Soaring bad loans pull down Housing Finance earnings

Monday November 27 2017

HF Group’s Rehani House head office on Kenyatta Avenue in Nairobi. FILE PHOTO | NMG

HF Group’s Rehani House head office on Kenyatta Avenue in Nairobi. FILE PHOTO | NMG 

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Mortgage lender Housing Finance (HF) #ticker:HFCK is looking to cost cutting after its net profit for the first nine months of the year plunged 81 per cent as non-performing loans swelled this year following the introduction of interest rate caps.

The group’s profit after tax dropped to Sh159.7 million in the nine months to September compared to the Sh837 million it made in the same period last year.

Its interest income from loans dropped 16.7 per cent to Sh5.1 billion contributing to the 25 per cent in total operating income as total operating expenses were barely changed year-on-year.

The bank said it had embarked on “cost management measures” that it expected would help it reduce its expenses. It did not say which specific measures they were undertaking.

Gross non-performing loans jumped 47.3 per cent to Sh8.1 billion in what the company said was a “slowdown in the property market and overall unfavourable macro-economic conditions”.

The real estate sector has been hurt from a politically charged environment that kept investors away for most of this year and the adverse effects of an interest rate caps law introduced just over a year ago.

Housing prices in Kenya dropped the most in three years in the third quarter of this year, the Kenya Bankers Association said last month.

HF Group chief executive Frank Ireri said in a statement accompanying the nine-month financial statements that he expected the company to perform better in the last quarter of the year when two of its projects — Komorock Heights and Richland — are completed.

Mr Ireri said HF would also benefit from funds that will be released once pending transactions are completed as expected when the government normalises the property conveyance process at the Ministry of Land registries.

The ministry has been carrying out reforms with a view to improving the process of land transactions and ensuring the sanctity of title deeds as well as reducing fraud.