HF drags Britam to Sh2.2 billion loss

What you need to know:

Britam, which bought a 48.2 percent stake in HF, lost nearly Sh4 billion in paper wealth after the mortgage lender’s share sunk to a 15-year low after a turn of poor financial performance.
It made a loss on its listed equities and had depressed returns on property investments that resulted in a Sh2.7 billion drop in profit from Sh527 million net earnings recorded in 2017.
Britam acquired 57.2 million HF shares from Equity Bank in December 2014 for Sh2.8 billion — adding to the 49.5 million it already owned at the time.

Britam Holdings Limited #ticker:BRIT slid into the red after posting a Sh2.2 billion after-tax loss for the year ended December 2018 following a hit on its equity investment in mortgage lender Housing Finance Group (HF) #ticker:HFCK.

The insurer, which bought a 48.2 percent stake in HF, lost nearly Sh4 billion in paper wealth after the mortgage lender’s share sunk to a 15-year low after a turn of poor financial performance. Britam’s stake in HF totals to 186.2 million shares, which are now valued at Sh1 billion.

It made a loss on its listed equities and had depressed returns on property investments that resulted in a Sh2.7 billion drop in profit from Sh527 million net earnings recorded in 2017.

“The reported loss is mainly attributable to unrealised loss in listed equities of Sh3.2 billion compared to a gain of Sh0.9 billion in 2017,” said the firm in its financial statements.

Rights issue

Britam acquired 57.2 million HF shares from Equity Bank #ticker:EQTY in December 2014 for Sh2.8 billion — adding to the 49.5 million it already owned at the time.

In 2015, Britam took up an additional 64 million shares in the lender after a rights issue, paying Sh1.92 billion for the additional stock.

HF was the worst performing banking stock at the NSE in 2018.

In writing off some of its investment in HF, Britam has joined a number of other listed firms that have paid the price for bad investment decisions leading to losses when impairing assets.

Britam further attributed its loss to provisions of the new IFRS9 due to significant investment in financial assets. It also incurred increased one-off costs as a result of a business restructuring within the period.