GCR Upgrades Quest Merchant Bank Ratings, Revises Outlook to Positive
GCR Ratings has upgraded Quest Merchant Bank Limited’s national scale long- and short-term issuer ratings to BBB+(NG) and A2(NG), respectively, from BBB(NG) and A3(NG), with the outlook revised to positive.
The ratings upgrade reflects Quest Merchant Bank’s strategic importance within Custodian Investment Plc, which became the bank’s majority shareholder following a recapitalisation exercise in April 2026 and now holds a 49.2% stake.
Consequently, Quest MB’s ratings are now anchored on Custodian’s credit profile, according to GCR. Ratings analysts said this reflects the bank’s significant contribution to the group, accounting for 57.2%, 35.0% and 27.0% of total assets, total income, and profit after tax, respectively, as of 30 June 2026.
However, given that Quest MB is not the dominant operating entity within the group, ratings analysts said they have applied a negative adjustment to Custodian’s Anchor Credit Evaluation in determining the bank’s ratings.
GCR said the acquisition of Quest MB in 2025 has enhanced the group’s competitive profile and diversified its financial services offering.
Ratings analysts highlighted that Custodian benefits from an established brand franchise in Nigeria, underpinned by over three decades of operating history in the insurance sector.
Its insurance subsidiaries remain leading players in their respective segments, with the life and non-life insurance businesses collectively accounting for an estimated 8.2% of the insurance industry’s gross written premiums in 2025.
The group has also established meaningful franchises in pensions and real estate, although these businesses maintain more modest market positions.
Quest MB also holds a strong position within Nigeria’s merchant banking segment, accounting for about 30% of the sub-sector’s total assets as of 31 December 2025.
However, its position remains modest within the broader Nigerian banking sector, with a market share below 1.0%, GCR said.
The rating note stated that over the outlook period, the group’s competitive profile is expected to remain stable, supported by the scale and earnings contribution of Quest MB, as well as its established insurance franchise.
However, effective integration and realisation of synergies across subsidiaries will be key to sustaining competitive positioning. The group’s capitalisation is considered strong, supported by the robust capital base of the insurance subsidiaries and Quest MB.
As of June 2026, the group’s leverage ratio registered at 18.6%, reflecting a conservative balance sheet structure.
As of 31 December 2025, Custodian Life Assurance Limited’s GCR capital adequacy ratio (CAR) was strong at 2.3x, up from 1.5x in 2024, while Custodian and Allied Insurance Limited’s GCR CAR was in the high range at 2.5x, up from 3.9x in 2024.
Quest MB’s capitalisation is also strong, with the GCR core capital ratio improving to 24.1% as of 30 June 2026 from 15.6% in 2024 and 12.8% in 2023, supported by solid internal capital generation and the recapitalisation exercise.
GCR said looking ahead, capitalisation is expected to remain supported by the strong capital buffers of the insurance subsidiaries and continued earnings accretion from Quest MB.
Ratings analysts, however, expected that capital injections into the asset management, pension, and trustee subsidiaries to meet new regulatory minimum capital thresholds ahead of the June 2027 deadline could moderate leverage metrics over the near- to medium-term if funded through additional debt issuance.
The group’s credit risk exposure emanates from Quest Merchant Bank and is assessed as positive to the ratings. As of 31 December 2025, the bank’s NPL ratio stood at 3.2%, which compares favourably with the banking sector average of about 8%.
The bank currently has one non-performing loan for which it is pursuing collateral realisation; however, this exposure has been fully provided for.
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 largest loan and the twenty largest loans accounting for 10.4% and 96.8% of gross loans, respectively, as of 31 December 2025.
This level of concentration poses risks to asset quality; however, the bank’s internal ratings of these obligors are strong. Overall, ratings analysts expect the bank’s risk profile to remain good over the next 12 to 18 months.
The group is primarily funded by core deposits from corporates and high-net-worth individuals (HNIs), which typically constitute the bulk of its funding base.
However, given the nature of the merchant banking license, the customer deposits largely comprise price-sensitive wholesale deposits from corporates and financial institutions.
As a result, the cost of funds registered within the high range at 11.5% in 2025.
Quest Merchant Bank’s liquidity is considered strong, with liquid assets coverage of customer deposits and wholesale funding registering at 157.3% and 93.5x, respectively, as of 30 June 2026, down from 184.0% and 85.9x in 2025.
“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”.
The positive outlook reflects expectations of an improvement in Custodian’s financial profile over the next 12 to 18 months, driven by higher earnings contributions from Quest Merchant Bank as operational integration deepens and group synergies are increasingly realised.
FG Appoints Quest Merchant Bank as Transaction Advisor for Project BRIDGE
