Housing Finance (HF) has received shareholders nod to craft a non-financial entity to help it offer banking services and expand its footprint across East Africa to shore up dividend payouts.
The mortgage financier said the resolution to restructure the business will help diversify operations as it seeks to cede over-reliance on mortgage business to effectively compete with commercial banks that have eaten into its segment.
Housing finance will now incorporate a new wholly owned Subsidiary under the name, Housing Finance Company (HFC) limited, upon regulatory approvals.
HFC, a non-operating holding entity, will help the home loans lender expand investments across the East Africa region and investments to its subsidiaries to boost returns.
Consequently, Housing Finance (HF) Group will be formed to enable it open up to banking functions and lend to shareholders.
“The Area of mortgage financing is being invaded by commercial banks. We also want to invade the segment where they make lots of profit so they (banks) can say the fallen giant has awoken,” said Housing finance Chairman, Peter Munga.
Munga also doubles up as the chairman of Equity Bank.
HF will now join Kenya commercial Bank (KCB), Equity and I and M banks that have adopted the non-financial institution to help it run subsidiaries and regional off-shoots.
“We had been tied to invest upto 25 percent of our share capital which is about Sh 1 Billion, but the firm will now be able to pump in more cash in investments to benefit shareholders interest,” said HF Managing Director, Frank Ireri at an Extraordinary General meeting(EGM) in Nairobi.
The mortgage lender has committed to increase dividend pay outs from current Sh 1.75 as it targets to raise Sh 3 to Sh 4 billion in rights issue next year.
Central Bank of Kenya (CBK) has developed new guidelines allowing the special purpose vehicles own more than 25 percent of share capital in a bank.
Munga downplayed the planned introduction of capital gains tax will adversely impact its business after re-organisation- its shareholders expressed fears the new law will add to their tax burden.
“It is our obligation to pay taxes to develop the economy and improve security in the country to create an enabling environment for business,” he said.
Planned valuation of shares by government will see those who invested shares on properties between 2007 and now taxed five percent on value of shares sold out.
The HF shareholders have also approved sale of Equity Bank shares at HF to investment firm Britam valued at sh 2.4 Billion and will involve transfer of 24.67 percent of shares held by Equity.
Britam will significantly increase its shareholding at Housing finance through its wholly owned subsidiary, British American Insurance Company to 40.6 percent.
Upon regulatory approvals Britam will enjoy a bigger clout in mortgage business in a new synergy that will also see the two boost insurance and property businesses.