HF Group reported a 46.3 percent rise in net profit to Sh266.2 million in the first half of the year ended June on the back of higher revenue from transactions and lending.
Profits rose from Sh181.9 million in the previous year. The bank’s profit increase was driven by improved income, with the group’s total operating income rising 11.1 percent to Sh2 billion from Sh1.8 billion.
HF Bank’s non-interest income registered the fastest growth of 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 net interest income rise 8.3 per cent to Sh1.3 billion from Sh1.2 billion, with the company increasing its lending income despite its loan book shrinking slightly to Sh37.9 billion from Sh38 billion.
This shows the impact of high interest rates, which have also benefited other banks, as the Central Bank of Kenya raised its benchmark interest rate to combat inflation and support the local currency.
HF also recorded a rise in income from government debt securities. Its fixed income portfolio grew by 24.7% 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 increase in NPL cover was partly due to a 6.6 per cent rise in the bank’s total NPLs to Sh11.2 billion from Sh10.5 billion.
HF Bank’s main subsidiary, the banking business, achieved the core capital and liquidity ratios of Sh1.7 billion and 27.9 percent respectively.
However, the core capital ratio deteriorated slightly from Sh2.4 billion in the same period last year, but remains above the statutory requirement of Sh1 billion.
The lender has deficiencies in other key capital metrics including its core capital to total deposit liabilities, core capital to total risk-weighted assets ratio, and total capital to total risk-weighted assets ratio.
These ratios represent indicators of the banks’ ability to meet their obligations to customers when they arise, with a deficit indicating the possibility of being subject to pressure from the lender.
The bank will issue 1.5 billion shares by offering shareholders the option to buy three new shares for every share they own.
HF currently has 384.6 million shares outstanding, which are traded on the Nairobi Securities Exchange (NSE) at Sh3.97 per share. The price of the rights issue has not yet been announced.
The last rights issue was in 2015, when it issued 116.67 million shares at Sh30, at a ratio of one share for every two shares held. The offering raised Sh3.5 billion from investors’ bids of Sh9 billion. The funds were earmarked for branch expansion and increasing mortgage lending capacity.
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