HF Group has posted a 46.3 percent rise in net profit to Sh266.2 million for the half year ended June on the back of higher revenue from transactions and lending.
The profit rose from Sh181.9 million a year earlier. The bank’s higher profit was driven by improved income, with the group’s total operating income rising 11.1 percent to Sh2 billion from Sh1.8 billion.
HF’s non-interest income grew the fastest at 30.6 percent to Sh716.3 million from Sh548.1 million, driven mainly by higher loan and commission income and foreign exchange trading income.
Meanwhile, the lender saw its net interest income rise by 8.3 percent to Sh1.3 billion from Sh1.2 billion, with the company increasing its income from lending despite its loan book shrinking slightly to Sh37.9 billion from Sh38 billion.
This shows the impact of higher interest rates, which also benefited other banks as the Central Bank of Kenya (CBK) raised its benchmark interest rate to fight inflation and support the local currency.
HF also recorded higher income from government debt securities. Its fixed income portfolio grew by 24.7 percent to Sh12.1 billion from Sh9.7 billion.
The lender incurred interest expenses of Sh1.7 billion from Sh1.1 billion as customer deposits grew by 10.8 percent to Sh45 billion from Sh40.6 billion.
Meanwhile, the group’s operating expenses rose to Sh1.7 billion from Sh1.6 billion due to a slight increase in several items including loan loss provisions.
The rise in the bad loans cover was partly due to the bank’s gross non-performing loans rising by 6.6 percent to Sh11.2 billion from Sh10.5 billion.
HF’s main subsidiary, the banking business, met its prescribed core capital and liquidity ratios at Sh1.7 billion and 27.9 percent respectively.
However, the core capital ratio has deteriorated slightly from Sh2.4 billion at the same time last year, but remains above the statutory requirement of Sh1 billion.
The lender has deficiencies in other key capital measures including its core capital to total deposit liabilities, the core capital to total risk-weighted assets ratio and the total capital to total risk-weighted assets ratio.
These ratios are indicators of how well banks can meet their obligations to customers as and when they arise, with a shortfall indicating the possibility of stress on the lender’s part.
The lender will issue 1.5 billion shares by offering shareholders the option to buy three new shares for each share held.
HF currently has 384.6 million shares in issue, which are trading on the Nairobi Securities Exchange (NSE) at a price of Sh3.97 per share. The pricing of the rights issue is yet to be announced.
HF last conducted a rights issue in 2015, when it issued 116.67 million shares at Sh30, at a rate of one for every two held. The offer raised Sh3.5 billion from investor bids worth Sh9 billion. The funds were earmarked for branch expansion and increasing mortgage lending capacity.
