GCR Revises Quest Merchant Bank Ratings Outlook to Stable
GCR Ratings has affirmed the national scale long-term and short-term issuer ratings of BBB(NG) and A3(NG), respectively, accorded to Quest Merchant Bank Limited – formerly FBNQuest Merchant Bank Limited – with the outlook revised to stable from Rating Watch Negative.
In its rating note, GCR said the revision of the outlook to stable is anchored in the successful acquisition of Quest Merchant Bank Limited by EverQuest LLP following FBN Holdings’ divestment in September 2025.
GCR said the ratings continue to reflect the bank’s sound risk profile, improved capitalisation and strong liquidity, which are balanced against its modest competitive position within the wider banking sector.
Quest MB is now wholly owned by EverQuest LLP, a consortium of institutions that was established to acquire the bank. As of 31 December 2025, the majority shareholder of EverQuest LLP was Custodian Investment Plc (Custodian), an investment holding company with interests in life insurance, general insurance, pension fund administration, and trusteeship.
“Quest MB’s franchise strength is underpinned by its solid track record as well as its good market position within the merchant banking segment, where it accounts for abiut 30% of the sub-sector’s total assets as of 31 December 2025”.
The rating note acknowledges that the merchant lender remains relatively small, with sub-1% market share compared with larger players in the broader Nigerian banking sector.
GCR revealed that the bank reported stable revenue growth over the review period, with net interest income and fees and commissions jointly accounting for 85.4% of earnings in 2025.
Its strong revenue generation and well-managed cost structure have translated into profitability, with a cost-to-income ratio averaging 47.8% over the past three years.
Custodian is one of Nigeria’s leading financial services groups, with a significant presence in the life and non-life insurance industries, where it accounted for 11.9% and 6.6% of premiums, respectively, as of 31 December 2024.
Analysts said they expect the bank’s relationship with Custodian to provide cross-selling opportunities and operational efficiencies that further support profitability.
The bank’s capitalisation has steadily improved over the years, with the GCR core capital ratio at 17.9% as of 31 December 2025, driven by strong internal capital generation and prudent risk-weighted asset growth.
Ratings note revealed that Quest Merchant Bank successfully raised capital totalling NGN42.9 billion in March 2026 to comply with the CBN’s new minimum capital requirement.
This equity injection, along with earnings retention, is expected to support the bank’s GCR Core Capital Ratio in the 20%-22.5% range over the outlook period.
GCR said Quest MB’s risk profile supports the ratings. The bank’s NPL ratio of 3.2% in financial 2025 compares favourably with the banking sector average of about 7%.
The bank currently has one non-performing loan for which it is pursuing collateral liquidation; however, this exposure has been fully provided for.
Ratings analysts said while this led to a spike in the credit loss ratio to 2.7%, the current level compares favourably to the banking sector average of about 4%.
The bank’s loan book is concentrated, with the single and 20 largest loans accounting for 10.4% and 96.8% of gross loans, respectively, as of 31 December 2025.
GCR said this level of concentration poses risks to asset quality; however, the bank’s internal ratings of these obligors are strong. GCR expects the Quest Merchant Bank’s risk profile to remain good over the next 12 to 18 months.
Quest MB is mainly funded by core deposits from corporates and HNIs, which typically make up the bulk of the funding base, the rating note said.
However, the proportion of core deposits of the funding base declined in 2025 to 56.7% (2024: 94.7%) due to increased reliance on deposits from financial institutions.
As a result, funding costs increased to 11.5% in 2025 from 10.9% in the prior year. Additionally, the bank’s deposit book is concentrated in line with merchant banking trends.
Liquidity remains strong, with liquid assets coverage of customer deposits and wholesale funding registering at 83.5% and 43.1x, respectively, in 2025 from 80.9% in 2024.
“While we expect some decline in liquidity given the planned growth in risk assets, the metrics are expected to remain sound over the outlook period.
“Our assessment of group support is currently neutral to the ratings due to the additional capital injection, which could change Custodian’s equity stake”, GCR said in the rating note.
The stable outlook reflects expectations that the bank’s credit profile will be sustained over the next 12 to 18 months, supported by its strong capital position, stable funding, and good liquidity metrics.
“We also expect the asset quality metrics to remain sound over the outlook period”, GCR said.
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