Banks Make Provisions as Customers’ Claim Via Litigations Hit N4.1tn

Kayode Tokede

As customers intensified settling their disputes with Nigerian banks in courts at home and abroad, a total of nine banks in 2022 were exposed to various lawsuits worth over N4.1trillion as against N3.61 trillion in 2021.

According to the banks’ audited result and accounts for year ended December 31, 2022, the litigations are related to alleged errors, omissions, and breaches of agreement.

The 10 banks are Guaranty Trust Bank Holding Company Plc (GTCO), Zenith Bank Plc, United Bank for Africa (UBA) Plc, Union Bank of Nigeria Plc, and Fidelity Bank Plc.

Others are Sterling Bank Plc, FCMB Group Plc, Stanbic IBTC Holdings Plc and Wema Bank Plc.

However, the banks insist that the actions are being contested stressing that they are of the opinion that none of the aforementioned cases is likely to have a material adverse effect on them.

Despite insisting that the litigations instituted by their customers will not have any impact on their financial positions, the banks are making provisions.

THISDAY analysis of the banks’ 2022 audited result and accounts revealed that Union Bank of Nigeria has the highest litigations among the mentioned banks, while Fidelity Bank has the lowest amount instituted by its customers against the lender. 

Union Bank of Nigeria as of the 2022 financial year litigations stood N1.497trillion from N1.98trillion in 2021.

UBN, one of the oldest banks in Nigeria explained that among its litigations is a case instituted by a claimant in 2012 against it, the Central Bank of Nigeria (CBN), the Minister of Finance and the Attorney General of the Federation (AGF) in which the Federal High Court (FHC) gave judgement in 2014 against the defendants jointly and severally and ordered them to, among others return the claimant’s foreign capital amounting to £2.56billion which was allegedly deposited with the Bank through a Barclays bank cheque for this amount and of which a substantial part was allegedly transferred to the CBN.

Union Bank, which was acquired by Titan Trust Bank Limited (TTB) in its 2022FY stated that, “Out of the total face value of the Barclay’s Bank cheque, the Bank was directed to pay £396.8million with interest at 21 per cent per annum from 1994 up till the liquidation of the judgement debt. As at the reporting date, the Naira equivalent of the total judgment debt awarded directly against the Bank was N1.495trillion.

“In 2018, the Court of Appeal dismissed the Bank’s appeal against the judgement of the FHC and a further appeal was filed to the Supreme court. While the Bank’s appeal was pending before the Supreme Court, its application for leave to amend its notice of appeal, to appeal on grounds of mixed law and fact and to extend time to apply for leave was dismissed. The Bank subsequently filed another application seeking the leave of the Supreme court to appeal the judgement of the lower court.

“On December 22, 2021, the Supreme court unanimously granted leave to the Bank to appeal the judgement of the Court of Appeal and to file its Notice of Appeal.  The bank file an appeal on the 5 May 2022, but the court is yet to fixed a date for hearing after initial adjournment. The Bank has complied with the ruling of the Supreme Court by filing its Notice of Appeal and Appellant’s Brief within the time stipulated in the ruling. Hearing of the substantive appeal is expected to be scheduled once the arguments of the parties have been filed.”

Based on legal advice received, the management of Union Bank of Nigeria stated that it believe the substantive appeal before the Supreme Court in this case has chance of success. 

Commenting, the external auditor of Union Bank of Nigeria, EY pointed out that, “This matter was considered to be a key audit matter due to the size of the potential liability and the significant judgment made by the directors in determining that no provision is required in the consolidated and separate financial statements.”

But a lawyer who does not want his name in print questioned the decision of the management of Union Bank not settle the case out of court, stressing that cases at the end of the day might not favour the bank and it might collapse the bank.

On its part, Fidelity Bank Plc stated that it is currently involved in 58 cases as defendant as against 54 in 2021 and 15 cases as Plaintiff from 14 in 2021.

