* It’s Business Combination, Bank Source Insists
Providus Bank Limited, about seven years old financial institution, is negotiating with the 35 years old Unity Bank management to acquire a majority stake.
The proposed acquisition according to metrobusinessnews.com (MBN) has already received approval in principle from the Central Bank of Nigeria’s Committee of Governors during Godwin Emefiele’s time in office.
The report stated that the leadership of both banks has almost concluded the deal and with the approval by the regulatory authorities, announcement will soon be made to the public.
But a source familiar with the development Insists that, it is a business combination as opposed to an acquisition.
Confirming the development and pleading for restraints as according to him, ‘negotiations are still going on’ , he said, “Discussions are ongoing, but it’s not an acquisition but business combination and still in the works.”
Pressed further on the workability of the said business combination as both banks have different value propositions and historical antecedents, the source could not give further elaboration.
But the development, coming after the 2018 failed move by Milost Global Inc., a New York-based private equity, to invest $ 1 billion in the bank, and similar one where one of Nigeria’s oldest financial institutions, Union bank, recently announced its delisting from the Nigerian Exchange (NGX) on account of acquisition by yet a younger bank, may have set tongues wagging on the seemingly paradigm shift and ‘swapping of positions in the industry.
Union Bank has announced it is delisting from the Nigerian Exchange (NGX) following acquisition by its core shareholders, Titan Trust Bank Limited all the shares in the company in May.
However, MBN gathered that the recent changes in the CBN may have slowed down the acquisition deal between Providus and Unity banks of advancing the deal closer to a conclusion.
The report stated that the leadership of both banks is engaged in intense talk and will soon make the announcement to the public.
The recent moves may have turned the fortunes of shareholders around for good as, for instance, the closing share price moved from N1. 28 as at November 20, 2023 to N1. 40 on November 21, 2023, making gain of 12kobo.
However, going by some financial Indicators, the bank may be grappling with liquidity challenges.
Specifically, the Bank has been grappling with meeting its minimum capital requirement since 2017, as reported by ThisDay.
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For instance, the financial report by the bank for the 9-month 2023 showed a decline by 2,461% In its profit. This translates into a N48 billion loss compared to the N2 billion profit in the corresponding period of 2022.
Similarly, the bank reported a decline in revenue by 10% for the period from N42 billion to N38 billion. Its net operating income dropped by 204% from positive N22.6 billion to negative N23.5 billion.
Total assets were N423 billion while total liabilities of the bank were N613 billion as of 30th September 2023. This further strengthens the position of deficiency in its balance sheet.
Similarly, its Earnings per share (EPS), which measures the profitability of a company on a per-share basis, recorded a negative 546.56 Kobo.
Some analysts who spoke with MBN say these recent ‘unusual happenings’ may be precursors to major reforms being contemplated by Bola Ahmed presidency through the Jim Obazee investigative committee.
