Equity to Take Over Teachers’ Troubled Spire Bank

BUSINESS TODAYSep 12, 20221 Mins read1.7k

Equity Group CEO James Mwangi noted in August that the bank was shifting focus to expansion from mitigation of the impact of Covid-19. [Photo/ Equity Bank Kenya]

Equity Group Holdings has agreed a deal to acquire Spire Bank, the struggling bank currently owned by Mwalimu Sacco – a teachers’ co-operative society. The deal is to be officially sealed in the course of the week.

Dubbed Project Gamma, it will reportedly see Equity onboard the teachers’ Spire Bank deposits and push to recover the bank’s non-performing loans. Equity, a tier-1 lender, will take over around Ksh900 million in assets and Ksh1.3 billion in liabilities.

Mwalimu Sacco will pay Equity an additional Ksh1.7 billion to cover liabilities. The fee considers employee costs, claims and litigation.

The deal ties into the expansion strategy being pursued by Equity Group, which on Tuesday, August 23 announced its financial results for the first six months of 2022. The company saw its half-year net profit rise to Ksh23.7 billion, a 35% increase compared to Ksh17.5 billion in the same period last year. Equity Group CEO James Mwangi noted that the company was shifting focus to expansion from mitigation of the impact of Covid-19.

Earlier this year, Mwalimu Sacco CEO Kenneth Odhiambo told MPs that the Central Bank of Kenya (CBK) had declined a request to offer Spire Bank a long-term interest-free loan facilitate their recovery.

Instead, the Dr. Patrick Njoroge-led CBK has been providing short-term liquidity of up to Ksh1.3 billion through short-term Reverse Repo (Repurchase Agreements), which is insufficient to support the bank’s steady recovery.

Spire has also been unable to access credit from other banks in the country due to its financial struggles.

CBK Governor Patrick Njoroge previously told MPs he had not yet considered putting Spire Bank under receivership, expressing hope that the lender could turn it around. He explained that receivership could affect the sacco’s future participation in the financial sector as it was a last resort carrying the risk of having the sacco deemed financially unviable.

Co-operative laws intended to limit sacco members’ exposure have also held back the teachers, limiting their exposure after they injected billions into Spire Bank since acquiring it from the late businessman Naushad Merali of Sameer Group in 2020.