Kenyan Listed Banking Sector Quarterly Earnings and Operating Metrics

- HF Group Summary of Performance – Q3'2022 • • Profit before tax increased by 114.0% to Kshs 0.1 bn, from a loss before tax of Kshs 0.5 bn in Q3'2021. Notably, the Group posted a profit after tax of Kshs 61.5 mn in Q3'2022, up from a loss of Kshs 569.9 mn in Q3'2021, becoming the third consecutive quarter that HF Group has registered a profit after tax Total operating income increased by 26.8% to Kshs 2.3 bn, from Kshs 1.8 bn in Q3'2021, driven by a 66.1% increase in Non-Funded Income (NFI) to Kshs 0.8 bn, from Kshs 0.5 bn in Q3'2021, coupled with a 13.9% increase in Net Interest Income (NII) to Kshs 1.6 bn, from Kshs 1.4 bn in Q3'2021 Total operating expenses declined by 4.7% to Kshs 2.2 bn, from Kshs 2.4 bn in Q3'2021, largely driven by a 12.8% decrease in Loan Loss Provision (LLP) to Kshs 0.15 bn, from Kshs 0.17 bn in Q3'2021. The reduction in provisioning can be attributed to a reduction in Real Estate credit risk, evidenced by reduction in Gross Non-performing loans by 4.7% to Kshs 75.6 bn in September 2022, from Kshs 79.4 bn in June 2022 The balance sheet recorded an expansion as total assets grew by 5.6% to Kshs 55.1 bn, from Kshs 52.2 bn in Q3'2021, Improved Asset Quality - The group's asset quality improved significantly, with the NPL ratio improving to 20.3% in Q3'2022, from 22.0% in Q3'2021, attributable to the 5.9% decline in gross non-performing loans to Kshs 8.5 bn, from Kshs 9.0 bn in Q3'2021, coupled with 2.3% growth in Gross loans during the quarter, • Going forward, we expect the bank's growth to be driven by: i. We maintain our view that HF Group as a conventional bank has a long way to go, despite the injection of tier II capital of Kshs 1.0 bn by the majority shareholder Britam Holdings in H1'2021 and three consecutive quarters of profitability. They will either have to adjust their business model, or couple up with a strong bank with a sizeable asset base, and a strong deposit gathering capability, to capitalize on HF's strength in real estate and mortgage Cytonn 79

View entire presentation