Billionaire Nashaud Merali withdrew Ksh1.7 billion from Spire Bank, days after he had sold it to Mwalimu National Sacco. The withdrawal caused a chain of reactions that pushed the bank to near collapse.
Merali's withdrawal was a fifth of the bank's Ksh8.54 billion deposits. This prompted other lenders to take out their money.
This information was revealed by Spire Bank's top officials during a parliamentary probe on April 28, 2021.
Spire's lending power was crippled as it was backed into losses that wiped out its core capital. The bank lost billions of shillings in customer deposits.
After Merali's move, the bank lost a further Ksh2.2 billion. Withdrawal of 81.3 percent or 1.79 billion of the cash happened in one year.
The billionaire's move was viewed as a vote of no confidence against the bank. This fueled previous concerns that the businessman sold the teachers a dead bank after pocketing Ksh2.4 billion for 75 percent of the financial entity.
"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 Committee for Finance and Budget.
"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 deposits at the bank cut back its lending power by 66 percent 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 to Ksh8.4 billion which wiped out all shareholder capital which now stands at negative Ksh1.8 billion.
The bank is no longer lending.
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