Teachers to buy more Merali shares in Spire Bank

Loss-making teachers’ lender, Spire Bank, may cost Mwalimu Holdings more money as the Sacco seeks to increase its stake in the lender.

Spire Bank last year doubled its losses to Sh2.2 billion in the 12 months to December 2018, up from Sh1.12 billion recorded in 2017. It blamed the slide on deferred tax disclosures that will be written in its book over the next ten years.

The bank paid Sh1.5 billion in deferred taxes as it sought to balance its records with the Kenya Revenue Authority (KRA).

“The bank has 10 years to utilise these derecognised tax provisions against future profits as per the KRA rules. As management, we are optimistic the bank will recover this asset from taxes as it returns to profitability,” said Spire Bank Managing Director Norman Ambunya.

Loans issued reduced by 15 per cent from Sh5.2 billion in 2017 to 4.4 billion last year as the bank sought to cut down operating losses before tax by 53 per cent, from Sh1.6 billion to Sh746 million. Years of sustained losses have eaten into the teachers’ shareholders fund which shrunk from Sh1.1 billion in 2017 to a deficit of Sh1 billion that will require more funding from the Holding Sacco.

The bank said it will seek additional funds from a strategic buyer. However, the transaction will involve buying more shares in the loss-making bank before targeting external buyers.

According to the lender, Mwalimu Holdings will buy off additional stake from Merali and offer the same to a strategic investor.

“The shareholders are tracking an ongoing recapitalisation programme with a strategic investor already identified and the transaction is at an advanced stage,” said Chairperson Teresa Mutegi

 “Mwalimu National Holdings Ltd is in the process of buying out minority shareholder. The board remains optimistic for a return to profitability.” Last year, UK crypto lender, BlockBank walked out of a deal to buy Spire Bank after showing interest.

According to the lender, BlockBank had approached it but failed to prove it had money to seal the deal, going quiet after the announcement of the proposal.

“They had expressed interest to partner at the equity level. They were given conditions including proof of funds which they could not show,” Ambunya said. “They visited a number of banks and we were part of the banks they talked to.”