Housing Finance lifts dividend after 64 per cent growth in profit

Increased borrowing for home loans has seen Housing Finance reward its shareholders with a 71 per cent rise in the dividend payout.

HF, however, warned that the prevailing high interest rates would hurt its business this year. The mortgage firm’s dividend payout stood at Sh1.20 per share up from Sh0.70 in 2010 and Sh0.50 in 2009 — a major boost to its key shareholders including British America Investment and Equity Bank.

This comes after Housing Finance announced that its net profit for the year ended December increased 64 per cent to Sh622 million on increased borrowing that saw its loan book grow 29 per cent to Sh25.2 billion in the period under review.

Frank Ireri, the managing director, says expensive credit, coupled with sky-high inflation and jitters over the election will impact on new lending opportunities.  “We are projecting a difficult year where demand for credit will be depressed,” added Mr Ireri. The firm’s net interest income increased to Sh1.9 billion from Sh1.4 billion in the period.

On average lending rates have risen to 20.04 per cent in December from 13.91 per cent in June on expensive deposits prompted by the tightening of the country’s monetary policy by the Central Bank of Kenya. While most banks reviewed their lending rates on October, HF says it’ll review its rates in December—a signal that the expensive credit look set to have an impact on its operations this year.

Its share price has lost 49 per cent in the past year to stand at Sh13.90 at the close of trading yesterday and analysts expect the dividend payment to draw investors to the counter.

Analysts anticipate that the high cost of funds are likely to affect HF’s performance more than its peers in the banking sector because it relies on interest income for up to 80 per cent of its total revenue. “We expect some contraction on appetite for credit this year and HF is more exposed compared to other commercial banks,” said Francis Mwangi, a research analyst at Standard Investment Bank, adding that the high interest rates would slow down the growth of HF’s mortgage book.

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.