Money Markets
Housing Finance posts 64pc rise in net profit
Housing Finance chief executive officer Frank Ireri at a past function. The mortgage lender has announced a Sh622m net profit for year ended December 2011, a 64 per cent increase from previous year's profit. File
Posted Wednesday, February 22 2012 at 10:57
Mortgage lender Housing Finance has reported a 64 per cent jump in net profits to Sh622 million for 2011 on increased lending to both developers and home buyers, but projects a tough operating environment this year.
The firm's mortgage book grew Sh5.8 billion in the year growing its mortgage book to Sh25 billion in a period where interest rates in the market shot up, sharply depressing appetite for credit.
HF has declared a Sh1.20 dividend for the year up from Sh0.70 as it juggles between earnings retention to grow its lending capacity and rewarding its shareholders.
"We are optimistic that we can maintain the growth curve in the current financial year on the back of long term financing which will shield the company from current market fluctuation in the money market," Frank Ireri, the managing director of the lender, told an investor briefing.
He said the firm's net interest income rose to 1.9 billion shillings from 1.4 billion shillings.
Concerned with the huge fluctuations in short-term funding instruments, Housing Finance said in October it was considering floating a 25-year housing bond targeting pension funds and real estate investment trusts.
Ireri said the company was now seeking to raise funds abroad as opposed to the bond, because of the high domestic rates.
"We cannot come in with a bond right now because guys will ask for very high interest rates. We are borrowing an offshore debt," Ireri said.
The mortgage lender raised 7 billion shillings through a seven-year bond issue in October 2010. The bond had a fixed rate set at 8.5 per cent and a variable rate pegged at 3 per cent above the 182-day Treasury bill rate.
High interest rates and double digit inflation in Kenya are hurting the real estate industry, as developers and buyers struggle to meet financing requirements, property pricing index firm HassConsult said in January.
Shilling depreciation for most of 2011 also slowed the flow of real estate developments and hurt the industry as construction material costs rose.
"There is a lot of imported content in construction and with the exchange rate going crazy and interest rates raising last year some developers slowed down," said Ireri.
"The impact may still be there this year, but in 2013 we may find that there is a housing shortage ... and there will be high demand again."
RSS