NAIROBI, Kenya, Jul 17 – Housing Finance has posted a marginal growth of four percent in profit after-tax of Sh250 million up from Sh241 million in the second quarter of 2012.
Despite a slowdown in the mortgage sector, the firm’s credit risk and cost management measures continued to support growth.
A strategic move by the mortgage financier to protect existing customers by only adjusting its lending rate by 2.5 percent to 16.5 percent has continued to impact positively on its loan book.
The gross Non Performing Loan book dropped to Sh1.5 billion from Sh1.6 billion during a similar period in 2011.
The firm also maintained costs at six percent year-on-year, despite the high inflation rate which currently stands at 10 percent, while operating expenses increased to Sh571 million from Sh541 million in 2011.
Housing Finance Managing Director Frank Ireri said the firm would continue to focus on acquisition of stable low cost, long term funds to sustain growth.
The firm has already secured Sh1.1 billion off shore funds for its mortgage business and recently signed a Sh850 million ($10 million) bilateral term loan with the London based Ghana International Bank PLC (GHIB) to support the firm’s mortgage lending business.
“One of our biggest challenges has been interest expense on deposits which has continued to increase year on year, thereby affecting our profit margin,” Ireri said.
The cost of funds continued to weigh heavily on performance of the firm with interest on customer deposits increasing by 260 percent to Sh1.1 billion up from Sh312 million in 2011.
The interest on customer deposits, which currently stands at Sh21.9 billion, averaged 11.8 percent in 2012 up from 4.5 percent last year.
Ireri said the reduction in the Central Bank Rate (CBR) will reduce the cost on corporate deposits.
Housing Finance last week joined the clearing house, paving way for the company to operate current accounts.
The introduction of Housing Finance current account is expected to broaden the firm’s funding base and reduce operating costs.
“Operating current accounts will enable Housing Finance access stable financing which will insulate the business from current market fluctuations,” Ireri said.
Mortgage sales dropped during the period by 27 percent to Sh4.8 billion from Sh6.5 billion in 2011.
“Disbursement of new loans totalling Sh3.5 billion has been slow due to the high interest rate regime,” Ireri said.
The firm is also looking at increasing its participation in property development through its subsidiary Kenya Building Society (KBS), which is expected to become a major contributor to the firm’s bottom line by 2015.
“Housing Finance intends to increase its participation in its involvement on the supply side of residential middle and lower income housing in the current financial year,” Ireri said.
KBS is currently involved in the development of phase five Komarock housing project and the Kikambala and Kisaju affordable housing projects.