Mwalimu Sacco payout to Equity for Spire deal drops to Sh400m

EquityGroup CEO James Mwangi during the release of the lender's quarter 3 results at the bank's headquarters on November 22, 2022. PHOTO | DIANA NGILA | NMG  

By PATRICK ALUSHULA More by this Author  

Mwalimu National Sacco paid Equity Group Sh400 million as part of the deal that saw it hand over the

undercapitalised Spire Bank to the country’s largest bank.

The figure, a drop from the earlier estimate of Sh500 million, was based on the actual value of loans and deposits that were passed to Equity by midnight of January 31 when the changeover concluded.

Equity’s executive director Mary Wamae said the bank took over deposits amounting to Sh1.3 billion and loans valued at Sh900 million, necessitating the Sh400 million top-up in the unique transaction.

Read: Teachers learn Sh10bn loss lesson in Spire deal

The deposits were in the hands of about 20,000 customers while the loans were spread out in about 3,000 accounts, all passed to Equity.

“The bank received in cash the difference between the deposits and the loan book, which was about Sh400 million,” said Ms Wamae.

Mwalimu Sacco had initially estimated that it was going to hand to Equity a loan book of about Sh1.75 billion and deposits of Sh1.94 billion.

The sacco had kept Sh510.7 million in an escrow account to settle the transaction that was pegged on what was going to be the difference between the assets and liabilities being absorbed by Equity.

“We felt honoured we could be called upon to provide a national solution,” said James Mwangi, Equity’s chief executive.

Mwalimu Sacco paid Sh2.4 billion to businessman Naushad Merali, now deceased, in a controversial transaction in 2014 for a 75 percent stake. The sacco acquired the residual stake in November 2020.

The sacco said before that its woes in the bank started after Merali withdrew his deposits worth Sh1.7 billion — at that time, an equivalent of a fifth of all the bank’s deposits.

The bank lost Sh2.2 billion in the three years following Merali’s move, with the withdrawal of 81.3 percent of the cash or Sh1.79 billion happening in under a year.

Read: Equity will get up to Sh510m for acquisition of Spire Bank

Spire had soaked in accumulated losses of about Sh10 billion by the time Equity agreed to the deal which Mr Mwangi described as a “transaction of empathy.”

The spire-Equity transaction was initiated under the Insolvency Act due to the Sacco’s inability to keep sustaining the loss-making bank.

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