Kenya’s top bank Equity Bank Group is set to acquired troubled lender Spire Bank. This is after Equity and Spire concluded acquisition talks last week.
The deal will see Mwalimu Sacco which owns Spire Bank pay Equity Sh. 1.7 billion to cover liabilities.
According to a report that appeared in a local business newspaper, Equity Bank will take over just under Sh. 900 million in assets and Sh. 1.3 billion in liabilities.
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“The half-a-billion-shilling difference, employee costs, claims and litigations amounting to Sh. 1.7 billion will be borne by Mwalimu Sacco,” the report said, adding that Equity Bank will acquire Spire Bank under a deal known as Project Gama.
As at September 2021, Spire had a negative core capital of Sh. 314 billion, meaning that it requires Sh 4.14 billion to meet the CBK minimum capital of Sh. 1 billion.
The bank has been on a loss making streak. It last made a profit eight years ago while trading as Equatorial Commercial Bank (ECB). By September 2021, its accumulated losses hit Sh. 8.92 billion.
The bank has been seeking investors to pump in the much needed capital to stabilize its operations. Some investors, have however, backed out deals with the bank in the last minute. One of these was UK-based crypto lender BlockBank.
In the half-year ended June 2022, Spire Bank trimmed its net losses to Sh. 403 million. Core capital improved from a negative position of Sh. 3.1 billion to a deficit of Sh. 1.8 billion.
This is attributed to the conversion of part of customer deposits worth Sh. 3.4billion by Mwalimu Sacco into new equity/capital.
Despite the ease, Spire Bank remains in breach of the Central Bank of Kenya (CBK) capital rules which would require an additional injection of at least Sh. 1.8 billion to meet the regulatory requirements.
Banks are required to maintain a floor of 10.5 percent for core capital to total risk-weighted assets ratio, 14.5 percent for total capital to total risk-weighted assets, and eight percent for the core capital to total deposits ratio.
The bank’s liquidity position rose to 6.8 per cent from 4.3 per cent even as it remains below the regulatory threshold of 20 per cent.
