Peter Lewis Jones is out as Managing Director of Housing Finance Company of Kenya.
Earlier this month, the Nation reported that CBK wantd him out because HFCK was for violating Prudential regulation no. 10 which deals with provision for bad and doubtful loans and advances. HFCK has been making too little provisions as defined by CBK.
In their auditor’s letter at the end of 2003, KPMG made a point about future operations at HFCK noting that "a significant portion of their mortgage portfolio is non-performing, and low interest rates in the country have also lowered interest margins at HFCK. Also further growth is constrained by existing capital under the Bank Act and CBK act. The current licence does not allow for diversification, and the banks ability to make profits depends on recovery of non-performing assets."
The bank was supposed to make efforts to comply with PR10 and consult with shareholders by December 2004. - and these efforts have not borne much fruit, which is why CBK has forced the MD out.
In 2004, net interest income fell to 900 milliom, down from 1.6 billion in 2003 (and 2.0 b in 2002). HFCK ended the year with a pre-tax profit of 98 m (down from 112m in 03). HFCK has a bad debt portfolio of 4 b, but they also have 5 b as realizable value of securities (i.e. if they re-possess and sell houses of people who have defaulted)