The cash-strapped Spire Bank’s lending power is teetering on the brink of collapse after piling up losses over the last decade.
The bank lender’s power was crippled in 2016 when Naushad Merali withdrew Sh1.7 billion from Spire Bank days after selling the lender to Mwalimu National Sacco.
The tycoon’s huge withdrawal prompted other customers to remove cash from the bank weakening the bank’s lending.
This pushed it deeper into losses that have wiped out its core capital and shareholder funds even as the bank lost billions of shillings in customer deposits.
The bank lost Sh2.2 billion in the three years following Merali’s move, with the withdrawal of 81.3 per cent of the cash or Sh1.79 billion happening in under a year.
Mwalimu National Sacco had acquired majority stake in Equatorial Commercial Bank owned by Merali before rebranding to Spire Bank through Sh2.4 billion injection of teachers’ savings that included buying some interests from Merali.
Since then, the bank has never paid any dividends after Mwalimu became a shareholder seven years ago further sinking teachers’ savings down the drain.
In 2020, it acquired the remaining 25 per cent, offering it full control of the loss-making bank.
As of June 25, 2019, Mwalimu National Sacco had deposits amounting to Sh171 million, Sh4 billion owned by customers while Sameer Investment Group owned by Merali had deposits amounting to Sh90 million.
Over the last couple of years, Spire Bank’s accumulated losses of up to Sh8.4 billion has wiped out shareholder funds, which now stand at negative Sh1.8 billion.
The bank is no longer lending, with a negative capital position. Loans issued shrank from Sh3.3 billion in 2019 to Sh2.5 billion at the end of last year.
On July 8, 2019, four bank shareholders petitioned Central bank of Kenya (CBK) to investigate claims of corruption and abuse of office against one of the troubled bank’s non-executive directors.
“With these trends, the bank has a few options since shareholder funding is no longer tenable. The situation is unsustainable without a substantive stabilization fund immediately.” An internal correspondence to the board dated June 27, 2019 reads in part.
Bank records shows by February in 2019, the customer deposits hit the Sh6 billion but the shareholder’s deposits had been consistently on a downward trend.
The bank has fallen short of the CBK requirement for lenders to have a core capital of over Sh1billion raising fears of possible closure like other lenders that have gone under notably Chase bank and Dubai Bank.
Through a petitioned to the CBK signed by four bank shareholders; Joseph Koech, Mary mwilu, Charles Mwaniki and Kenneth Otieno, they accuse Christine Sabwa of gross corruption and abuse office.
The appeal was also copied to the Directorate of Criminal Investigations, the Ethics and Anti-Corruption Commission, Kenya Bankers Association, Spire Bank and Mwalimu Sacco.
“We have given our lawyers strict instructions to institute legal proceedings against her if she is not relieved of her duties as a director of the bank within seven days from the date of this letter thereof.” The petition received by CBK on July 11, 2019 reads in part.
Now, Mwalimu Sacco are set to sell the Bank to a local lender by the end of March this year.
In a communique to members, the Sacco’s Chairman John Ochieng said they are executing resolutions of an October annual general meeting where its members decided to either sell the bank or liquidate the bank.
“The Sacco is currently engaging both regulators, the Central Bank of Kenya and SASSRA as well as potential entities to take over Spire Bank completely off Mwalimu National’s ownership,” read the communique.
The Sacco says it has not and will not inject any additional funds into the bank in terms of cash flows from the Cooperative.
The sale is part of the Sacco’s plan to shed off the bank which has been stuck in a loss-making spree making it a sour investment for the teachers who are now keen to cut their losses.
