Loss-making teachers’ lender Spire Bank is facing fresh scrutiny after the Senate launched an inquiry seeking an explanation on its worsening financial state.
The inquiry, through a statement by the Senate Departmental Committee on Finance and Budget, also seeks to establish the current ownership of the bank and the efforts to find a strategic investor.
“Explain plans by the bank to improve on its interest income given that it recorded a 90 per cent default rate which is seven times higher than the industry rate of 13.1 per cent pushing gross non-performing loans to Sh2.69 billion out of a loan book of Sh2.96 billion,” said the statement signed by Nominated Senator Millicent Omanga.
Owing to the default, the bank had found itself in breach of capital-related ratios set out by the Central Bank of Kenya (CBK). “Explain whether or not the bank has managed to inject the much-needed capital given that its liquidity ratio is at 6.6 per cent, below the regulatory base of 20 per cent,” said the statement.
Spire Bank Acting Managing Director Brian Kilonzo, in defence of the lender, termed the default rate quoted in the Senate letter as “erroneous.” He said they were actively scouting for an equity investor or a long term debt financier to improve their liquidity.
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“We are scouting for an equity investor or long term debt financier to improve our capital and liquidity ratios and grow lending business to generate more income. The quoted default rate is erroneous as the published loan book was net loans whereas the non-performing loan figure is gross,” said Kilonzo in a response to The Standard.
The inquiry also sought to know why Spire Bank made a net loss of Sh556 million for the first six months of this year compared to a net profit of Sh81.48 million posted in a similar period last year.
Kilonzo said they made an “exceptional income” from debt recovery in the first quarter of 2019, which was not repeated in 2020, besides a reduced income on a reducing loan book. Early this year, two main shareholders businessman Naushad Merali and Mwalimu National Sacco announced plans to sell their stakes.
Kilonzo said the existing shareholders were willing to offload some equity stake once an equity investor was found. “The bank is scouting for an equity investor to inject additional capital to support business operations and growth. The existing shareholders are willing to offload some equity stake,” he said.