HF is fully valued at the current price

1. State of the loan book-NPL ratio way above sector average

2. Loan Loss Coverage-way below sector coverage.

3. Land Laws-Land or a house is no longer that attractive as collateral.

4. Real Estate Sector-returns from the sector are taking a knock...most likely to affect HF's loan book as people scale back on plans in the sector.

5. Margins...over reliance on interest income-margins to come under pressure from high cost of funds i.e MTN last year was at 13%.

Given the risks...A P/B Ratio of 1.22 is fair...last time HF traded on a sky high PE was bcos Equity Bank was talking of a bid.

FY13 PAT most likely to be up by 20-35%.

Unfortunately I know what I'm talking about....

1. On 3 read the new land laws

2. On 4 check Hass Consult Property Index

3. @Deal was a buyer at Ksh13-Ksh15

4. HF deposits and loan book isnt growing at a faster pace than industry average..check Q3 2013 earnings...look at q/q balance sheet growth

5. Let Ireri increase loan loss coverage to 50%...lets see if there will be any growth in 2013.

6. Add a rights issue...HF will need to recapitalise in the next 3 years....

HF is no longer attractive as it was at Ksh12-15 last year...given the risks...

DTB...CFC...are all trading on single digit forward PE's...I think theyre better picks at current prices than HF.

Currently pe is actually 6. Something. Eps fy 12 was 3.22

Its amazing to see the negativity towards housing finance as an investment more so from "seasoned" investors...
Just because you love CFC (@the deal) or you love DTB (@VVS)does not mean all objectivity is out the window..

Historical P/E for HF is around 15...

Historical P/E for the whole banking sector is around 12....

Historical P/B for HF is around 2...

Historical P/B of the whole sector is also around 2...

In what world is it impossible to return to those ratios at least for the whole sector??

Given that the new land laws are not retrospective and the so called NPL ratios are cooked at board meetings I still think HF is the best bet in the banking sector...

And not to forget that DIVIDEND YIELD is on fire in this current market!!!!

@VVS my source is directly from Caroline Kariuki who is CEO of The Mortgage Company after I had asked her how they would factor in the risk... Where is your source from about the retrospective laws... I'm always open to correction!

@VVS perhaps you didn't read the document too well

HF looks pretty safe to me after what I read below..

4.3. Charges over private land - mandatory provisions and retrospective effect

Enacting laws with a retrospective effect is unusual, particularly where the retrospective effect is likely to cause detriment. In our view, retrospective legislation that leads to any form of arbitrary expropriation of a right or interest in land may be challenged for being unconstitutional

(c) Spousal consent required for charge of land; charge may be void if no consent obtained

As discussed above, spousal consent will be required in order to validly charge any land held by a person who is married. If spousal consent is not obtained or if the borrower gives misleading information on the lenders inquiries regarding spousal consent, the charge will be deemed void at the option of the spouse or spouses whose consent was not obtained. This provision does not have retrospective effect.

@guru267, you seem to have a liking for real estate investments with Home Afrika then Housing finance...Mr. Market is negative on real estate there is some element of risk in defaults and overvaluation

How are the new Land Laws positive for the business?

if implemented properly, these will cut out lots of red tape, no doubt the spousal approval and landlord rights might impact negatively on banks and landlords respectively....