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Unity Bank, new investor discussion reaches final stages – Sources

By The Citizen
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There are indications that talks between Unity Bank Plc and one of the three venture capital firms that were reported to be showing interest in acquiring a stake in the Bank have reached an advanced stage and a conclusion to the deal appears to be around the corner.

Although details of the deal are still being held in confidence, sources close to the prospective investor have confirmed to THE CITIZEN that the firm has recently completed their due diligence exercise on the bank but the Management of the Bank has also met with them following this to review the outcome of the due diligence and agree on positions.

'There are indications that the Bank may be finalizing plans to raise about N35 billion to develop the structure needed to drive its retail business through the Issuance of Rights. All of this is in the run up to the upcoming discussions on the price of the bank's shares to be offered by the investor, which is the last major phase in the deal and which could result in a dramatic soaring in the price of its shares,' a source said.

If these transactions sail through as expected, some financial analysts have opined that these initiatives will see a fresh injection of huge capital into the institution that is geared towards catapulting it into one of the major players in the Nigerian banking industry in the very near future.

'These are perceived as very significant for the banking industry as a whole and it has stakeholders excited as the likely entrance of a freshly re-invigorated Unity Bank, strengthened in finances, processes and service delivery has the potential of changing the entire playing field,' said a Lagos based analyst.

It could be recalled that the first inklings of this deal came to limelight in September after investigations revealed that two foreign and one domestic venture capitalist, keen on investing in high potential financial service operators in Nigeria, had been showing interest in the bank.

Investors say this will be another major positive expansion happening in the Nigeria banking industry in recent times and could be an indication that the financial sector is witnessing positive growth. Over the past few months for instance, First Bank Plc had completed its acquisition of the West African operations of the International Commercial Bank in which it acquired a 100% equity interest in ICB Ghana, Sierra Leone, Guinea and Gambia.

With the expected conclusion of the deal by December 2013, analysts say total shareholder funds of the 20 Deposit Money Banks will end another year on a strong note. The funds which had reached an all-time high of N2.37 trillion at the end of 2012, representing a 22% increase over 2011's end of year figures, will definitely receive a boost from this injection and further strengthen the banking sector.

Financial analysts posit that this and other positives in key indices contained in the recently released Annual Report of the Nigeria Deposit Insurance Corporation (NDIC) has further boosted investor confidence in the stability and profitability of the Nigerian financial sector.

The NDIC report had also indicated that the banking industry made a profit-before-tax of N525.34 billion against the N6.1 billion of 2011 while the Asset Quality of the industry improved significantly also in the period covered by the report. The improved process of loan underwriting also helped drop the rate of non-performing loans from N360 billion in 2011 to N286 billion in 2012.

A formal announcement is expected from Unity Bank in the next few weeks and this will give a clearer picture of the investor concerned.