Equity Bank has agreed to buy struggling Spire Bank, which has been operating in the red in the last couple of years. The bank is running on an asset base of Ksh900 million against liability of Ksh1.3 billion.
Spire Bank, formerly known as Equatorial Commercial Bank (ECB), is owned by Mwalimu Sacco.
In an operation dubbed Project Gamma, it is reported that Equity has already concluded negotiations to acquire the teachers-owned lender for an undisclosed amount.
“Project Gama was approved after a very long meeting on Thursday. Equity Bank is expected to sign the deal around midday Monday,” a source told a local daily.
Read: Spire Bank: MPs Unearth More Mess For The Teachers’ Bank
The buyout will see Mwalimu Sacco bleed an extra Ksh1.3 billion in a bid to cover employee costs, claims and litigations, in addition to the Ksh400 million difference between the current assets and liabilities.
According to a report by the National Assembly released early this year, the troubled lender has been surviving on emergency loans from the Central Bank of Kenya (CBK), commonly known as the reverse repo facility.
“In order to mitigate its liquidity constraints, the bank has been borrowing from the Central Bank of Kenya through the reverse repo to stabilise its operations” Mwalimu National Sacoo chief executive officer Kenneth Odhiambo said in a submission to the committee.
Spire’s Bank’s repo balance was Ksh1.3 billion and the lender’s position at 8.91 percent against a statutory requirement of 20 percent as at December 31 last year.
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Mwalimu Sacco, which owns a 75 percent stake, has been supporting the lender by converting deposits into equity or share capital and daily liquidity injection.
Mwalimu Sacco bought the bank from deceased tycoon Naushad Merali, who within days withdrew Ksh1.7 billion, sending depositors into a panic mode pushing them to withdraw their deposits.
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