Notwithstanding the stellar financial results released by Union Bank for the 2020 financial year, the bank’s potential legal liabilities were a cause of concern for its auditors.
The Bank is involved in various legal actions in the ordinary course of business, which has resulted in contingent liabilities amounting to N7.32 trillion as at 31 December 2020, up from N6.95 trillion in 2019.
The most significant are two cases, with total claims of N6.89 trillion (2019: N6.62 trillion) in which judgement had been awarded against the Bank and other co-defendants by a Federal High Court in prior years.
The Bank appealed against the judgements, which are currently pending before the appellate and supreme courts.
This matter was considered to be a key audit matter by Ernst & Young, Union Banks auditors, 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.
Key audit matters are those matters that, in the professional judgement of the auditors, were of most significance in audit of the consolidated and separate financial statements of the current period.
Union Bank’s contingent liability of N7.3 trillion is particularly high when compared to other banks like Guaranty Trust Bank, United Bank for Africa (UBA) and Zenith Bank.
Guaranty Trust Bank has a total amount claimed in 507 cases against the Bank estimated at N440.83 Billion and $32.60 Million. However, the solicitors of the Bank are of the view that the probable liability which may arise from the cases pending against the Bank is not likely to exceed N190.20 Million.
Zenith Bank Group is presently involved in several litigation suits in the ordinary course of business. The total amount claimed in the cases against the Zenith Bank is estimated at N78.8 billion up from N27 billion in December 2019.
UBA Group, in the ordinary course of business, is currently involved in 1,000 legal cases (2019: 644). The total amount claimed in the cases against the Group is estimated at N385.07billion (2019: N472.04 billion).