HF Group borrows Sh1.9bn at 18pc, lends at 10pc

Mortgage financier HF Group #ticker:HFCK is servicing two loans worth Sh1.95 billion at a rate of more than 18 percent while lending at 10.72 percent, underlining the company’s negative margins.

The high-priced loans, whose rate is above the maximum interest of 13 percent by local commercial banks, signals the company’s relatively lower creditworthiness.

Disclosures in HF’s annual report for 2018 show that it has an outstanding balance of Sh1.49 billion on a loan owed to Crescent Finco LLP, which it is servicing at an annual rate of 18.5 percent.

HF group’s fully owned subsidiary HF Development and Investment Limited, which was formerly known as Kenya Building Society, is servicing a loan taken up from Shelter Afrique in 2015 at 18.7 percent, with a balance of Sh454 million outstanding at the end of last year.

HF also holds a short term loan facility of Sh516.3 million from fellow listed lender NIC Bank #ticker:NIC, for which it is paying interest at 14 percent per annum.

“The loan balance from Crescent Finco LLP as at December 31 2018 was Sh1.49 billion at an effective rate of 18.5 percent,” said HF in the report.

“The Shelter Afrique loan is at (Shelter Afrique’s) base rate currently at 18.7 per cent…both interest and principal are payable on a quarterly basis. The loan balance as at December 31, 2018 was Sh454.04 million.”

The Shelter Afrique loan is for the development of housing units at Komarock Estate in Nairobi’s Eastlands.

HF made a net loss of Sh598.2 million last year, compared to a profit of Sh126.2 million in 2017 on the back of lower interest income. In total, HF’s outstanding loans and borrowings as at December 2018 stood at Sh10.4 billion, down from Sh12.9 billion at the end of 2017.

This fall was largely due to paying down a Sh309 million shilling facility held at Cooperative Bank and another of Sh591 million from the International Finance Corporation (IFC). HF also reduced debt owed to Ghana International Bank by Sh510 million to Sh1.55 billion, European Investment Bank by Sh498 million to Sh3.3 billion and Symbiotic SA by Sh469 million to Sh1.34 billion.