Spire Bank has embarked on an aggressive search for new capital injection to shore up its capital by an additional 4 billion shillings in order to return shareholder funds into the positive side.
During a parliamentary probe, the Bank’s top officials told the senate committee on finance that 4 investors have shown interest in the bank giving it positive prospects for recovery.
The officials revealed that tycoon Naushad Merali’s huge withdrawal in 2016, then an equivalent of a fifth of the bank’s Sh8.54 billion deposits, prompted other customers to remove cash from the bank.
“This weakened the bank’s lending and pushed it deeper into losses that have wiped out its core capital and shareholder funds even as the bank lost billions of shillings in customer deposits,” they said.
Merali withdrew Sh1.7 billion from Spire Bank days after selling the lender to Mwalimu National Sacco, triggering a chain reaction that has pushed the lender owned by teachers on the brink of collapse.
The bank lost Sh2.2 billion in the three years following Merali’s move, with the withdrawal of 81.3 percent of the cash or Sh1.79 billion happening in under a year.
Mwalimu National Sacco acquired majority stake in Equatorial Commercial Bank owned by Merali before rebranding to Spire Bank through Sh2.4billion injection of teachers savings that included buying some interests from Merali.
Since then, bank has never paid any dividends since Mwalimu became a shareholder further sinking teachers’ savings down the drain.
Further, the lender’s loss of deposits, a key source for lending to customers has cut its loan book 66 per cent over the past four years to Sh2.55 billion, weakened its ability to grow revenues.
The lender has fallen short of the CBK requirement for lenders to have a core capital of over Sh1billion raising fears of possible closure like other lenders that have gone under notably Chase bank and Dubai Bank.
Through a petitioned to the CBK signed by four bank shareholders; Joseph Koech, Mary mwilu, Charles Mwaniki and Kenneth Otieno, they accuse Christine Sabwa of gross corruption and abuse office.
The bank is still facing a multi-pronged investigations over possible internal fraud as the bank’s future liquidity soundness remains shaky with inadequate deposits and massively dwindling profit margins to sustain operations.
However, the process of accepting any investor will require the lender to work closely with CBK to avoid getting fake investors.