Mortgage-focused lender HF Group Plc.

INTERNATIONAL – Mortgage-focused lender HF Group Plc warned on Friday its 2018 net earnings would be 25 percent lower than the previous year, after posting a nine-month loss.

Declining interest income after a cut in the central bank rate led to lower lending rates, and higher non-performing loans weigh on its performance, the bank said in a statement.

The central bank cut its key lending rate to 9.00 percent in July from 9.50 percent, and has left it unchanged since then.

Kenya has had a cap on commercial lending rates — in place since late 2016 and set at 4 percentage points above the central bank rate.

“Further, the trading environment continued to be unfavourable, leading to a slowdown in the real estate sector credit growth,” the bank said.“The tough operating circumstances have led to an increase in the non-performing loans position, which has also adversely affected the business performance.”

The bank reported a pretax loss of 325.65 million shillings ($3.18 million) for the nine months to end-September, compared with a 231.87 million shilling profit a year earlier.

Net non-performing loans rose to 5.15 billion shillings from 5.12 billion shillings, while net interest income fell to 1.8 billion shillings from 2.18 billion shillings.

HF Group said a redundancy exercise it undertook during the period also increased its staff costs due to one-off payments to those laid off.

The bank said its liquidity ratio fell to 22.89 percent from 26.03 percent, against a statutory minimum of 20 percent.

Reuters