Quest Merchant Bank has emerged from an ownership transition and recapitalization with a stronger credit profile, winning an upgrade from GCR Ratings even as the lender remains heavily reliant on a small number of borrowers and price-sensitive deposits.
GCR raised its national-scale issuer ratings to BBB+(NG)/A2(NG) from BBB(NG)/A3(NG) and revised the outlook to positive, according to its Sept. 30 announcement.
Quest held about 30% of Nigerian merchant banks’ total assets at the end of 2025.
Its share of the broader banking industry was below 1%, making it a significant player in a narrow segment rather than one of Nigeria’s largest lenders overall.
Strong Assets, Concentrated Loans
Quest’s non-performing loan ratio was 3.2% at the end of 2025, compared with a banking-sector average of about 8% in the supplied figures.
One non-performing exposure had been fully provided for, although it contributed to a 2.7% credit-loss ratio. Those measures point to comparatively sound reported asset quality, but they do not eliminate the risk inherent in the structure of the loan book.
The 20 largest loans accounted for 96.8% of gross lending, while the largest single loan represented 10.4%. That concentration means the performance of a relatively small group of borrowers can have an outsized effect on future impairments.
Strong internal borrower ratings offer some comfort, but investors and creditors will need to see how the portfolio performs through changing economic conditions.
Liquidity Offsets Funding Costs
Quest is funded principally by corporate and high-net-worth deposits. Its cost of funds reached 11.5% in 2025, according to GCR data.
Liquidity provides the counterweight. Liquid assets covered 157.3% of customer deposits at June 30, 2026. That was lower than 184% at the end of 2025, but still represented substantial reported coverage. Liquid-assets coverage of wholesale funding rose to 93.5 times from 85.9 times.
Custodian’s Strategic Bet
Quest’s acquisition through a Custodian Investment-led consortium expanded Custodian’s reach beyond its insurance-led businesses into merchant banking, capital markets and advisory services.
Custodian’s reported 49.2% stake following the April 2026 recapitalization makes it a significant shareholder.
For Quest, the strategic opportunity is to turn that group relationship and its merchant-banking scale into a broader pipeline of transactions and clients.
The constraint is that growth must not come at the expense of credit diversification or force the bank to rely on still more expensive wholesale funding.
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