KCB set to hive off its mortgage unit again

KCB Group plans to separate its mortgage lending unit SandL from the banking business, making it a standalone subsidiary by year-end as its housing business value hit Sh56 billion.

The process will reverse its absorption in 2009 when the bank turned it into a department. At the time of the merger SandL was headed by Carole Kariuki who left the bank to form her own company and was replaced by Joram Kiarie.

Mr Kiarie has, however, moved to manage KCB Uganda in an acting capacity.

KCB Group plans to use the subsidiary to enter the construction sector by building cheaper houses targeting emerging the middle class.

“What we want SandL to do now is shape itself as an independent entity of the company that builds affordable houses. We want to build 10,000 houses in the next three years,” said KCB chief executive Joshua Oigara.

The bank’s management said its mortgage book is currently Sh56 billion which is 14 per cent of the banks total loan book.

KCB had absorbed the mortgage lender SandL at a time when the unit was facing liquidity issues. It was made a department within the main bank in a move meant to strengthen its capacity to finance huge housing projects in the region.

“We will give it a chance to get its own capital, look for partners. Right now we are working with people in Brazil and Mexico to bring in seed funding for investment,” said Mr Oigara.

The bank hopes to ride on technology to build houses priced between Sh1 million and S million.

The average size of mortgages in the country is Sh7.5 million, making it difficult for majority of Kenyans to own homes financed by banks.

READ: Average home loan soars to Sh7.5m, locking out many

KCB joins mortgage lender Housing Finance in owning a property company. HF owns Kenya Building Society which contributed 15 per cent of the lenders pre-tax profit in 2013, a year after its activation.

CBA has also bought into a property company, Mutuya Holdings, investing Sh2.3 billion for a 24 per cent shareholding in the real estate company valued at Sh11 billion.

Kenya’s real estate sector has been vibrant in the last decade, proving to be a cash cow for developers and property managers.

KCB, Kenya’s largest bank by profit, has been aggressive in increasing its revenue streams with plans to launch its insurance and brokerage businesses by end of the year.

Mr Oigara disclosed the bancassurance agency was concluding on brokerage arrangements with select insurers.

Insurance companies had initially complained of banks entering the industry through bancassurance services arguing that they were giving business to only select companies limiting the options available to the public.

Mr Oigara said the matter had been resolved paving the way for the bank to launch its bancassurance.

The lender has also set up an independent department targeting diaspora remittances, with a workforce of 10 employees.

Management said the bank currently controls an estimated seven per cent of the diaspora remittances business but is targeting to increase its share to more than 10 per cent by end of the year.