Capital Markets

Britam not in a rush to sell 48.2pc stake in loss-making HF

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Britam Group Managing Director Benson Wairegi during an investor briefing in Nairobi last year. PHOTO | SALATON NJAU | NMG

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Summary

  • Britam doubled its shareholding in HF Group in 2014 and 2015 using part of the cash it raised from continued sale of part of its shares in Equity Group.
  • Britam has, nonetheless, continued to book significant paper loss on its exposure in the mortgage lender as a result of a downturn in the high-end property market from 2016, due to the rate cap that was in force and a softening economy.

Britam Holdings #ticker:BRIT says it will only consider offloading part of its 48.22 percent in HF Group #ticker:HFCK to strategic investors in the medium term when it expects its multibillion-shilling investment to have rebounded to a profit.

Britam doubled its shareholding in HF Group in 2014 and 2015 using part of the cash it raised from continued sale of part of its shares in Equity Group.

Britam has, nonetheless, continued to book significant paper loss on its exposure in the mortgage lender as a result of a downturn in the high-end property market from 2016, due to the rate cap that was in force and a softening economy.

HF is now transitioning to a full-fledged commercial bank under new management led by chief executive Robert Kibaara.

“What we are doing is to support HF in that transformative journey, and this is long-term. The question is shall we continue holding our 48 percent stake? Probably not because we might want to do the same thing we have done with Equity Bank,” said Britam chief executive Benson Wairegi, who is set to retire by the end of the year.

“As the bank grows, we also reduce our exposure to realise the investment and also probably bring in a strategic investor who can also run the bank because remember even as we invest, we are not bankers.”

Britam, which at one time held about a third of stake in Equity, has since 2014 reduced its holding in Kenya’s second largest lender by assets to about 7.3 percent at the end of 2019.

This is in line with regulatory guidelines that caps insurer’s investment in a bank at 10 percent of its total assets.

Britam’s 185.48 million shares in HF are worth Sh671.43 million at the current price of Sh3.62 per unit – representing a paper loss of Sh4.04 billion on its investment in 2014 and 2015 alone.

“We believed just like we helped Equity transform from a small building society to a giant bank, we could do the same for HF. We have not been very successful, but we are optimistic,” Wairegi said.