Equity Bank buys struggling Spire Bank

By Staff Reporter

Equity Bank has signed a deal to buy the teachers -owned Spire Bank and inherit over 20,000 depositors and 3,700 loan customers by November 2022.

Mwalimu National bought the cash strapped Spire Bank for KSh2.4 billion from business mogul Naushad Merali in 2015.

Unlike in common buyouts where Equity Bank would be expected to pay for the acquisition, Mwalimu National will pay Equity Bank KSh1.7 billion.

Equity Bank is expected to take over KSh945 million in loan assets from the struggling Spire Bank and deposit liabilities of KSh1.3 billion.

The KSh377 million shilling difference, employee costs, claims and litigation amounting to KSh1.7 billion will be borne by the Sacco.

“Equity Bank will take on Spire Bank’s 20,000 existing deposits of approximately KSh1.322 million and about 3,700 loan customers with a loan book of approximately KSh945 million,” Equity Group CEO James Mwangi said after signing the deal on Monday.

The development is expected to see Equity Bank lock more than 100,000 teachers spread across the country and who access its services through their branches.

This is expected to give the top tier lender, with an asset base of KSh1.3 trillion a foothold in the race to command the banking sector in the country.

The Central Bank of Kenya (CBK) said on Monday that it had been advised by both Equity and Spire Bank of the proposed acquisition, which was subject to regulatory approvals.

Though the lender had not been put on receivership, CBK was hopeful that it would recover and avoid going down with teachers’ investments.

CBK has been providing the bank with short term liquidity of up to KSh1.3 billion through Reverse Repo (Repurchase Agreements), which is short term and not enough to revive the lender.

Sacco Societies Regulatory Authority (Sasra) stopped Mwalimu National from pumping billions into the Sacco after they had sank billions in previous years.

However, the giant Sacco has been supporting Spire Bank with funds after it accumulated losses estimated to be about KSh9 billion.

The losses include a KSh3.4 billion conversion of teachers’ deposits into equity.

This has proved a financial strain to the Sacco, thus providing critical lessons for Saccos keen on buyouts.

According to the Sacco Supervision Annual Report, 2021, Mwalimu National reported asset base of KSh60.6 billion by end of December 2021, emerging as the wealthiest Sacco in the country in as many years.

Its deposit portfolio stood at KSh44.29 billion, loan book KSh38.19 billion and an income of KSh7.58 billion.

Spire Bank, formerly known as Equatorial Commercial Bank Limited (ECB) started operations in 1984 as a non-bank financial institution and converted into a commercial bank on December 13, 1995.

ECB and Southern Credit banking Corporation Limited merged their respective businesses with effect from June 1, 2010, and retained the name ECB.

In December 2014, Mwalimu National Cooperative Savings and Credit Limited (Mwalimu National) acquired a majority stake in ECB.

Effective May 20, 2016, the bank changed its name to Spire Bank Limited, which was ranked 39 out of 39 banks in June 2022 with a market share of 0.05 per cent and 12 branches across the country.

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