16 July 2014

Kenya: Housing Finance Posts Sh474.44 Million H1 Profit

Nairobi — Housing Finance (HF) has posted 19 percent net profit growth in the first half of 2014 to Sh474.44 million compared to the same period last year that recorded Sh402.6 million.

The group's loans and advances to customers increased by 19 percent to Sh38.80 billion up from Sh32.47 billion during a similar period in 2013 while total interest income increased by nine percent to Sh2.91 billion from Sh2.77 billion same period last year.

Total non-interest income grew by 241 percent to Sh506.29 million from Sh148.4 million compared to the same period last year owing to realising income for the first time from forex trading which added Sh17.09 million to the non-interest income.

Commenting on the results, HF Managing Director Frank Ireri said plans are on course to establish a holding company to further boost its income diversification strategy.

"Plans are at an advanced stage to establish a non-trading holding company that will enable Housing Finance launch new lines of businesses that will reduce our reliance on interest income," said Ireri.

Ireri said the firm will also undertake a rebranding exercise during the year in line with the new strategic direction.

"The rebranding exercise will enable Housing Finance cater more efficiently to its current customer demands, rejuvenate the internal culture while reflecting the larger, more sophisticated company it has now become," Ireri stated.

HF managed to gain Sh500 million in new business from Ezesha in the period under review - the new home ownership product which enables customers to access up to 105 percent financing.

Customer deposits increased to Sh27.66 billion from Sh25.84 billion during the period under review with the firm shifting its focus on growing deposits from savings accounts and current accounts to reduce reliance on expensive corporate deposits that have weighed down interest margins for the firm.

Ireri said the firm is on course to increase its liquidity level by the third quarter of the year following a successful deposit mobilisation campaign.

Total operating expenses increased to Sh1.16 billion from Sh956.55 million as a result of ongoing investment in five new branches, staff costs and investment in the new core banking system which is set to go live by the end of the year.

Gross non-performing loans and advances increased to Sh3.87 billion from Sh2.94 billion in 2013 as a result of the conveyance system at the lands office.

"The rise in the non performing portfolio is due to ongoing reforms at the lands office which are aimed at improving efficiency of the department in the long term. We expect the NPL level to drop within the next two quarters once the changes at the lands office begin to be felt by the industry," said Ireri.

The group has issued a Sh0.75 interim dividend.

Ireri said the firm does not plan to market its Sh20 billion bond issue in the short term as the debt market is still expensive.

In November 2013, Housing Finance received approval from the Capital Markets Authority (CMA) to issue a Sh20 billion Medium Term Note, with the offer valid until 2016.

Ireri said the firm also plans to leverage on its partnership with British American Investment Company (Britam) to explore joint venture projects and explore the possibility of issuing a joint Real Estate Investment Trust (REIT) after it received a license to operate as a REIT Trustee from CMA.

Britam recently announced plans to acquire Equity Bank's 24.76 percent shareholding in HF to bring its direct and indirect control to approximately 46.08 percent of the issued share capital of the Company.

The transaction is subject to approval by the CMA and Central Bank of Kenya.


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