Frank Ireri, Housing Finance CEO, says market conditions have largely impacted a great deal on the performance.

HF Group posted major drop in half-year period pre-tax profit to Ksh12.6 million for the period ending June 30, 2018, from Ksh231 million in 2017, blaming the decline on a slowdown in business caused by the low controlling interest rates.

Total interest income declined by 13.1% over the period under review to Ksh3.194 billion down from Ksh3.679 billion recorded in 2017. Correspondingly, net interest income also declined by 13.8% from Ksh1.5 billion in a similar period in 2017 to Ksh1.3 billion. This is attributable to the interest rate capping that took effect in April.

Total operating expenses increased by 9.4% to Ksh1.91 billion up from Ksh1.75 billion on the back of increased provisions for the non-performing loans, ICT and marketing expenses aimed at bolstering its digital banking strategy. Non-performing loans increased during the period to Ksh8.86 billion from Ksh7.9 billion in 2017.

Customer deposits declined by 3% to Ksh36.22billion down from Ksh37.35 billion recorded in 2017. Loans and advances to customers also decreased by 9.8% from Ksh52.76 billion in 2017 to Ksh 47.59 billion in 2018. The decline in loans is attributable to strategic de-risking following the interest rate capping during the period under review that has made risk pricing of long-term loans impractical.

“Market conditions have largely not changed and this has impacted a great deal on the performances by various units within the group including our banking subsidiary HFC and property development subsidiary HFDI,” said HF outgoing Group Managing Director Frank Ireri.

“The management shall continue to focus on cautious growth of loan sales, disbursements, and a conservative approach to cost and cash flow management as it continues to address the liquidity challenge,” he added.

Mr Ireri is leaving the company in March 2019 after opting not to renew his contract as CEO mortgage lender.

Strategy review

Based on the market outlook, the Group has reviewed its business strategy and shifted its focus to growth through leveraging digital channels, an initiative which is poised to attract return on investment in the next 18 – 24 months.

The group has also up-scaled full service banking proposition targeting SMEs and retail customers, refocused on service delivery and customer experience which has seen the launch of a digital financial services platform dubbed “HF Whizz” that is set to accelerate the growth of the bank’s digital banking strategy.

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Earlier this month, the group embarked on organizational restructuring program in line with its recently launched digital banking strategy. The process revolved around the merger, redundancy and creation of new roles in a move that is poised to improve the financial services group’s responsiveness and operational efficiencies. The process resulted in the redundancy of up to 9% of the group’s total workforce at a cost of over Ksh100 million that is expected to be recouped through savings in reduced staff cost.

“The ensuing market conditions have prompted the management to rollout the new strategic thinking around all businesses, a move we believe will improve the group’s performance moving forward,” said Mr Ireri.

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