Thursday, April 28, 2005

HFCK Boss Out

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)

5 comments:

Anonymous said...

Jones ouster is the first in a series of calculated moves from CBK. Next on the chopping board is Terry Davidson over at KCB.

bankelele said...

on what anonymous grounds?

Shiroh said...

that guy should have been kicked out a long time he really sacked guys including my pals mum guys who had experience for over 20 years he thought he couldnt go too , this is Kenya

Anonymous said...

Shiroh, the reason for Jones being kicked out should be PERFORMANCE not coz he sacked your pal's mum. It depends what her experience was in. If she was a cashier, they are a dying breed with ATMs, online transfers, cheques, etc.

Anonymous said...

As far as Davidson (KCB) is concerned, his contract runs out Jan 2006 but KCB 50% owned by non-government shareholders so it will be difficult to kick him out since he is popular with the shareholders. That said the Board can kick him out coz there aren't many independent directors. Warren Buffet argued that the best independent directors are those with vested interest i.e. those who own lots of shares in the firm. When I looked at the 2004 Annual Report, the only director with a significant shareholding (excluding those who represent the government or NSSF) was a Sunil Shah. All the directors should be paid in restricted shares not cash so they lose if shareholders lose.

I expect jimnah mbaru (of the now collapsed jimba credit) to be a major player since he owns/controls almost 10% of the shares.

I think jimnah should get a seat BUT all related dealings with his firms should be watched very closely.

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