By Peter Egwuatu

Fitch Ratings, has maintained an unfavourable Long-Term Issuer Default Rating of ‘B-‘ and Viability Rating of ‘b-‘ on Rating Watch Negative (RWN) for Ecobank Nigeria Limited, following the Federal High Court of Nigeria’s recent judgment on a protracted lawsuit with Honeywell Group.

The rating agency explained that 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.

The Federal High Court of Nigeria recently ordered ENG to pay N72.2 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)” Fitch stated.

Fitch said that it expects to resolve the RWN once there is more clarity on the outcome of the dispute and its implications for Ecobank, in addition to when the impact of the naira devaluation on capital ratios and asset quality becomes clear.

The RWN may be maintained longer than six months if the dispute is not concluded within this timeframe.