HFC bank’s profit for 2015 was heavily squashed following an increase in its loan portfolio.
The bank which was acquired by Republic bank of Trinidad and Tobago through a mandatory takeover in 2015 saw its profits drop by over 140 percent in 2015 as compared to 2014.
[contextly_sidebar id=”sdEobLrk1gCtLPwbWywjvzIQikOznFa4″]According to figures released by the bank its profit after tax dropped by 163 percent in 2015, hitting 36 million three hundred and thirty five thousand cedis from the fifty seven million eight hundred and ninety five thousand cedis recorded in 2014.
The bank’s interest income went up to by 31 percent to 256,676,000 in 2015 while interest expense also went up by 76 percent to 113,672,000 cedis.
Fees, commissions and other income dropped by nine percent to 60,835,000, while the bank’s operating expenses went up by 41 percent to 159,943,000 in 2015.
Unpaid loans dents bank’s profits
But perhaps the most troubling development was the astronomical growth of the bank’s loan impairment expense.
According to the bank its loan impairment expense went up by a whopping 474 percent to end 2015 at 81,848,000 cedis.
Despite the troubling development Managing director of the bank today told shareholders during the bank’s Annual General Meeting (AGM) that the bank will arise above the challenges this year and was poised to record significant profits year end.
The huge loan portfolio of HFC bank increased astronomically last year after new owners embarked on a critical review of the bank’s loan portfolio.
The move saw the bank’s Non – Performing Loans Ratio (NPL) going up to 21.07 percent in 2015 from the 10.43 percent recorded in 2014.
The deterioration was primarily due to the decision of the bank to increase the NPL portfolio from 72.9 million cedis in 2014, to 213 million cedis in 2015 to bring the bank in line with international best practices in financial regulatory requirements.
The review resulted in a 195 percent increase in impaired loans from the 41.9 million cedis recorded in 2014 to the 123.8 million cedis recorded last year.
This figure represents about 58 percent of NPL portfolio of 213 million cedis.
The loans were largely accumulated between 2010 and 2014.
MD of HFC bank Robert Le Hunte tells Citi Business News new measures have been put in place to deal with this development.
‘Our financial result is an indication of the work that we need to do in the bank in the areas of recoveries and deposit generation. I wish to assure shareholders, that this development is a one off occurrence and we do not expect this to continue in the coming years.’
Light at the end of the tunnel
The bank believes however that despite these setback its 2016 performance and beyond will be impressive.
The bank believes this will be made possible through its new strategic plan dubbed 3-in-3.
The three year strategy will focus on 5 core pillars including deposit mobilization, asset creation, improving recoveries, cost management and revitalizing the culture of the bank.
According to Robert Le Hunte the strategy is also expected to push the bank to achieve its objective of becoming a 1st tier bank in the next three years.
‘The new direction of the bank is to leverage on the infrastructure and strong mortgage base to generate additional income and deepen its presence in retail, corporate and commercial and SME banking while building on the experience of RFHL’.
Projections for 2016
Meanwhile the bank says the seven new products it introduced this year have already begun yielding positive results.
The bank early this year, launched a new range of deposits products captioned, “You deserve more, make the switch now”.
The new range of products include; HFC cradle to golden age account; HFC brainy child account; HFC smart save account; HFC susu plus account; HFC home save account; HFC I do account as well as HFC 55 plus account.
According to the bank the move has begun yielding positive results.
The bank says it will post at least nine million cedis in profits for the first quarter of 2016 alone despite its challenges.
By: Vivian Kai Lokko/citibusinessnews.com/Ghana