HF Group has reported a 27 per cent growth in profits for the half year of 2016 buoyed by rise in interest income from its banking subsidiary HFC, and income from housing projects by its property investments and development subsidiary HFDI.
The property and financial services provider saw its half-year profit before tax increase to Sh889.7 million, a 27 per cent increase compared to Sh699.6 million over a corresponding period in 2015.
The group’s profit after tax and exceptional items rose 27 per cent to Sh612.6 million from Sh485.1 million reported in the same period in 2015.
“This growth was attributed to increase in net interest income that rose from Sh1.71 billion in 2015 to Sh2.09 billion in the six months to 30th June 2016,” said HF Group managing director, Frank Ireri on Tuesday while announcing the results.
The company’s loan book grew by 7 per cent to Sh53.5 billion from Sh49.9 billion in a similar period in 2015 whilst customer deposits on the other hand increased by 6 per cent to Sh39.8 billion from Sh37.4 billion in 2015 on account of increased customer numbers.
The Group also increased its holding of government securities from Sh516 million to Sh3.7 billion both to take advantage of the improved yields on Government paper as well as building a sinking fund towards liquidation of the first tranche of its Corporate Bond expected in October 2017.
The Group’s non-performing loans increased during the period to Sh5.3 billion from Sh4.1 billion in 2015 on account of delayed liquidation of some project loans whose conveyance process is in progress and expected to be paid off during the year.
Mr Ireri said that this was expected to reduce gross non-performing loans level to 7 per cent of the total loan book.
The firm has remained robust despite the rising negative macroeconomic drivers in the real estate sector that have shaken the operations of many financial service providers.
According to the latest reports by the Central Bank of Kenya, the real estate sector recorded the highest increase in Non-Performing Loans (NPLs) over the quarter by Sh5.9 billion or 42.3 per cent.
They attributed this to slow uptake of housing units, job losses and delayed salaries in the public sector.
“We are expanding our branch network and banking channels to serve more clientele plus diversifying our operations in line with the long-term strategic plan to ensure we remain solid,” Mr Ireri said.
Additionally, the quality of Core Residential Mortgage business remained stable.
The total operating expenses increased from Sh1.36 billion to Sh1.6 billion on account of increased amortization costs due to commissioning of the new core banking system and other business software earlier in the year.
The company achieved annualised earnings per Share of Sh3.51, a 26 per cent increase compared to Sh2.79 reported over a similar period last year.
The Group, through its banking subsidiary HFC has also embarked on a branch expansion plan in areas with high potential and with clientele who fit into their long-term strategic plan in support of HFC commercial banking strategy.
The new branches opened during the period are Komarock, Machakos, River Road, Hurlingham, Nanyuki and Ongata Rongai which brings the total number of operational branches to 24.