The total amount claimed against the Bank is estimated at N12.06 billion as of 31 December 2022 (2021: N7.26billion) while the amount in the 15 cases instituted by the Bank is N5.19 billion as of 31 December 2022 (31 Dec 2021: N4.07billion, 14 Cases).

“Based on the advice of the Bank’s legal team and the case facts, the management of the Bank estimates a potential loss of N883 million (31 Dec 2021: N623 million) upon conclusion of the cases, ”the bank said. However, the bank made a provision of N883million in case of a potential loss.

Furthermore, GTCO customers claimed N624.34billion in 2022 from N583.63billion in 2021, while Zenith Bank reported N967billion worth of litigations in 2022 from N143billion in 2021.  

GTCO in its 2022FY said, “The Group, in its ordinary course of business, is presently involved in 842 cases as a defendant (31 December 2021: 721) and 454 cases as a plaintiff (31 December 2021: 442).

“The total amount claimed in the 842 cases against the Group is estimated at N609.5 Billion and $33.08 million (31 December 2021: N570.28 billion and $32.82 million) while the total amount claimed in the 454 cases instituted by the Group is N109.73 billion (31 December 2021: N98.64bllion).

“However, the solicitors of the Group are of the view that the probable liability which may arise from the cases pending against the Group is not likely to exceed N205.38 million (31 December 2021: N205.38 million).”  

Zenith Bank disclosed that the actions are being contested adding that its directors are of the opinion that none of the aforementioned cases is likely to have a material adverse effect on the Group, “and we are not aware of any other pending or threatened claims and litigations. “In arriving at this conclusion, the Group has relied on evidence and recommendations from its internal litigation group and its team of external solicitors,” the bank disclosed in 2022FY results.”

Others:   UBA reported N666.12billion worth of litigations in 2022 from N698.95billion in 2021; Sterling Bank reported N42.4billio litigations in 2022 from N43.5billion in 2021; FCMB group declared Nn27.29billion litigations in 2022 from N26.37billion in 2021; Stanbic IBTC Holdings reported N267billion worth of litigations in 2022 from N122.32billion in 2021 and Wema Bank reported N8.3billion in 2022 from N8billlion in 2021.

Further findings showed that Stanbic IBTC Holdings’ litigation portfolio as at 2022 consisted of 411 cases and the aggregate value of monetary claims against the Stanbic IBTC Group was N264,842,827,754.70, $4,438,678.78 and £74,284.64.

“The Directors are satisfied, based on present information and the assessed probability of such existing claims crystallising that the Group has an adequate insurance cover and/or provisions in place to meet such claims,” the management explained.

Meanwhile, stakeholders have expressed that litigations in the corporate world have increased significantly amid modern day business transactions, urging banks to strengthen compliance with provisions of the CBN.  

Speaking with THISDAY, the President, Bank Customers Association of Nigeria (BCAN), Dr. ‘Uju Ogubunka said the monetary value of litigations against Nigeria banks stand a chance of collapsing their businesses, stating that some banks’ litigation at courts are much higher than their capital base.

“The natural thing is that banks will appeal and some of these cases are settled out of court. We have seen scenarios where banks are making provisions once they realize it will be against them,” Ogubunka said.

He added, “I hardly see a customer wanted to negotiate with bank once they have a very good case. The negotiation should have been done at the first instance before either party had the opportunity of going to the law court.

“There is a sub-committee on ethics and professionalism that intervene when a customer complains about their banks. It is an avenue where disputes are resolved and banks are advised when customers complain.

“Before a case gets to court, I am sure customers might have written severally to resolve it before thinking of going to court. The bank may have thought they had a good case and ignored it. The customer in annoyance dragged them to court.”

He urged banks to always utilize sub-committee on ethics and professionalism in resolving customer disputes in order to sanitize the banking sector.

The Economic and Financial Crimes Commission (EFCC), CBN, among other stakeholders over the years had warned financial institutions and compliance officers to be diligent and avoid being complicit in financial practices.