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Nova Commercial Bank Limited, has opted to downgrade its license to a regional bank with plans to concentrate operations in Southern Nigeria and the FCT, after struggling to meet new capital requirements for national commercial banks, MoneyCentral has gathered.
Nova Bank transitioned to a national commercial bank in July 2024, having operated as a merchant bank for five years before then.
NOVA Commercial Bank’s former CEO Adebowale Oyedeji told MoneyCentral in July 2024 that shareholders were ready to step up and recapitalize the lender to meet higher capital requirements set by the Central Bank of Nigeria (CBN).
“We have very solid foreign investors who have committed to raising the money to meet the CBN’s capital requirements,” Oyedeji told MoneyCentral at the opening of NOVA’s first commercial banking branch at 18, Kofo Abayomi Street, Victoria Island.
The CBN has placed a N200 billion capital requirement for commercial banks with national authorisation, while the new requirement for banks with regional authorization is N50 billion.
NOVA had planned to raise additional equity capital of over N160 billion through a combination of rights issue, private placement, and an initial public offer (IPO) within the two-year timeframe (2024-2026) to meet the new capital requirements for the commercial banking license.
It has apparently abandoned those plans and is looking to a more conservative growth approach.
It also aimed at broadening the bank’s product offerings and reaching a wider customer base through the phygital business model supported by agency banking networks and partnerships with market leaders within the fintech space.
However it has struggled to gain market share from more established banks in the country as well as from popular fintechs such as OPAY.
With a balance sheet size of N373.5 billion (USD258.1 million) as of 31 December 2024, Nova Bank’s market share remains low at below 1% of the Nigerian banking industry assets and a major constraint on its competitive position.
Deposits from customers fell 2.5% in the Full Year 2024 period, compared to the previous period, with just two physical branches (VI and Ikeja) in Nigeria as at the First Quarter (Q1) of 2025.
The bank is also trying to shift from the expensive institutional term deposits to the low-cost current and savings accounts (CASA) deposits. NOVA Bank’s CASA deposits grew to N47.1 billion at the end of 2024, supported by a lower cost of funds of 14.0%, it however remains above the industry average.
Analysts at GCR say NOVA’s stable funding structure and adequate liquidity is partly offset by the bank’s modest competitive position, weak earnings quality, and sustained loan book concentration.
In the financial year ended 2024, operating revenues grew to N18.2 billion, with non-interest income accounting for 67.7% of operating revenues.
Nonetheless, earnings quality remains weak, given the bank’s sustained reliance on market-sensitive income, which accounted for 47.3% of operating revenues in 2024.
Obligor concentration remains high, with the top 20 obligors accounting for a considerable 87.8% of the loan book as of 31 December 2024.
NOVA shareholders’ equity hit N40.83 billion in Full Year 2024, however it was still way off the new Central Bank national regulatory capital requirements, but closer to the regional bank license capital requirements.
It has also been a turbulent time for leadership of NOVA which quietly named Chinwe Iloghalu as Acting MD/CEO after the exit of its former CEO Adebowale Oyedeji, who moved on to become the GMD of FBN Holdings after just 11 months on the job.
NOVA Bank had appointed Adebowale Oyedeji as its new Managing Director and Chief Executive Officer, effective January 2, 2024.
He was succeeding the former MD, Nath Ude, whose tenure concluded on November 6, 2023.
Ms. Iloghalu is the third CEO of the bank since November 2023, and has apparently failed with executing plans to recapitalize the lender to meet higher capital requirements set by the Central Bank of Nigeria (CBN).
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