GCR Affirms Providus Bank BBB-(NG)/A3(NG) Ratings
Africa-focused ratings agency GCR has affirmed Providus Bank Limited’s national scale long and short-term issuer ratings of BBB-(NG) and A3 (NG) respectively. According to the rating note, the outlook on the rating is revised to Evolving from Rating Watch Evolving.
The ratings affirmation reflects Providus Bank Limited’s (Providus Bank or the bank) improved but limited competitive position, stable funding and adequate liquidity, and modest risk position against deteriorating capitalisation metrics. The evolving outlook is hinged on uncertainties around the proposed merger of Providus Bank and Unity Bank Plc.
The regional commercial bank, Providus Bank Limited, has grown steadily since its inception, according to the rating note. As of 31 December 2024, the balance sheet registered at N2.5 trillion or USD1.6 billion and reflected a 63.0% growth over the 2023 position.
Further growth was recorded to N3.8 trillion or USD2.4 billion as of 31 March 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.
GCR said nonetheless, the bank’s market share remains low, accounting for less than 2% of total industry assets, loans, and customer deposits.
Operating revenue registered a three-year CAGR of 80.7% to N129.9 billion in 2024 or USD84.8 million, with the net interest income and non-interest income accounting for 42.5% and 57.6% of the revenue base (31 December 2023: 42.1% and 57.9%), respectively.
In August 2024, the Central Bank of Nigeria (CBN) announced a proposed merger with Unity Bank Plc, a relatively smaller Nigerian-based commercial bank with a national license. Given that the process is ongoing, GCR will continue to assess the possible impact on the bank’s credit profile in the coming months.
GCR rating analysts assessed Providus Bank’s capitalisation at an intermediate level, reflecting significant moderation in the lender’s capitalisation metrics.
The ratings firm’s core capital ratio declined to 15.7% as of 31 December 2024 from 23.7% in 2023, primarily due to a sharp 121.3% increase in risk-weighted assets to N833.8 billion or USD544.3 million, outpacing the 47.4% growth in internally generated capital.
In January 2025, the bank injected N9.4 billion in capital via private placement, resulting in an improvement in the GCR core capital ratio to 16.0% as of 31 March 2025, remaining within the lower band of GCR’s intermediate assessment.
“Looking ahead, we expect capitalisation metrics to register between 15.0% and 17.5% as the bank slows down on risk asset growth”.
Despite the 63.2% expansion in the loan book, provisioning remained low; as a result, the loan loss reserve coverage of gross non-performing loans (NPLs) declined to 38.0% in 2024 from 109.0% in 2023.
“Whilst we noted an improvement to 60.3% in March 2025, a downward trend in the level of provisioning could place pressure on capital, given the weak operating environment”, GCR said.
Analysts said in the rating note that Providus Bank’s asset quality was pressured during the year under review. As of 31 December 2024, the gross NPL ratio increased materially to 8.3% from 2.3% in 2023, due to a sharp 502.4% increase in Stage 3 loans to N68.8 billion.
GCR stated that the bank’s management has attributed this movement to macroeconomic challenges that some of the obligors have faced during the period.
Ratings analysts said the bank has embarked on various strategies to reduce NPLs below the regulatory limit, including cautious loan book growth, deliberate recovery efforts, loan restructuring, and write-offs.
As a result, the NPL ratio improved slightly to 6.5% as of March 2025, although it still registered above the regulatory limit of 5%. Notably, the credit losses ratio improved to 1.7% in March 2025 from 2.8% in December 2024, well below the industry average of 3.5%.
The ratings agency highlighted that Providus Bank has maintained a relatively diversified loan book by sector, with no single sector accounting for more than 20% of gross loans and advances as of 31 December 2024.
Additionally, counterparty concentration of the top 20 obligors to gross loans registered at 38.7% in March 2025, an increase from 35.3% in December 2024 from 37.3% in 2023, comparing well with peers.
GCR analysts expect the asset quality to gradually improve as the bank continues to adopt a cautious approach to risk asset growth looking ahead.
“Our assessment of funding and liquidity is a positive rating factor. Providus Bank’s funding structure is broadly comparable to its peers, with customer deposits (majorly CASA) contributing the bulk of the funding base at 79.1% as of 31 December 2024, an improvement from 55.2% recorded in the prior year”.
The ratings note explained that the 39.9% growth in customer deposits to N1.5 trillion or USD979.2 billion in 2024 reflects the bank’s effective deposit mobilization strategy, driven by well-established partnerships with fintechs and the continued onboarding of retail customers.
However, given the high-interest rate environment, interest expense as a percentage of the average funding base increased to 7.9% as of 31 December 2024, and further to 9.5% in March 2025 from 5.9% in 31 December 2023.
“This position is expected to gradually moderate over time as the bank continues to onboard more retail clients in line with its growth strategy.
“The concentration of the top 20 depositors remains moderate at 22.2% of total deposits as of 31 December 2024 from 24.6% in 2023, with no single sector contributing more than 5% to the overall deposit base”.
The bank is sufficiently liquid; according to GCR Ratings, noting that liquid assets coverage of customer deposits and wholesale funding registered at 60.8% and 1.5x, respectively, as of 31 December 2024.
Going forward, the ratings agency expects Providus Bank’s funding and liquidity metrics to remain at acceptable levels over the rating horizon
GCR said the evolving outlook reflects expectations that the ratings may be downgraded, improved, or unchanged depending on its analysts’ assessment of the anticipated merger of Unity Bank Plc when concluded. Naira Appreciates as CBN Sells Additional Dollars in FX Market
