The HF Group has reduced non-performing loans by Sh2 billion over the past six months as mortgage holders struggle to repay their loans in an economy plagued by a slowdown in the property market and job cuts.
Besides the sales, HF also revealed that it had enrolled 700,000 customers on its HF Whizz App that transacted deals worth Sh3.7 billion. The company also gave out loans amounting to Sh1.6 billion in the past year.
The firm’s next generation drive dubbed HF 2.0, also facilitated deposits worth Sh2.5 billion with its clientele base drawn from Kenyans living in various parts of the world.
On the sale of distressed properties, the lender has signed up auctioneers to sell off the houses and commercial buildings in a move aimed at trimming its non-performing loans portfolio.
The sales are a reflection of the struggles that mortgage holders are going through as thousands have lost jobs across different sectors of the economy, especially property developers who are finding it difficult to sell houses built on loans.
HF chief executive Robert Kibaara Thursday said that some of the property sales have been triggered by customers in what is known as private treaty, which allows for the disposal of a property at market price.
Under this arrangement, the property owner keeps the difference after offsetting the loan balance.
“We have collected more than Sh2 billion in the past six months and NPLs (non-performing loans) hardly bother us now as we are on a mission to future-proof the bank for the next generation,” said Mr Kibaara during the launch of a WhatsApp platform for its customers.
The platform allows users to initiate a conversation that enables them to pay for utilities and transfer money.
The platform developed by Kenyan startup, WayaWaya, integrates a customer’s account via the HF WhatsApp platform.
The property auction also points to widespread distress in the real estate sector that has kept home prices flat and poor earnings from auxilliary sectors like the manufacture of cement.
HF has in recent weeks issued auction notices for the sale of more than 50 properties across the country, including office blocks worth hundreds of millions of shillings.
Majority of the 54 properties put up for sale in Nairobi were stand-alone homes and apartments whose reserve prices ranged from Sh3.4 million to Sh300 million, totalling to Sh2 billion, while the rest worth Sh527.4 million are located in Mombasa, Nakuru, Eldoret and Kisumu.
HF’s acceleration of its debt recovery efforts is part of a plan to clean up its loan book, whose quality deteriorated last year as the property sector underperformed.
The lender’s stock of bad loans stood at Sh12.97 billion at the end of March, compared with Sh8.47 billion a year earlier. Its loan book in the meantime contracted from Sh48.4 billion to Sh41.9 billion in that period.
A depressed housing market due to oversupply and credit access constraints have not helped.
The latest housing price index by the Kenya Bankers Association (KBA) shows that house prices have been contracting in the first half of the year—by 2.78 percent in the first quarter and 1.72 percent in quarter two.
“Weak household income continues to keep demand for housing tight. Even with slight uptick in private sector credit growth during the first half of the year, home buyers remain constrained,” said KBA in the report.
“The limited availability of funding to the housing market has been on the back of increased levels of non-performing loans generally, and especially in the construction sector.”
Non-performing loans attributable to the real estate sector have risen three-fold in the past five years, from Sh12.66 billion in 2014 to Sh43.5 billion as at September last year.
The lower interest income hurt the bottom line, with HF reporting a net loss of Sh598.2 million last year compared to a profit of Sh126.2 million in 2017, pulled down by lower income from loans.