Equity locks in teachers with Spire Bank purchase

 Spire Bank Chester House branch. FILE PHOTO | NMG

Equity Bank will inherit over 20,000 depositors and 3,700 loan customers in the teachers-owned Spire Bank by November after signing a buyout deal that will see Mwalimu Sacco pay Sh1.7 billion to the top-tier lender.

The deal is expected to give Equity a new foothold in the race for the teachers' client base, with the purchase making it home to over 100,000 teachers accessing its services across the country.

The deal will see Equity, which has a Sh1.3 trillion asset base, take over Sh945 million in loan assets from struggling Spire Bank and deposit liabilities of Sh1.3 billion.

The Sh377 million difference, employee costs, claims and litigations amounting to Sh1.7 billion will be borne by the giant teachers' savings and credit cooperative society Mwalimu Sacco, which owns the bank.

Equity has got a bargain onboarding teachers’ deposits, assets of just under a billion and has the muscle to recover the Spire Bank’s bad books.

“Equity Bank will take on Spire Bank’s 20,000 existing depositors with a deposit of approximately Sh1,322 million and approximately 3,700 loan customers with a loan book of approximately Sh945 million,” Equity Group CEO James Mwangi said after signing the deal on Monday.

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 it said was subject to regulatory approvals.

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 Society Limited (Mwalimu National) acquired a majority stake in ECB. Effective May 20, 2016, the bank changed its name to Spire Bank Limited.

It was ranked 39 out of 39 banks in terms of market share as at June 30, 2022, with a market share of 0.05 percent and 12 branches across the country.

“CBK welcomes the transaction which will enhance the stability of the Kenyan banking sector. Further updates will be provided as the transaction progresses,” the CBK said in a statement.

Dr Mwangi said the purchase of Spire Bank will help Equity lock in over 100,000 teachers spread across the country and access its services through their branches. Currently, Equity processes a total monthly remittance of Sh1.8 billion in teachers’ salaries.

He said 43,000 teachers have borrowed loans valued at Sh33 billion with a monthly repayment of Sh800 million. In addition, Equity is home to over 24,000 early childhood development and education (ECDE) institutions, primary schools and over 4,000 secondary schools.

Dr Mwangi said by supporting the deal, Equity was taking a thought leadership role in enhancing the stability of the Kenyan banking sector.

Teachers have, however, pumped billions of shillings into the bank bought from the late Naushad Merali in 2015 for Sh2.4 billion. Spire Bank accumulated losses of Sh9 billion, including a Sh3.4 billion conversion of teachers’ deposits into equity.

Kenneth Otieno, a teacher from Siaya County, said in a court case that Mwalimu Sacco will be forced to write off Sh9 billion from their assets and recapitalise the bank to the tune of Sh2 billion before winding up, bringing a total loss of nearly Sh11 billion.

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