Billionaire businessman Nashaud Merali withdrew Ksh1.7 billion from Spire Bank, days after he had sold the financial entity to Mwalimu National Sacco.
The move triggered the beginning of collapse for the bank that was the first teachers-owned bank in Kenya.
The businessman had withdrawn a fifth of the bank’s Ksh8.54 billion deposits and was viewed as a vote of no confidence against the bank. This led other lenders to withdraw their money.
Spire Bank’s top officials told the Senate Committee for Finance and Budget on April 28, 2021, that it lost its lending power and made losses that wiped out its shareholder capital. The financial entity lost billions of shillings in customer deposits.
It lost a further Ksh2.2 billion where 81.3 percent or 1.79 billion of the cash happened under a year.
Merali’s move fueled prior concerns that he sold a dying bank to the teachers after they paid him Ksh2.4 billion for 75 percent of the bank.
“One thing we are aware of is that when Merali was still part of the bank, he had huge deposits there to the tune of Ksh1.7 billion which he later withdrew in 2016,” Mwalimu National Sacco chairman Wellington Otinde told the Senate
“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 bank,” he added.
The decline of deposits at the bank cut back its lending power by 66 per cent over the past four years to Ksh2.55 billion. This stunted the bank’s ability to grow its revenue.
For the year ended December 2020, Spire Bank lost Ksh1.2 billion compared to Ksh472 million in 2019.
The bank was left with a Ksh1.8 billion negative asset base risking its Ksh4.79 billion customer deposits.
Mwalimu Sacco which is owned by teachers acquired 75 percent of the bank when it was called Equatorial Commercial Bank and was owned by Merali.
The sacco acquired the remaining 25 percent of the bank in 2020, giving it full control of the loss-making.
Over the years the bank has accumulated losses totaling Ksh8.4 billion which wiped out all shareholder capital which now stands at negative Ksh1.8 billion.
The bank is no longer lending.