HF cuts lending by Sh4.8bn, shifts from real estate model

HF Group offices in Nairobi. FILE PHOTO | NMG 

By PATRICK ALUSHULA
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Summary

• Housing Finance (HF) reduced its lending by Sh4.89 billion on shift from real estate project financing to lending to individuals.
• The bank also slashed bad loans by Sh1 billion in a year when it put several properties on auction.
• This helped it to narrow losses by 81.6 percent to Sh110.1 million from a loss of Sh598.2 million the previous year, supported by a reduction in staff costs.

Housing Finance (HF) reduced its lending by Sh4.89 billion on shift from real estate project financing to lending to individuals.

The bank also slashed bad loans by Sh1 billion in a year when it put several properties on auction.

This helped it to narrow losses by 81.6 percent to Sh110.1 million from a loss of Sh598.2 million the previous year, supported by a reduction in staff costs.

Chief executive Robert Kibaara said the lender started shifting from the traditional business of lending to construction projects to issuing end-user mortgage customers.

The shift decelerated HF’s lending by 11.3 percent from Sh43.4 billion to Sh38.55 billion as the bank went in search of new opportunities in an environment of a slowed down property market.

“We decided to cut on lending to companies doing construction of houses because of uncertainty over whether they are going to sell the houses or not. We now lend more to end users who will reside in the house. This takes a bit of time but it is worth (it),” said Mr Kibaara.

Industry data showed HF opened 2019 with 5,079 mortgage accounts valued at Sh33.7 billion. Some 518 accounts had non-performing loans valued at Sh5.11 billion at the start of last year.

Its net interest income in that review period dropped by 13.2 percent to Sh1.97 billion on account of slowed lending.

However, the lender was also able to cut gross non-performing loans (NPLs) from Sh13.3 billion to Sh12.3 billion.

Mr Kibaara said HF was more aggressive in collecting debt, helping it receive Sh2.6 billion during the year, adding that part of the recoveries came from auctions.

In August, HF advertised for auction of 54 houses and commercial buildings worth Sh2 billion following defaults.

“Overall, we cut gross NPLs by over Sh1 billion since in the process of lending, a few other loans became non-performing,” he said.

Operating expenses dropped by Sh726 million or 17.1 percent to Sh3.51 billion, helping the lender to halt widening of the loss.

The fall in costs was hugely supported by 12.1 percent or Sh149 million drop in staff costs while loan loss provisioning was also cut by seven percent to Sh350.4 million. The lender laid off 36 employees in 2018.

Non-interest income, which is generated from fees and commission, dropped by 6.4 percent to Sh1.4 billion.