Billionaire Naushad Merali withdrew Ksh1.7 billion from Spire Bank days after selling the lender to Mwalimu National Sacco.
This was equivalent to 20 percent of Spire Bank’s Ksh8.54 billion deposits, a move that raised eyebrows even as other depositors started withdrawing their money.
In the months that followed, the bank almost remained a shell, even as customers withdrew billions greatly hurting core capital and shareholder funds.
In just three years, the bank lost Ksh2.2 billion, according to a testimony by Spire Bank’s top officials who spoke this week to the Senate committee on finance and budget.
One thing we are aware of is that when Mr Merali was still part of the bank, he had huge deposits there to the tune of Ksh1.7 billion which he, later on, withdrew in 2016. Coupled with what happened at Imperial Bank and Chase bank, there was some sort of panic and there were withdrawals by other customers. This weakened the financial base of the banksaid Mwalimu National Sacco chairman Wellington Otiende.
The drain in Spire Bank’s core capital saw it go slow on lending, greatly affecting its revenues. The lender sank into a Ksh1.2 billion loss for the year ended December 2020 from Ksh472 million a year earlier.
The bank currently has a Ksh1.8 billion hole in the asset base, which threatens to eat into the Ksh4.79 billion customer deposits.
The bank is currently fully owned by the Mwalimu Sacco, Mwalimu Sacco paid Ksh2.4 billion for a 75 per cent stake in 2016, which was acquired from Merali.
In 2020, Mwalimu Sacco acquired the remaining 25 per cent, despite the poor state of the bank.
The legislators felt that Merali was running away from a sinking boat, that the officials of the Mwalimu Sacco had been warned about.
Are you telling us Merali was taking a flight from a sinking ship? This is a person who first sells shares and all of a sudden withdraws deposits and then challenges set insaid the committee chairman Charles Kibiru.
Since 2016, the lender has been appointing a new CEO every year. Mr Tim Gitonga who was the CEO in 2016 was replaced by Mr Norman Ambunya in 2018.
In 2019, Mr Onesmus Muia replaced Mr Ambunya. Mr Muia did not oversee things for long, as he was edged out in favour of the current acting managing director Brian Kilonzo.
The change of guard every year has not worked so well, with its liquidity ratio shrinking to 7.6 per cent in the year ended December 2020, against the minimum statutory ratio of 20 per cent.
The bank is now operating on the red with a negative core capital of negative Ksh2.63 billion. This means that the bank requires capital injection of Ksh3.63 billion to be compliant.