HF Group PLC returned to form in 2025, posting a record after-tax profit of KSh 1.42 billion for the year ended December, marking its strongest performance on record.
The recovery caps a multi-year rebound from cumulative losses of KSh 4.6 billion between 2018 and 2021, driven largely by a strategic pivot towards government securities and tighter control over funding costs, rather than aggressive lending.
Pre-tax profit surged to KSh 1.61 billion, representing a 250% jump from the previous year.
At the same time, the balance sheet expanded meaningfully. Total assets rose to KSh 82.40 billion, customer deposits climbed 18.4% to KSh 56.90 billion, and core capital stood at KSh 10.15 billion. This strengthened position prompted the Central Bank of Kenya to upgrade its banking unit, HFC, back to Tier II status in August 2025.
Treasury Strategy Drives Earnings Surge
The standout contributor to earnings was a sharp increase in holdings of government securities, which grew 66% to KSh 28.27 billion.
This shift delivered KSh 2.83 billion in investment income, up 79% year-on-year, as the group leaned into high-yield bonds during a favourable monetary cycle.
Loan growth, by contrast, remained subdued, with net loans rising just 5.8% to KSh 41.11 billion, reinforcing the view that the profit rebound was largely balance sheet-driven rather than credit-led.
Lower Funding Costs Boost Margins
Funding costs eased significantly over the period:
- The weighted deposit rate dropped from 6.30% to 4.90%, a 22% decline
- Interest expenses fell by KSh 593 million, despite strong deposit growth
This dynamic, combined with higher investment income, pushed net interest income up 63.8% to KSh 4.36 billion, the largest annual increase in the group’s history.
Cost Pressures Persist Despite Efficiency Gains
Operating expenses rose 25.5% to KSh 4.69 billion, largely driven by a 22% increase in staff costs to KSh 2.31 billion.
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Still, efficiency improved:
- Cost-to-income ratio narrowed to 75.9% from 89.5%
- However, it remains above the 60–65% benchmark typical of well-run mid-tier banks, leaving room for further tightening
Capital Strength and Liquidity Improve
Following a KSh 5.99 billion rights issue in 2024, which was oversubscribed, HF Group’s capital base strengthened considerably:
- Core capital: KSh 10.15 billion (well above the KSh 3 billion minimum)
- Liquidity ratio: 51.5%, more than double the regulatory requirement
This recapitalisation played a central role in restoring the bank’s Tier II classification.
Subsidiaries Add Momentum
- HFDI (property arm) delivered KSh 340 million in pre-tax profit, collected KSh 3.5 billion, and generated KSh 657 million from land-related wealth management activities, while exiting legacy projects
- HFBI (bancassurance unit) recorded KSh 787.5 million in premiums and KSh 82 million in profit, alongside industry recognition at the Think Business Insurance Awards
Shareholder Returns Still on Hold
Despite the improved profitability, earnings per share slipped to KSh 0.75 from KSh 0.90, reflecting dilution from the prior rights issue.
No dividend was declared, extending the group’s payout drought to eight consecutive years.
Looking ahead, management is targeting KSh 2.49 billion in pre-tax profit for 2026, implying a further 55% growth if execution holds.
