HF Group posted a first-quarter profit before tax of Sh129 million during the quarter to March 31, 2017, a 73% drop compared to Sh470 million over a similar period in 2016.
The Group attributed this drop in performance to the interest rate capping law that resulted in significant drop in interest-related income and an increase in interest related expenses. Net interest income contributes 82% of the Group’s total income.
During the period, net interest income declined by 20% from Sh1billion in a similar period in 2016 to Sh798 million.
The company’s loans and advances to customers increased by 2% from Sh53.4 billion to Sh 54.6 billion.
Non-performing loans increased during the period to Sh7.78 billion from Sh4.5 billion in 2016 due to stalled property transactions at the lands office and unfavorable macro-economic conditions.
Total operating expenses increased by 9% on the back of increased provisions for the non-performing loans.
The Group’s liquidity has been maintained above the statutory minimum despite the challenges experienced during the quarter. The liquidity position is expected to further improve on the back of debt facilities of approximately Sh4 billion expected by Quarter 3.
The Group MD, Frank Ireri said that the Group performance was expected to pick up in the second half of the year when Komorock Heights and Richland projects are completed.
He also explained that normalisation of the property conveyance process at the Ministry of Lands Registries will benefit the Group by releasing funds tied in incomplete transactions as well as improve asset quality as financed projects are closed.
“We expect the transactions at the lands office to normalise during the second half of the year, which will enable us to close the projects we financed which, though completed the conveyance process has been delayed for a very long time,” said Ireri.
During the quarter, the Group’s banking subsidiary HFC rolled out it's MasterCard debit card which is set to increase the Group’s non-interest income and also give customers enhanced accessibility and convenience.
Ireri said that the Group will continue to leverage on its new core banking system to roll out alternative channels. The bank is currently piloting its internet banking, mobile platform and interactive website which are set for launch in the second half of the year.