February 19, 2014 / 5:47 AM / 4 years ago

UPDATE 2-Kenya's Housing Finance to borrow after sovereign bond

* Pretax profit leaps to 1.48 bln shillings

* Non-interest income up 382 pct

* Sees successful Eurobond driving rates lower (Adds bond)

By Duncan Miriri

NAIROBI, Feb 19 (Reuters) - Kenya’s second-largest mortgage lender, Housing Finance Ltd, will issue a medium-term note to take advantage of potentially lower rates once the east African nation has sold its debut Eurobond, it chief executive said.

The company, which posted a 63 percent jump in 2013 pretax profit to 1.48 billion shillings ($17.16 million), has already secured regulatory approval for a seven-year, 20 billion shilling corporate bond.

“It is an issue of timing so we can get good rates,” Frank Ireri told Reuters after an investor briefing.

Kenya plans to start marketing the Eurobond of up to $2 billion this month. A successful issue is expected to put downward pressure on local lending rates, Ireri said.

Funds raised through Housing Finance’s bond will be used to support growth, including hiring of new staff, opening of five new branches and increased lending, with a view to growing the balance sheet.

“We are optimistic, expecting our balance sheet to grow by 30 percent this year,” Ireri said, citing improved macroeconomic stability, higher government spending and demand for investment opportunities from locals and foreigners.

Housing Finance reported its non-interest income increased almost five-fold to 1.3 billion shillings during 2013, driven by growth in property sales.

In 2012, Housing Finance revived its housing development arm to tap a fast-growing middle class in east Africa’s biggest economy. Kenya faces a huge housing deficit, with some independent studies putting the demand at 160,000 units per year, against a supply of 30,000 units.

In the same year the company established another subsidiary, Housing Finance Insurance Agency. The two subsidiaries contributed 18 percent of the profit last year, up from less than 1 percent in 2012.

The firm raised its dividend per share by a quarter to 1.75 shillings each.

Ireri said the risk of further attacks by Somali Islamist militants and their sympathisers posed the biggest risk to the 2014 outlook.

Kenya has suffered a series of attacks blamed on Somali al Shabaab rebels including an assault on an upscale shopping mall in the capital last September in which at least 67 people were killed. ($1 = 86.25 Kenyan shillings) (Editing by Richard Lough and Tom Pfeiffer)

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