Housing Finance posts Sh474.44mn in profits

Integrated financial services provider, Housing Finance (HF) has announced an after tax profit of Kshs 474.44 million, reflecting a 19 percent growth over the same period in 2013.

Despite a difficult trading period characterized by high cost of credit, the firm’s income diversification strategy has continued to sustain growth.

The group’s total-interest income increased by 9 percent to kshs 2.91 billion from kshs 2.77 billion in 2013. The firm’s however posted an impressive 241 percent jump in total non-interest income to kshs 506.29 million from kshs 148.40 million in 2013 as a result of contributions from its two key subsidiaries, Kenya Building Society and Housing Finance Insurance Agency.

HF also realized income for the first time from forex trading which added Kshs 17.09 million to its non-interest income.

Commenting on the results, Housing Finance, Managing Director, Mr Frank Ireri said the 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 Mr. Ireri.

The banking arm of HF has been growing at a rate of 6 percent, year on year, against a 15 percent annual growth for the Group.

Mr. Ireri said the firm will 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,” said Mr. Ireri.

Loans and advances to customers increased by 19 percent to Kshs 38.80 billion up from Kshs 32.47 billion during a similar period in 2013.

HF managed to gain Kshs 500 million in new business from Ezesha, the new home ownership product which enables customers to access up to 105 percent financing.

Customer deposits increased to kshs 27.66 billion from kshs 25.84 billion during the period under review. The Group is now 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. Expensive deposits have seen HF’s interest margin has dropped to 4.6 percent from 5.9 percent.

The ongoing strategy to shed off expensive deposits has reduced liquidity to 25 percent down from 33 percent. Mr. Ireri said the firm is on course to increase its liquidity level by the third quarter of the year following a successful deposit mobilization campaign

Total operating expenses increased to kshs 1.16 billion from kshs 956.55 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 kshs 3.87 billion from kshs 2.94 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 Mr. Ireri.

Despite increasing its retained earnings to Kshs 2.3 billion in 2014 up from kshs 1.4 billion an year ago to cater for its growth plans, the Group has issued a Kshs 0.75 interim dividend.

Mr. Ireri said the firm does not plan to market its Kshs 20 billion bond issue in the short term as the debt market is still expensive. Despite the successful Eurobond, the 90 day Treasury bill, is trading at a high of 11 percent. In November 2013, Housing Finance received approval from the Capital Markets Authority (CMA) to issue a Kshs 20 billion Medium Term Note, with the offer valid until 2016.

Mr. Ireri said the firm plans to leverage on its partnership with Britam to explore joint venture projects and explore the possibility of issuing a joint REITs. Housing Finance has received a license to operate as a Real Estate Investment Trust (REIT) Trustee from the Capital Markets Authority.

Britam recently announced plans to acquire Equity Bank’s 24.76 per cent shareholding in Housing Finance to bring its direct and indirect control to approximately 46.08 per cent of the issued share capital of the Company. The transaction is subject to approval by the Capital Markets Authority and Central Bank of Kenya.