Spire Bank, majority owned by teachers through Mwalimu National Sacco, has sunk into a Sh254.7 million loss in the first three months of trading on the back of reduced lending and higher costs even as it remained in breach of key regulatory ratios.
The loss is in contrast with Sh106.3 million profit it had posted in the first quarter of last year and now continues to complicate its revival in the absence of fresh capital injection.
Total operating income shrank from Sh251.4 million to Sh3.06 million in the wake of net interest loss and thinning non-interest income.
Spire Bank posted a net interest loss of Sh11.29 million, in contrast with net income of Sh16.9 million in the preceding similar quarter.
This was on account of reduced lending that saw interest on loans and advances drop by 50.2 percent to Sh61.2 million.
The loan book shrank by Sh1.2 billion or 28 percent to Sh3.1 billion as weak capital ratios constrained its ability to lend more.
Non-interest income, which comes mainly from fees and commission on loans, followed a similar trajectory, dropping from Sh234.5 million to Sh14.35 million.
The bottom line was further hurt by a rise in operating expenses.
Costs went up from Sh144.4 million used in first quarter of last year to Sh150.6 million in the quarter under review.
This was driven by other operating expenses rising from Sh64.4 million to Sh93.4 million despite a huge cut in loan loss provisioning from Sh92.64 million to Sh3.39 million.
Gross non-performing loans and advances eased from Sh2.76 billion to Sh2.58 billion, helped in a big way by slowed lending.
Spire Bank is in breach of both capital and liquidity ratios, which will require fresh capital to be corrected.
Capital position worsening
The bank’s core capital position worsened to negative levels and it now requires Sh2.78 billion to be in compliance with the Central Bank of Kenya’s minimum core capital base.
Its liquidity ratio is also at 6.6 percent, below the regulatory base of 20 percent.
The worsening performance comes at a time businessman Naushad Merali and Mwalimu Sacco plan to sell their stake.
The bank has been looking for a strategic investor to inject the much needed capital after six years of losses wiped its core capital and shareholder funds even as customer deposits dropped.