Borrowers have defaulted a record 90.65 percent of Spire Bank loan book, casting doubt on the survival of the loss-making lender that is also in breach of all regulatory ratios.
The lender, which is owned by businessman Naushad Merali and Mwalimu National Sacco, discloses in latest financial results that gross non-performing loans (NPLS) hit Sh2.69 billion last June against the Sh2.96 billion that has been lent out.
Spire’s NPLs ratio, which measures the proportion of credit for which principal or interest has not been paid for 90 days, is nearly seven times that of the entire banking industry (13.1 percent).
Borrowers have defaulted a record 90.65 percent of Spire Bank loan book, casting doubt on the survival of the loss-making lender that is also in breach of all regulatory ratios.
The lender, which is owned by businessman Naushad Merali and Mwalimu National Sacco, discloses in latest financial results that gross non-performing loans (NPLS) hit Sh2.69 billion last June against the Sh2.96 billion that has been lent out.
Spire’s NPLs ratio, which measures the proportion of credit for which principal or interest has not been paid for 90 days, is nearly seven times that of the entire banking industry (13.1 percent).
The deteriorating quality of loan book came in the period the six-month earnings moved from a net profit of Sh81.48 million to a net loss of Sh556.1 million.
The six-month loss is more than twice the Sh254.7 net loss it booked in the full year of trading in 2019.
Spire’s loan loss provision is Sh16.53 million in contrast with a negative loan loss provision of Sh150 million in the preceding similar period.
The bank had in June last year relied on the negative loan loss provision to bring down operating expenses to Sh272 million and book the net profit. Current period’s expenses amount to Sh523.9 million.
Accounting allows for negative loan loss provisions where a lender is more optimistic about its portfolio and expects fewer defaults going forward.
However, Spire’s negative provisions, which persisted to March at Sh3.4 million was despite CBK data showing that industry defaults were spiking.
Spire is now in breach of all CBK parameters that are used to measure stability of a bank.
The bank has a negative core capital of Sh2.11 billion, meaning that it requires Sh3.12 billion to meet the CBK minimum capital of Sh1 billion. This has seen it breach all the capital-related ratios such as total capital to total risk weighted assets ratio which in June stood at negative 34.61 percent against the set minimum of 14.5 percent.
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