N72.2 Billion Damages Against Bank Takes Unexpected Twist For CEO Bolaji Lawal

The new twist further complicates the workings of Chief Executive Officer, Bolaji Lawal for a brighter future – for the Bank.

Highly regarded barometer for excellence in the global Capital Markets, Fitch Ratings has given the Bank with the official name Ecobank Transnational Inc (ETI) unwanted ratings based on assessments the N72.2billion played a prominent role .

The International financial markets assessor gave EcoBank a Long-Term Issuer Default Rating of ‘B-‘ and Viability Rating of ‘b-‘ on Rating Watch Negative (RWN).

“The RWN already reflects the risk of the bank breaching its minimum total capital adequacy ratio (CAR) requirement due to the effect of the naira devaluation and other macroeconomic risks on capital and asset quality. The RWN now also incorporates further risks to ENG’s business profile and financial profile, in particular its capitalisation, stemming from the recent High Court judgement.” Fitch Ratings stated in its assessment.

And added “the Federal High Court of Nigeria recently ordered ENG to pay NGN72.2 billion in damages in respect of this lawsuit. ENG has appealed this judgement, although the timing of the conclusion of the dispute is uncertain. The High Court judgment, if upheld, would lead to a breach of ENG’s CAR requirement as the damages are large (end-2022: 31% of total regulatory capital).”

ENG is Eco Bank.

The Federal High Court ruling is the N72.2billion damages secured by Honeywell Flour Mills Plc (HFMP) against Eco Bank.

It is relief for the huge loss HFMP suffered through an ex-parte order ( motions for orders that can be granted without waiting for a response from the other side) Eco Bank secured against its operations while seeking to recover a disputed loan.

The ex-parte order freezed the assets of Honeywell Flour Mills as part of efforts by Eco Bank to force recovery of the disputed loan – resulting in estimated significant losses for the company and the direct and indirect dependants on its operations.

Though EcoBank has appealed the decision, the impact of the court order for payment of N72.2billion damages ( which represents 31% of total regulatory capital) to Honeywell Flour Mills Plc continues to be far-reaching as evident in the latest assessment by the held in high opinion, Fitch Ratings.

In arriving at the unfavorable conclusions in the appraisal of EcoBank, Fitch Ratings disclosed some of the “Key Drivers” as standalone creditworthiness, exposure to market and legal risks, asset-quality issues, weak profitability, challenging operating environment while stating out rightly that ” ENG’s National Long-Term Rating is among the lowest of all Nigerian banks under Fitch’s coverage, primarily reflecting its weak earnings and modest capitalisation.”

Explaining that that EcoBank ” has notably weaker profitability than other commercial banks, with operating profit averaging just 0.4% of risk-weighted assets (RWAs) over the past four years. Weak profitability is influenced by a particularly narrow net interest margin (NIM) and high loan-impairment charges (LICs) that have accompanied asset-quality issues in recent years’, Fitch Ratings points out the very grave concern that “the damages (equivalent to 6.9x of operating profit in 2022) would have a large negative impact on profitability if realised.”

TrackNews checks revealed that these are not goods news for Bolaji Lawal, the Chief Executive Officer who took office on March 1, 2022 and his team.

Lawal made a career revamping move to EcoBank after missing out in becoming the Managing Director at Guaranty Trust Bank (GTBank) 2021.

He was fingered as the backbone of GTBank’s major play in the digital space and Ecobank wanted such a person – with the hope of getting a disputed N13.5billion judgement debt from Honeywell Flour Mills Plc – everything looked ready made for a mutually beneficial relationship beyond measures.

The N72.2billion damages secured by Honeywell Flour Mills Plc on July 18, 2023 changed the narrative for the Bank and Managing Director, adding the twist of unwanted international recognition broadening things better left unsaid with the Fitch Ratings appraisal.

“That is one unexpected twist many didn’t see coming, the airing of inside details by Fitch Ratings and the prominent role the N72.2billion is playing” TrackNews learned.