Mwalimu Sacco’s Spire Bank Gets a Lifeline from Teachers
Teachers in the Mwalimu National Sacco have thrown a lifeline to the potential turnaround of Spire Bank, the Cooperative’s wholly-owned banking unit.
A new conversion of deposits into share capital serves as a lifeline.
Mwalimu National Sacco converted teacher deposits into Ksh.3.4 billion in share capital.
The conversion raises the bank’s authorized share capital to Ksh.9.2 billion.
The capital release is viewed as a critical plank in the bank’s revival, as it is currently in the red due to regulatory capital and liquidity adequacy breaches.
For example, the conversion will help the lender’s core capital recover from a Ksh.4.4 billion deficit.
Nonetheless, Spire Bank will require a minimum of Ksh.1 billion to bring its core capital up to the Central Bank of Kenya’s requirements (CBK).
Having partially filled the gap, Spire is optimistic that the new capital injection will make the bank more appealing to a potential investor or buyer.
Without the injection, any new investor in the bank would have had to first plug the Ksh.4.4 billion hole before embarking on any growth or expansion plans.
Spire Bank is owned entirely by the Mwalimu National Sacco, which purchased the lender, then known as the Equatorial Commercial Bank, from businessman Neushad Merali in 2015.
The teacher-owned Sacco, on the other hand, is eager to sell the lender or sell a majority stake in the bank after years of losses since its purchase.
The bank posted an expanded loss of Ksh.818.8 million in the nine months to September 2021, up from a loss of Ksh.783.6 million in the previous period.
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The bank’s assets total Ksh.4.2 billion, which includes Ksh.2.1 billion in net loans and advances to customers.
The teachers have converted deposits totaling Ksh.1.7 billion since acquiring the bank.
While complying with the Central Bank of Kenya’s (CBK) regulatory requirements, the capital injection is expected to create solvency in its balance sheet, with assets growing faster than liabilities.