Mortgage lender Shelter Afrique has issued a profit warning attributed to increased provisions for bad loans.
This comes after a forensic audit confirmed allegations of creative accounting and subprime lending at the financier.
Shelter
Afrique, which has listed a Sh5 billion bond on the Nairobi bourse,
says it expects earnings for the period to December 2016 to drop by more
than 25 per cent attributed to impairment costs for non-performing
loans.
“The main reason for the lower earnings in the
restated 2015 results and 2016 is a sharp increase in the level of
impairment charges to provide for expected losses from the portfolio,”
Shelter Afrique said in a trading update.
The pan-African housing financier posted a net profit of $3.1 million in 2015, compared to $0.45 million a year earlier.
Alleged book-cooking
Deloitte was last year invited to conduct an in-depth
review of Shelter Afrique’s books after the lender’s former head of
finance Godfrey Waweru blew the whistle on alleged book-cooking at the
lender.
The Deloitte report, adopted by the financier’s
board in February, raised the flag on inadequate loan loss provisions,
queries on loan swaps for non-performing loans, and discrepancies on
Shelter Afrique’s loans software platform.
Ratings
agency Moody’s in November downgraded Shelter Afrique’s long-term
issuer rating from Ba1 to Ba3, and placed it on review for further
downgrade.
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