Kenya’s HF Group Warns of Lower FY Profit on Declining Interest Income

Kenya Literature Bureau MD, Victor Lomaria and HFC MD, Sam Waweru sign a partnership agreement. Photo credit: Kenyan Digest

Kenya’s HF Group Warns of Lower FY Profit on Declining Interest Income

Mortgage finance provider in Kenya, HF Group Plc on Friday predicted its 2018 net earnings would be 25 per cent lower than the previous year, after posting a nine-month loss.

The bank in a statement said the declining interest income after a cut in the central bank rate led to lower lending rates, and higher non-performing loans weigh on its performance.

The Central Bank cut its key lending rate to 9.00 per cent in July from 9.50 per cent, and has left it unchanged since then.

Kenya has had a cap on commercial lending rates in place since late 2016 and set at 4 percentage points above the central bank rate.

The bank said “Further, the trading environment continued to be unfavourable, leading to a slowdown in the real estate sector credit growth.”

“The tough operating circumstances have led to an increase in the non-performing loans position, which has also adversely affected the business performance.”

The bank reported a pretax loss of 325.65 million shillings ($3.18 million) for the nine months to end-September, compared with a 231.87 million shilling profit a year earlier.

Net non-performing loans rose to 5.15 billion shillings from 5.12 billion shillings, while net interest income fell to 1.8 billion shillings from 2.18 billion shillings.

HF Group said a redundancy exercise it undertook during the period also increased its staff costs due to one-off payments to those laid off.

The bank said its liquidity ratio fell to 22.89 per cent from 26.03 per cent, against a statutory minimum of 20 per cent.

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