Kenya’s smallest bank will wind up banking operations in a deal that transfers most of its business to Kenya’s second-largest bank, by market share.
A notice by Spire Bank states that all its depositors, except its main shareholder, will become customers of Equity Bank Kenya. Spire had 20,000 depositors, with about 3,700 loan customers and an equivalent of Kshs 1.32 billion of deposits will be transferred to Equity along with loans worth Kshs 945 million.
Equity term the transaction as “immaterial” to their group financial statements as it only adds 0.25% to their deposits now at Kshs 522.7 billion, but which will ensure that Spire customers enjoy uninterrupted banking services. Spire will pay Equity a cash amount, estimated at Kshs 468 million, to bridge the difference in the loans and the deposits transferred.
As per the agreement, Spire will cease offering bank services and deal with its creditors and staff. Spire’s parent, the Mwalimu National Sacco, has over Kshs 60 billion in assets but will walk away from the ill-advised venture into banking – that never made a profit from when it was acquired as Equatorial Commercial Bank – confident that the exit decision is in the best interests of its customers and stakeholders.
EDIT: Jan 27: The Government has ordered an inquiry into Mwalimu National Sacco’s bid to acquire Equatorial Commercial Bank. The Commissioner of Co-operatives has appointed an inquiry team report to him following a protest by the Co-operative Alliance of Kenya (CAK)
Last week, Mwalimu SACCO became the majority shareholder of Equatorial Commercial Bank (ECB), acquiring 51% of the bank for Kshs 1.6 billion (~$18 million). The acquisition was cleared after no objections were received from the Central Bank of Kenya (CBK), Competition Authority of Kenya (CAK) and Sacco Societies Regulatory Authority (SASRA). There was another objection, but not from any of the regulators, who were aware of the issues raised.
Mwalimu with Kshs 24.5 billion of assets (2013), acquired the stake in ECB, the country’s 27th largest bank (Kshs 15 billion) which has been boosted by an earlier merger with Southern Credit Bank. Mwalimu will have three (3) seats on the board of ECB, but the Society is not converting into a bank nor merging with ECB. Due diligence of the financial and legal processes was done by Ernst and Young and Mose & Mose Advocates.
This comes two years after the LAPTrust, a pension scheme and the Kenya Tea Development Agency acquired a combined 22% stake in Family Bank – and LAPTrust estimated their stake was worth 1.6 billion in 2013, just two years after paying a 1/4 of that amount.