Teachers' bank cut losses despite delays in sale

A Spire Bank branch in Nairobi. FILE PHOTO | NMG

Teachers are yet to find a buyer for Spire Bank more than two months after the June target that had been agreed with the Central Bank of Kenya and Sacco regulator Sasra.

Spire Bank has explored over seven potential buyers including a local bank that confirmed interest in the lender’s good books and teachers’ membership but the banking regulator has turned down most of the suitors on conflict of interest and credibility issues.

Mwalimu Sacco, the lender’s owner, told the Parliamentary Finance Committee in April that it had agreed with the regulators to resolve the Spire Bank problem either through a strategic buyer or liquidating the bank by end of June.

“There is no fixed deadline imposed on the shareholder as such and the search for a sustainable solution is ongoing,” Spire Bank said on Tuesday.

Despite the uncertainties over its future, the bank was able to cut its losses in the half year to June 2022 on lower costs, loan recoveries and conversion of shareholder deposits into equity.

Spire cut its net loss by 21 percent to Sh403 million from Sh512.8 million last year, despite constrained lending due to low capital and delayed resolution through the bank sale or finding a strategic investor.

Interest expense declined from Sh221 million to Sh85 million on the conversion of Sh3.4 billion deposits to equity while operating expenses declined seven percent to Sh470 million.

The bank has been unable to lend due to low capital ratios that have seen its loan book shrink from Sh2.3 billion to Sh1.7 billion.

The lender whose capital ratios are below the mandatory CBK requirements has, however, seen an improvement in its core capital from negative Sh4.1 billion in June last year to negative Sh1.7 billion due to the deposit to equity conversion.

On its capital adequacy ratios, core capital to total risk-weighted assets stood at negative 33.4 percent in June against the statutory minimum of 10.5 percent in June, while total capital to total risk-weighted assets stood at negative 32.1 percent against a required minimum of 14.5 percent.

The core capital to total deposits ratio, which lenders are supposed to maintain at a minimum of eight percent, stood at negative 40.8 percent.

Spire Bank has also been unable to access cash from peer banks due to its financial challenges.

The lender has also been begging for additional support from Mwalimu Sacco and the CBK to allow it to earn money to meet expenses and recover years of losses, but the Sacco faced limitations from helping out due to limitations imposed by the sector regulator.

A parliamentary probe revealed that Sasra stopped Mwalimu Sacco from pumping additional money into the bank after they sank billions of shillings into lender bought from the late Naushad Merali in 2015 for Sh2.4 billion.

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