HF Group Plc, one of Kenya’s leading financial services provider, signaled a major turnaround with the release of its full-year 2024 financial results. The results, buoyed by an impressive rights issue and strong profitability, underscore a well-executed strategic shift that positions the company for sustainable long-term growth. The FY2024 numbers not only show resilience in a challenging economic environment but also reaffirm HF Group Plc’s transformation from a mortgage-heavy institution into a full-fledged diversified financial services provider.
Strong FY2024 Financial Performance
HF Group Plc reported a net profit of KES 525 million for the year ending December 31, 2024, marking a 35% increase compared to KES 388 million recorded in FY2023. This marks the third consecutive year of profitability, a testament to prudent financial management, diversified revenue streams, and disciplined cost control.
Total interest income rose by 23% to KES 6.41 billion, while non-funded income increased by 21% to KES 1.51 billion. This growth reflects increased lending activity and improved uptake of digital and transactional banking services. Operating income was supported by enhanced cost-efficiency measures, as well as a sharper focus on high-margin lending segments such as SME and retail banking.
HF Group’s total assets expanded by 14% to KES 70.15 billion, driven by growth in customer deposits and strategic lending. Customer deposits grew by 9% to KES 47.86 billion, while the loan book expanded by 3% to KES 43.8, reflecting renewed confidence among borrowers and investors.
The Group’s core capital ratio improved significantly from 5.3% to 21.4%, well above the CBK minimum of 10.5%. Liquidity also strengthened, with the liquidity ratio rising from 24.5% to 41.8%, providing a robust buffer against market shocks.
Oversubscribed Rights Issue Strengthens Capital Base
In a strategic move to strengthen its capital position, HF Group Plc successfully completed a rights issue in December 2024. The rights issue raised KES 4.6 billion, with applications totaling KES 6.38 billion—an oversubscription of 38.32%. The rights were priced attractively at KES 4.00 per share, offering two new shares for every one held.
The high uptake demonstrates strong investor confidence in HF Group’s turnaround strategy and future prospects. The proceeds from the rights issue are earmarked for business expansion, investment in digital platforms, and compliance with enhanced capital adequacy requirements set to take effect in 2028.
Despite a short-term pullback of 13% over the last month—likely driven by profit-taking—the fundamentals remain strong. The stock’s price-to-earnings ratio of 4.41, based on an EPS of KES 1.56, suggests that it remains undervalued relative to its earnings potential.
Strategic Transformation into a Universal Financial Services Provider
Historically, HF Group was synonymous with mortgage lending. However, over the past five years, the Group has undergone a successful transformation into a universal bank offering corporate banking, retail and SME lending, trade finance, bancassurance, and digital banking.
This diversification has significantly reduced HF’s dependence on the real estate and construction sectors, allowing the Group to weather economic cycles more effectively. The transformation is underpinned by strategic investment in technology, branch network optimization, and talent acquisition, all of which are yielding tangible results.
Why HF Group Plc Is on the Right Path
There are several reasons to believe HF Group Plc is poised for sustainable success:
- Strengthened Capital Position: The successful rights issue provides the capital buffer necessary to support growth, meet regulatory thresholds, and absorb market volatility.
- Improved Profitability: Three consecutive years of profitability suggest a sound operational model.
- Diversified Business Model: A wider range of products and services positions HF to capture value across various segments, especially SMEs and retail banking.
- Digital Transformation: Continued investment in digital banking platforms enhances customer engagement and operational efficiency.
- Supportive Macroeconomic Trends: Kenya’s economic rebound and growing demand for credit offer tailwinds for further expansion.
So, What’s our Final take?
HF Group Plc has made commendable strides in stabilizing its business, reorienting its strategy, and returning to profitability. With a robust capital position, diversified revenue streams, and a commitment to innovation, the Group is now better equipped to navigate the dynamic financial services landscape in Kenya.
As it enters a new growth phase, HF Group Plc is not only redefining its legacy but also reinforcing its position as a trusted financial partner for individuals, SMEs, and corporate clients. For investors and stakeholders, the message is clear: HF Group Plc is on the right path, and you definitely should buy the shares at the current price levels.
