central Bank of Nigeria (CBN) proposed a merger between Providus Bank and Unity Bank Plc, a smaller Nigerian commercial bank with a national license. In January 2025, Providus Bank also injected N9.4 billion in new capital through a private placement.

Operating revenue has demonstrated strong growth, registering a three-year compound annual growth rate (CAGR) of 80.7 per cent to reach N129.9 billion in 2024. The revenue mix remained relatively stable, with net interest income and non-interest income accounting for 42.5 per cent and 57.6 per cent respectively in 2024 (compared to 42.1 per cent and 57.9 per cent in 2023).

Asset quality under scrutiny

Despite a 63.2 per cent expansion in its loan book, Providus Bank’s asset quality came under pressure during the period under review. The gross non-performing loan (NPL) ratio increased to 8.3 per cent as of December 31, 2024, up from 2.3 per cent in December 2023. This appreciation was attributed to a 502.4 per cent increase in Stage 3 loans, reaching N68.8 billion. Management cited macroeconomic challenges faced by some borrowers as the primary reason for this deterioration.

In response, the bank has implemented various strategies to reduce NPLs below the regulatory limit of 5 per cent, including cautious loan book growth, deliberate recovery efforts, loan restructuring, and write-offs. As a result, the NPL ratio improved slightly to 6.5 per cent as of March 2025, although it still remains above the regulatory threshold.

Despite the increase in NPLs in 2024, provisioning remained relatively low, leading to a decline in the loan loss reserve coverage of gross NPLs to 38.0 per cent at the end of 2024 (down from 109.0 per cent in December 2023). However, this coverage improved to 60.3 per cent by March 2025.

Providus Bank maintains a relatively diversified loan book by sector, with no single sector accounting for more than 20 per cent of gross loans as of December 31, 2024. Counterparty concentration of the top 20 obligors to gross loans stood at 38.7 per cent in March 2025, an increase from 35.3 per cent in December 2024 (2023: 37.3 per cent), which compares favourably with its peers.

Funding structure and interest expenses

Providus Bank’s funding structure is broadly in line with its peers, with customer deposits, predominantly low-cost current and savings accounts (CASA), contributing the bulk of the funding base at 79.1 per cent as of December 31, 2024, an improvement from 55.2 per cent in the prior year. The 39.9 per cent growth in customer deposits to N1.5 trillion ($979.2 billion) in 2024 reflects the bank’s effective deposit mobilisation strategy, driven by partnerships with fintech companies and the continued onboarding of retail customers.

However, the high-interest rate environment has led to an increase in interest expense as a percentage of the average funding base, rising to 7.9 per cent as of December 31, 2024, and further to 9.5 per cent in March 2025 (compared to 5.9 per cent in December 2023). The bank anticipates that this position will gradually moderate as it continues to onboard more retail clients in line with its growth strategy. The concentration of the top 20 depositors remains moderate at 22.2 per cent of total deposits as of December 31, 2024 (2023: 24.6 per cent), with no single sector contributing more than 5 per cent to the overall deposit base.

According to analysts, the asset growth and ongoing merger discussions position Providus Bank as a notable player in the Nigerian regional banking landscape. However, the material increase in NPLs will likely remain a key area of focus for investors and regulators. The bank’s efforts to improve asset quality and integrate with Unity Bank will be closely watched in the coming periods.