Spire Bank, majority owned by Mwalimu National Sacco, has used up Sh1.6 billion in cash and other liquid assets in the nine months ended September as its financial performance deteriorated.
The lender which posted a Sh212 million net loss in the review period, is operating on a negative core capital Sh1 billion and has breached all capital adequacy ratios.
In the nine months, its cash reduced by Sh101 million, balances at CBK (Sh386 million), government debt paper (Sh559 million), deposits in local banks (Sh176 million), cash in foreign banks (Sh160 million) and its Sh283 million investments in associates was also used up.
Although the lender in which Mwalimu National Sacco has a 75 percent stake, converted Sh950 million of deposits into equity, it is still in need of more capital.
“The majority shareholder has converted their deposits of Sh950 million to tier one capital to strengthen the capital position,” Spire Bank acting managing director Onesmus Muia said in a recent interview.
Mwalimu National Sacco invested a total of Sh2.4 billion to acquire the majority stake which it carries in its books at Sh1.2 billion or half its original capital.
The majority stake was acquired from businessman Naushad Merali who retained a 25 percent interest in the lender.
Accumulated loses of Sh6.7 billion in September up from Sh4.5 billion in a similar period last year wiped out this injection of money and shareholder funds stood at negative Sh291 million.
The bank’s ability to lend is constrained, leading to a Sh1 billion decline in outstanding loans from Sh4.4 billion to Sh3.4 billion.
This, in turn, resulted in interest income come dropping to Sh421 million from Sh662 million.
Spire Bank has lost customers as seen by deposits declining from Sh6.8 billion to Sh4.5 billion, a move that reduced interest expenses from Sh532 million to Sh359 million.
With a decline in lending, negative capital position and thinning cash reserves, the lender desperately needs rescue cash from a strategic investor which has been on the bank’s agenda for a while.
Mr Muia, who replaced the former chief executive Naaman Ambunya, said the troubled bank is in “advanced talks” with unnamed investor(s) whom it expects to inject an undisclosed amount of capital to improve its balance sheet.