Britam tightens grip on Housing Finance

Housing Finance building along Kenyatta Avenue in Nairobi. Photo/Fredrick Onyango 

By BD REPORTER

In Summary

• Filings with the regulator show that British American increased its stake to 21.46 per cent in the year to December from 20.68 per cent in 2011 and 12.41 per cent in 2010.

British American Insurance has increased its stake in Housing Finance as the insurer and its business partner Equity Bank tighten their grip on the mortgage financier.

Filings with the regulator show that British American increased its stake to 21.46 per cent in the year to December from 20.68 per cent in 2011 and 12.41 per cent in 2010.

This pushed its total shareholding along with Equity’s 24.9 per cent to 46.51 per cent in December from 37.31 per cent in 2010, in what analysts attribute to a plan to exert greater influence in the running of the mortgage financier besides reaping from its growing dividends.

“The larger stake signals that British American and its partner are keen to have a bigger influence in HF and shows they are confident of the business,’’ said an analyst at Standard Investment Bank.

The enhanced stakes has also raised debate on whether the two investors could be angling for a complete takeover of the mortgage financier, a quest that Equity Bank has quietly expressed before as it sought a closer working relationship with HF.

In mid-2007, Equity Bank and British America Investment Company (BAIC) acquired a 24.9 per cent stake from the Commonwealth Development Corporation. They grew their shareholding to 32.4 per cent in 2008, taking advantage of the rights issue that the mortgage financier carried out to raise an additional Sh2.3 billion in which some anchor shareholders decided not to participate.

As a result, Equity Bank and its partner bought the 10.8 million shares that had been left on the table by the National Social Security Fund (NSSF) and the Government—earning them an extra 7.5 per cent stake.

The government has a 3.65 per cent stake in Housing Finance while NSSF has a 6.81 per cent holding. The mortgage financier announced a 19.4 per cent increase in net profit to Sh743 million in the year to December.

This prompted the firm to raise its dividend from Sh1.20 from Sh1.40, which earned British American and Equity Bank Sh69 million and Sh80 million respectively.

On paper, Equity Bank and BAIC exist as different entities but they are in the grips of personalities who are bound by common business and commercial interests through cross-ownerships in the two firms.

Peter Munga doubles as the chairman of Equity Bank and BAIC, while Benson Wairegi, the group managing director of BAIC is also a director of Equity whose chief executive officer James Mwangi is also an owner and board member in British American.

BAIC owns about 11 per cent of Equity Bank, making it the second largest single shareholder after Helios, which holds 24.4 per cent.

 

In 2010, Equity’s quest to tighten grip on the home loans firm sparked a vicious boardroom battle that led to the replacement of two directors. This left the board in the hands of Mr Wairegi, Mr Munga and Prof Shem Migot Adhola, who are all directors of Equity.