HF contracts global consultant in drive to reform business

What you need to know:

Housing Finance has identified eight corporate actions that it wants the consultancy firm to advice on, all of them geared towards growing the company and improving its efficiency.

Mortgage lender Housing Finance (HF) has hired global consultancy firm McKinsey & Company to help restructure its business, including the formation of a stand-alone banking subsidiary.

McKinsey has in the past few years won major consultancy work for local banks including KCB and Co-operative Bank, advising them on business reorganisation and operational efficiencies.

Its assignment at the two institutions led to retrenchment of scores of employees in what was attributed to redundancy of roles. Banks are striving to hold down their cost-to-income ratios in a competitive market where institutions are raising new capital to boost lending capacity.

“We have taken the decision to appoint McKinsey & Company to be our consultancy partner for the next several months,” HF’s chief executive Frank Ireri told staff in a communication seen by the Business Daily.

It was not immediately clear whether HF would also trim its workforce after hiring the consultancy firm. The company has however signalled its intention to hire more workers, having introduced a “large number of new staff” at a company meeting last Friday.

HF has identified eight corporate actions that it wants the consultancy firm to advice on, all of them geared towards growing the company and improving its efficiency.

New banking entity

The firm is in the middle of creating a non-operating holding company which will own all subsidiaries including Housing Finance Company, a new banking entity being created. Unlike a bank, a non-operating holding company can own more than a quarter of an institution.

HF has four subsidiaries namely Kenya Building Society, Housing Finance Insurance Agency, First Permanent Limited and the Housing Finance Foundation.

The new structure will eliminate restrictions that HF has faced in terms of funding and ownership of other units such as Kenya Building Society.

HF recently raised Sh3.5 billion from a rights issue. The cash is expected to strengthen its subsidiaries including KBS which is undertaking several property projects.