Equity Bank (Kenya) Ltd, a subsidiary of Equity Group Holdings entered into an Assets and Liabilities Purchase Agreement with Spire Bank Limited for the purchase of certain assets and liabilities of Spire Bank Limited.
The deal is anchored in Equity’s plan to support economic recovery post COVID-19, with Equity is set to acquire approximately 20,000 deposit customers with deposits totalling Ksh.1.3 billion, and 3,700 loan customers with outstanding loan balances at Ksh.1.7 billion, with a net carrying value of Ksh.900 million after adjusting for statutory loan loss provisions of Ksh.800 billion.
Upon completion of the proposed transaction on November 30, 2022, all existing depositors of Spire Bank with exemption of deposits from Mwalimu National Sacco will become customers of Equity Bank Kenya, which ensures preservation of their deposits.
“We take this partnership as our gesture of gratitude and an opportunity to deepen our relationship with the teaching fraternity by ensuring that they continue to enjoy uninterrupted access to banking services.,” said Equity Bank Group Chief Executive, Dr. James Mwangi.
Upon completion of the proposed transaction, Mwalimu Sacco, which owns Spire Bank will pay Equity Group an additional Ksh.1.7 billion to cover liabilities.
With the 20,000 teachers who we will be inheriting from Spire bank, Equity will become home to over 100,000 teachers spread throughout the country and accessing our services through our branches, our agent network and digital banking channels.
Currently Equity processes a total monthly remittance of Ksh.1.8 billion in teachers’ salaries. Equity Group Chief Executive Dr. James Mwangi disclosed that 43,000 teachers have borrowed loans valued at Ksh.33 billion with a monthly repayment of Ksh.800 million.
In addition, Equity is home to over 24,000 ECDE institutions and primary schools, and over 4,000 secondary schools
“On completion of the proposed transaction on 30th November 2022, all existing depositors of Spire Bank (other than remaining deposits from Mwalimu National Sacco) will become customers of Equity Bank Kenya and enjoy a wide range of products and services through Equity’s extensive infrastructure and channels including branches, agent network and digital self-service channels. We shall also explore other areas of collaboration for the benefit of both institutions and their members,” said Chairman of Mwalimu National Sacco, Joel Gachari.
Spire Bank, which is fully owned by Mwalimu National Sacco, reported a loss of Ksh.403.0 million in H1’2022, a decrease of 21.4 percent from Ksh.512.9 in H1’2021.
The Bank has been recording losses since 2013, when it last recorded a profit of Ksh.55.6 million. The losses have eroded Spire Bank’s shareholder’s funds, which currently stand at a paltry Ksh.9.6 million, with accumulated losses at Ksh.10.0 billion.
Additionally, the bank’s capital adequacy levels have also been adverse, with key ratios such as the core capital to liabilities ratio coming in at 40.8 percent, below the regulatory limit of 8 percent.
Similarly, the core capital to risk weighted assets came in at 33.4 percent, 43.9 percent below the regulatory limit of 10.5 percent while the liquidity ratio came in 6.8 percent.