Capital Markets

HF eyes Sh3.8bn from auctions, private treaties

housing finance

The HF Group’s head office at Rehani House in Nairobi. FILE PHOTO | NMG

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Summary

  • HF Group is eyeing Sh3.8 billion from property auctions and negotiated sales with borrowers who have defaulted on loan payments amid rising economic hardships.
  • The lender says it has lined up the sales as part of bringing down the non-performing loans (NPL) that have weighed down on its performance.

HF Group #ticker:HFCK is eyeing Sh3.8 billion from property auctions and negotiated sales with borrowers who have defaulted on loan payments amid rising economic hardships.

The lender says it has lined up the sales as part of bringing down the non-performing loans (NPL) that have weighed down on its performance.

“The bank has instituted a robust NPL recovery strategy that includes negotiated settlements, realisation of collateral held and legal action for enforcement of security where there is no cooperation from the borrower,” says the lender.

HF targets Sh1.7 billion from private treaty settlements, Sh1.5 billion from auctions and Sh0.6 billion from other negotiated settlement arrangements.

Under private treaties, distressed borrowers agree with banks to look for the best available price for their properties and sell to repay loans as opposed to relying on the auctioneer’s hammer.

“The above recoveries are projected to result in unwinding statutory credit risk reserves amounting to at least Sh1.6 billion with a projected net impact of Sh600 million on the bank’s capital position.”

The stepped up debt recoveries come on the back of HF’s gross NPLs having dropped by 12.3 per cent to Sh10.79 billion last year.

Last year, HF made collections of Sh2.1 billion from the NPL portfolio, down from Sh2.3 billion, impacted by the coronavirus economic hardships, making it difficult for auctioneers to get buyers.

The lender disclosed that last year it purchased properties worth Sh31.5 million from distressed borrowers in full realisation of the debt owed to the bank.

Banks are allowed to force the sale of assets used as loan collateral to recover outstanding amounts from a borrower who has stopped making payments.

Banks are shunning forceful auction of property seized from loan defaulters in favour of private settlement after Kenya’s soft economy slashed asset prices below the minimum bid value set in law.

Sluggish economic activity has created a growing pool of distressed borrowers whose assets are being seized by aggressive lenders.