The Housing Finance premises. [File, Standard]
Mortgage lender Housing Finance Group’s net loss widened to Sh1.7 billion in the year ending 2020.
This was an increase of 1,450 per cent compared to a loss after tax of Sh110 million that the mortgage
lender posted in 2019. This follows a tough operating environment for the listed lender that saw its revenues decline even as its expenses ballooned.Earlier, while releasing the Group’s financial results for the third quarter of 2020, the lender’s Chief Executive Robert Kibaara said the company’s bottom line had been adversely impacted by Covid-19.
“As a result, HF Group projects that the net earnings for the year ended December 31, 2020, are expected to be substantially lower compared to the earnings reported for the same period in 2019,” he said.
Kibaara did not respond to The Standard Digital when asked to give reasons for this dismal performance. The lender’s revenue fell by a third, from Sh3.37 billion to Sh2.38 billion.
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Its expenses, however, rose by 15 per cent from Sh3.51 billion to Sh4.05 billion.
HF management attributed the growth in loss to several one-offs, recapitalisation, huge provisions for bad loans, diversification from real estate and budget re-orientation for the business model to retail banking. The lender earned Sh3.7 billion as interest on loans and advances, a drop of 27 per cent from the Sh4.7 billion that it got in the previous year.
As a result of the poor run, the lender’s capital adequacy strength, particularly the core capital to total risk-weighted asset - a key measure of a bank’s financial strength - declined to 7.49 per cent.
Such a performance is categorised as ‘unsatisfactory’ as the minimum statutory limit is 19.50. Although real estate, like the rest of the economy, was negatively affected by the Covid-19 pandemic, it did not bear the brunt of the outbreak like such sectors as education, tourism or transport.
In the second quarter of last year, economic activities in the real estate sector increased by 2.2 per cent at a time when most of the other sectors were in the red, with the size of the economy contracting by a revised 5.5 per cent.
The group's total non-performing loans (NPLs), or loans that have not been serviced by more than three months, declined from Sh12.3 billion in 2019 to Sh10.8 billion.
The industry trend was such that NPLs increased from Sh52.6 billion in June 2020 to Sh57.7 billion. Unlike other lenders, HF loan loss provision increased marginally to Sh405 million from Sh350 million.
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