Housing Finance has reported an after tax profit of KES 396 million in the 3rd quarter of 2012 through a difficult trading business environment the banking sector has been experiencing. Profits dropped marginally by 2.7 % compared to the previous year when it posted KES 407million.

Total interest income increased by 52% to KES 3.71 billion up from KES 2.44 billion realized the previous year. The growth was in line with the firm’s strategy not to pass on all costs of credit to customers. Total operating expenses however declined marginally by 4% to KES 999 million from KES 1.03 billion.

High Interest Rates

Housing Finance Managing Director Frank Ireri said the scramble for players to keep pace with credit growth in a high cost of funding environment led to an increase in interest rates for borrowers in the market.

“The results for the third quarter are on the whole pleasing given the continued difficult trading environment. The period was quite difficult for our customers who were exposed to the rising cost of credit,” said Mr. Ireri.

 The firm’s total interest expenses increased by 123% to KES 2.35 billion up from KES 1.05 billion in the same period in 2011.  Customer deposits increased by 29%  to KES 24.01 billion from KES 18.65 billion during a similar period in 2011. Loans and advances increased to KES 28.8 billion up from KES 22.9 billion representing a 26% growth.

Gross Non Performing Loans (NPLs) as a result of rising interest rates increased to KES 1.97 billion during the period compared to KES 1.57 in September 2012, representing a 26% increase.

 The increase in the NPL is attributable to the increase in the interest rates in the market as a result of the tight monetary policy in the market. The situation has since improved, due to lower interest rates in the market currently.

“Customers who were experiencing difficulties servicing at 23 percent are now comfortably servicing at 18 percent and hence improving quality of the book,” said Mr. Ireri.”

The mortgage financier's recent bond issue raised KES 5.2 billion against a target of KES 2.9 billion representing a 79% over-subscription. The money will be used for onward lending to clients and to increase Housing Finance's participation in housing supply. Following the success of the bond issue, Housing Finance plans to re-introduce part fixed mortgages as it moves to grow its mortgage business. The move is expected to cushion customers from interest rate fluctuations during uncertain times.

Agency Banking and Housing Supply

The recent agency banking agreement with Postbank is also expected to boost the deposit mobilization campaigns for the Company.  The recently launched current accounts will also shore up more business and expansion opportunities. The mortgage financier is targeting the lower and middle income segments of the market where there is an acute housing shortage.

 Ireri said Housing Finance intends to focus on two key growth pillars which are funding and supply of houses. On the funding, he says, Housing Finance will explore a mix of affordable funding options and on the supply side, they will ensure that there are houses in the market which the Kenyan populace can afford.