GCR Affirms Nova Bank Ratings, Revises Outlook to Stable
GCR Ratings (GCR) has affirmed Nova Commercial Bank Limited’s national scale long- and short-term issuer ratings of BBB(NG) and A3(NG), respectively, with the outlook revised to stable from evolving.
According to GCR, Nova Bank’s ratings balance its improved capitalisation metrics and adequate liquidity against an elevated credit risk profile, weak earnings quality, and modest competitive position within the Nigerian banking sector.
Nova Bank, a regional commercial bank, has operated under its current licence for two years following its transition from a merchant bank in July 2024.
The bank’s total assets declined by 34.9% to N243.8 billion as of 31 December 2025 and further to N227.2 billion as of 30 June 2026, primarily due to a contraction in its funding base arising from deliberate balance sheet optimisation, GCR said.
Consequently, Nova Bank’s market share, measured by total assets, customer loans, and customer deposits, remained below 1% of the Nigerian banking sector, reflecting its modest franchise and limited operating scale, which continue to constrain its competitive position.
Ratings analysts said the bank’s earnings generation capacity remained constrained by the limited operating scale and lower market-sensitive income in 2025.
Consequently, operating revenue declined by 9.4% to N16.3 billion in 2025, while pre-tax profit moderated to N2.2 billion from N11.4 billion in 2024.
GCR said the moderate earnings performance also reflected increased business expansion costs and higher impairment charges following the significant credit migrations over the last 18 months.
“Looking ahead, ongoing branch expansion, retail penetration drive, and continued investment in digital capabilities are expected to strengthen the bank’s franchise and diversify earnings.
“Nonetheless, the bank is likely to remain relatively small when compared with domestic peers over the outlook horizon, given the outlined cautious growth strategy”, GCR said in the rating note.
Ratings analysts said Nove Bank’s capitalisation remains a key ratings strength, reinforced by the injection of additional capital of N24 billion in Q1 2026 to comply with the new capital requirement for its license category.
Consequently, the GCR core capital ratio strengthened to 39.6% as of 30 June 2026, up from 16.9% in 2025. Over the next 12-18 months, ratings analysts expect the GCR core capital ratio to range between 25% and 30%, balancing the conservative loan book growth with improved internal capital generation.
Nova Bank’s risk profile deteriorated significantly over the last 18 months, with the non-performing loans (NPL) ratio increasing sharply to 13.9% as of 31 December 2025 from 1.8% in the equivalent period in 2024 and further to 18.6% in June 2026.
GCR said this was largely attributed to credit migrations within a concentrated loan book amid prevailing macroeconomic headwinds. Similarly, the credit loss ratio increased to 3.1% in 2025 from 0.1% in 2024 and registered at 2.7% as of 30 June 2026.
The loan book remains concentrated, with the top twenty loans accounting for 54.3% of gross loans as of 31 December 2025 versus 87.8% in the equivalent period in 2024.
GCR said the bank’s management expects a gradual moderation in the NPL ratio through intensified remedial action, including recoveries and collateral realisation on some litigated exposures.
However, the ratings agency highlighted that the cumbersome Nigerian judicial process and the challenging operating environment may prolong loan recovery, potentially sustaining asset quality metrics at weak levels over the outlook horizon.
“We have assessed funding and liquidity as a slight positive rating factor, underpinned by adequate liquidity buffers”.
Customer deposits declined by 36.0% to N90.6 billion as of 30 June 2026, largely due to the management’s deliberate strategy to reduce reliance on expensive term deposits and drive improved mobilisation of the low-cost CASA deposits.
Consequently, the proportion of term deposits moderated to 49.8% of customer deposits as of 30 June 2026 from 55.5% as at 31 December 2025 and 70.3% in 2024, resulting in a reduction in the cost of funds to 12.0% from 14.0% in 2025.
GCR said the bank’s concentration risk moderated, with the top twenty depositors accounting for 53.8% of total customer deposits as of 30 June 2026 from 60.3% in 2025.
Ratings analysts anticipate that continued investment in digital capabilities and the rollout of retail-focused products are expected to support the mobilisation of lower-cost retail deposits, further strengthening the funding profile and moderating funding costs over the rating horizon.
“We also assessed the bank’s liquidity position to be adequate, with the GCR liquid assets coverage of wholesale funding and customer deposits solid at 10.0x and 101.9% respectively as of 30 June 2026”, GCR said.
The stable outlook accorded to Nova Bank reflects the expectation that it will maintain the GCR core capital ratio between 25% and 30% over the next 12 to 18 months.
“The asset quality metrics could improve over the outlook horizon but remain vulnerable to the challenges in the operating environment.
“In addition, ongoing branch expansion, deeper penetration of the retail segment and continued investment in digital capabilities are expected to gradually strengthen the bank’s franchise. Furthermore, the bank is expected to maintain a stable funding profile and adequate liquidity”, GCR said. #GCR Affirms Nova Bank Ratings, Revises Outlook to Stable# NOVA Bank Refines Strategy for Organic Growth, Reaffirms Commitment to Branch Expansion
