Nova Commercial Bank Limited’s balance sheet contracted over the past 18 months, as the regional lender navigated its ongoing transition from a merchant banking franchise amid macroeconomic headwinds in Nigeria.
Total assets fell 34.9% year-on-year to ₦243.8 billion ($169.7 million) at the end of 2025, before shrinking further to ₦227.2 billion by June 30, 2026. The contraction reflects a deliberate strategy by management to optimize the balance sheet and reduce reliance on high-cost wholesale funding, according to credit assessment figures.
Despite the asset optimization, Nova continues to hold less than 1% market share across total assets, customer loans, and deposits in the Nigerian banking sector, underscoring its constrained competitive scale relative to Tier-1 domestic peers.
Earnings Squeeze and Asset Quality Stress
Operating revenue dropped 9.4% to ₦16.3 billion in 2025, driven by modest transaction volumes and lower market-sensitive income. Pre-tax profit fell 80.7% to ₦2.2 billion from ₦11.4 billion in 2024, weighed down by higher retail expansion overheads and elevated loan loss provisions following significant credit downgrades.
Asset quality weakened substantially over the period:
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Non-Performing Loans: The bank’s NPL ratio climbed from 1.8% in December 2024 to 13.9% by December 2025, hitting 18.6% as of June 30, 2026.
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Credit Losses: The credit loss ratio jumped to 3.1% in 2025 from 0.1% a year prior, standing at 2.7% in mid-2026.
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Portfolio Concentration: While loan book concentration eased—the top 20 borrowers accounted for 54.3% of gross loans in 2025 compared to 87.8% in 2024—exposure to large obligors continues to drive elevated credit risk.
Management expects a gradual recovery in NPLs through collateral liquidation and workout strategies, though protracted court proceedings in Nigeria could delay recoveries.
Capital Injection and Funding Pivot
To meet revised regulatory capital thresholds for its commercial license category, Nova injected ₦24 billion in fresh equity during the first quarter of 2026.
Concurrently, the lender overhauled its deposit mix. Total customer deposits dropped 36.0% to ₦90.6 billion ($65.7 million) by June 30, 2026, as management shed expensive corporate term deposits.
The proportion of term deposits fell to 49.8% of total deposits in June 2026, down from 70.3% at year-end 2024, lowering the bank’s overall cost of funds to 12.0% (down from 14.0% in 2025). High-value depositor concentration also eased, with the top 20 depositors accounting for 53.8% of total deposits by mid-2026, down from 60.3% in 2025.
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