African bank’s unit sees home loans booming in Kenya

Bloomberg

Stanbic Bank Kenya Ltd., a unit of Africa’s biggest lender by assets, forecasts its mortgage business in the nation to surge as the economy recovers from the pandemic and the end of presidential elections brings political stability.
The unit of South Africa’s Standard Bank group Ltd says it’s Kenya’s second-largest mortgage lender and demand for the product is surging. That in part will help the bank’s lending to expand in the “high double digits,” said Chief Financial Officer Dennis Musau.
“The pipeline we have for that area is close to three or four times of what we’ve been able to lend,” Musau said in an interview. “So it’s very, very healthy.”
High borrowing costs have kept most Kenyans away from mortgages. That’s changing as the Kenya Mortgage Refinancing Co., a state-owner financier, is lending to commercial banks at lower rates and helping create another product for lenders in East Africa’s biggest economy. Kenya Mortgage targets to disburse $79.2 million to banks by the end of the year.
Financing from Kenya Mortgage is helping Stanbic offer loans at 9% for affordable housing. It is also offering 13% rates for commercial property. Eight commercial lenders account for 84% of home loans valued at 245 billion shillings ($2 billion), according to the central bank’s annual supervision report. There are 26,723 mortgage loans in Kenya, most of which are issued with variable interest rates ranging from 7% to 15%,
according to the report.
Meanwhile, Stanbic said it will skip an interim dividend, choosing instead to invest in its various businesses.
Meanwhile, Standard Bank, the market leader in the home loans segment, says it will use its heft to grow its business banking offering, as it seeks to fight off rising competition in the space.
The continent’s biggest lender by assets will look to capitalise on its scale and geographical footprint to drive growth in the division, Chief Executive Officer Sim Tshabalala said during an
investor briefing.
That includes cross selling a variety financial solutions, including insurance and transactional accounts.
“We’re very well able to take any combination of established competitors and digital insurgents and take them on head on,” he said.
The sector is growing increasingly crowded, with South Africa’s first digital bank TymeBank announcing on Aug. 3 that it is buying small business-focused Retail Capital. African Bank announced in May that it would buy Grindrod Bank.
Tshabalala also said the lender is heightening its focus on climate change, and expects its green loan book to grow to at least 250 billion rand ($15 billion) by the end of 2026, up from an expected 50 billion rand at the end of this year.
“We have started work on the complex process of quantifying the emissions that we face,” Tshabalala says, adding that the timetable would be announced in “due course.”
Earlier the bank said net income rose 37% in the first six months of the year, helped by rising interest rates and increased client activity.
Standard Bank dropped as much as 2.6%, before paring gains to 2.1% by 2:55 p.m. in Johannesburg. Peers on the FTSE/JSE Africa Bank index slipped 2%, the biggest drop in more than two weeks.