Housing Finance has announced a 4% growth in profit after tax of Kshs250 million up from Kshs241 million in the second quarter of 2012. The firm’s credit risk and cost management continued to support growth despite a slowdown in the mortgage sector.

A strategic move by the mortgage financier to protect existing customers, by only adjusting its lending rate by only 2.5% to 16.5% has continued to impact positively on its loan book. The gross Non Performing Loan book dropped to Kshs1.5 billion from Kshs1.6 billion. The firm also maintained costs at 6% year on year despite the high inflation rate which currently stands at 10%. Operating expenses increased to Kshs571 million from Kshs541 million in 2011.

Housing Finance, Managing Director Frank Ireri said the firm will continue to focus on acquisition of stable low cost, long term funds to sustain growth. He said the firm has already secured Kshs1.1 billion off shore funds for its mortgage business. Housing Finance recently signed a Kshs 850 million ($10 Million) bilateral term loan with the London-based Ghana International Bank PLC (GHIB) to support the firm’s mortgage lending business.

“One of our biggest challenges has been interest expense on deposits which has continued to increase year on year, thereby affecting our profit margin,” said Mr Ireri. The cost of funds continued to weigh heavily on performance of the firm with interest on customer deposits increasing by 260% to Kshs 1.1 billion up from Kshs 312 million in 2011.

The interest on customer deposits, which currently stands at Kshs 21.9 billion, averaged 11.8% in 2012 up from 4.5% in 2011. Mr Ireri said the reduction in the Central Bank Rate (CBR) will reduce the cost on corporate deposits. Housing Finance last week joined the clearing house paving way for the company to operate current accounts.

The introduction of Housing Finance current account is expected to broaden the firm’s funding base and reduce operating costs. “Operating current accounts will enable Housing Finance access stable financing which will insulate the business from current market fluctuations,” said Mr Ireri. Mortgage sales dropped during the period by 27% to Kshs 4.8 billion from Kshs 6.5 billion in 2011. “Disbursement of new loans totalling Kshs 3.5 billion has been slow due to the high interest rate regime,” said Mr. Ireri.

The firm is also looking at increasing its participation in property development through its subsidiary Kenya Building Society (KBS). Despite the slowdown in mortgage sales, the firm believes the market will recover in 2013 after the general elections.

“Housing Finance intends to increase its participation in its involvement on the supply side of residential middle and lower income housing in the current financial year,” said Mr Ireri. KBS is involved in the development of phase five Komarock housing project and the Kikambala and Kisaju affordable housing projects. KBS is expected to become a major contributor to the firm’s bottom line by 2015.


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