HF profit up 48pc in first quarter on increased lending

This came as interest income increased 28.4 per cent to Sh2.3 billion, partly reflecting a 12 per cent loan book expansion to Sh53.4 billion. HF also raised its investment in government bonds and T-Bills to Sh4.2 billion from Sh255 million.

“The group also increased its holding of government securities…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 firm said in a statement.

HF is set to redeem Sh7 billion worth of its seven-year bond it issued in 2010.

The firm’s ‘other income’, expected to capture property sales, rose 43.5 per cent to Sh241.8 million. HF’s loan loss provisions dropped by Sh7.8 million to Sh136.8 million despite the gross bad loans rising by Sh105.8 million to Sh327.4 million.

The company, however, says it expects some of the non-performing loans to be paid off later this year.

“The group non-performing loans increased…on account of delayed liquidation of some project loans whose conveyance process is in progress and expected to be paid off during the year,” the company said, adding that the transactions could reduce the ratio of bad debts to seven per cent from the current 8.4 per cent  of the total loan book.

HF’s interest expenses grew 28.8 per cent to Sh1.2 billion, partly showing the impact of a 23.5 per cent increase in customer deposits to Sh40.8 billion.

The firm’s operating expenses expanded 15.1 per cent to Sh773.1 million in what the company attributed to increased amortisation cost due to commissioning of its new core banking system and other business software.

Among the services that are now available following the rollout of the new system include mobile banking through a new mobile app, salary advances and instant alerts on transactions. Internet banking is scheduled to be rolled out within the year.