Housing Finance Group (HF) #ticker:HFCK has dropped into loss for the first time in more than 10 years on reduced interest income that the mortgage lender previously blamed on the rate cap and a tough economic environment.
The listed firm posted a net loss of Sh598 million in the year ended December 2018, down from Sh126 million net profit made the previous year.
The tier-two lender saw its interest income drop by Sh1.08 billion to Sh6.045 billion as it struggled with reduced income from customer loans which dropped by 15 percent to Sh5.661 billion.
Its interest expenses dropped by Sh400 million in the period while non funded income was flat at Sh1.3 billion.
Operating expenses went up by Sh400 million, further shaving its already reduced operating income. Staff costs rose highest to Sh1.22 billion as the bank embarked on a massive downsizing programme.
“The Group undertook a redundancy exercise during the year which increased the staff cost due to the one-off pay-out,” said the bank in an earlier statement. Its share price on Friday closed at Sh5, down from Sh5.08 on Thursday as the financier announced to its shareholders that there would be no dividend for the year.
Having issued a profit warning in November last year, HF decried the downward revision of the Central bank benchmark rate to 9.5 percent and then further to nine percent, saying it had negatively impacted its interest income.
The bank also blamed unfavourable trading environment claiming it had led to a slowdown in the real estate sector growth. According to the 2017 annual banking supervision report by the regulator, HF had outstanding mortgages worth Sh46.65 billion which puts it at second position behind KCB’s Sh65.55 billion.
Being the only listed lender to record a loss in 2018, the bank saw its bad loans rise by Sh5.1 billion to Sh13.3 billion. This happened despite its loan book shrinking by Sh6.2 billion to Sh43 billion.
The lender’s core capital also fell by Sh1.6 billion to 7.37 billion.