National Housing Finance stocks soar on rising profits

National Housing Finance and Investments Ltd stocks gained 30% at the Dhaka Stock Exchange (DSE) last week thanks to its half-yearly performance that secured over 60% year-on-year profit growth.

The profit sharply dropped in the first half of 2020 but in the second half the company posted a record high profit that helped it report a record annual profit. 

Its after-tax profits for the January-June period this year also surpassed that over the same period of any previous year.

Two consecutive half-yearly figures of the highest ever net profits have apparently boosted stock investors' confidence.

The increased income from investments and operations over the second-half of 2020 together helped the specialised private sector non-bank financial institution (NBFI) leave its bad first half behind and post its highest ever annual net profits, according to Md Sarwar Kamal, company secretary of National Housing Finance. 

"The first half of 2020 was very challenging for us as NBFIs offices were closed during the nationwide shutdown to curb the first wave of Covid-19 pandemic," he said, adding that everything including its interest income and operating income dropped in the first half of 2020 and that reduced net profits by one-third.

"However, the second half was different. In fact, it was the best one, as economic activities resumed, customers were back to business with us and also, we secured robust income from investments," Sarwar Kamal explained the turnaround and journey to surpass the pre-pandemic performance.

Over the July-December period last year, National Housing more than doubled its profits compared to both the previous first half and the corresponding period of 2019.

Now in 2021 as lockdowns did not force its offices to remain closed, National Housing Finance lent a lot, recovered enough from clients, earned more in net interest income and also from investments, against a nominal increase in operational expenses.

On top of that, recovery of some once-written-off loans helped the financier reverse its previous provisioning expenses which also added to the bottom-line, he added.

National Housing Finance and Investments Ltd began its journey in late 1990s with a special focus in housing loans.

Housing had been its special focus, but small and medium enterprises (SMEs), term loans and lease financing were also a significant part of that until the mid-2010s, when its board of directors decided to concentrate more on mortgage loans.

In 2013, less than 60% of National Housing Finance's loan portfolio was in home loans, which grew to near 75% in 2015 and to over 93% at the end of 2020.

"We are still disbursing other loans but these are internally discouraged products as housing loans are our specialisation and also have better collateral," said Company Secretary Kamal.

Alongside home loans, their mortgage portfolio now also includes some commercial properties and projects as nearly 88% of the total loan portfolio is to the home owners, according to the 2020 annual report.

National Housing, sponsored by 15 renowned corporate shareholders including three banks, seven insurance companies and five corporate groups, got listed in the local bourses in 2008.

At the end of June this year, its net asset value per share increased to Tk17.7, which was Tk16.97 a year ago.

Credit rating of the company improved to "AA" for long-term and "ST-2" for short- term this year, which were "A1" for long-term and "ST-2" for short-term in the previous year. 

The company has declared 15% dividends for 2020.

Sponsors and directors own 57.24%, institutional investors 11.07%, the government 9.34% and general public 22.35% shares of the company, according to DSE data at the end of May this year.

National Housing Finance shares were trading between Tk25 and Tk53 over the last one year, while it closed at Tk61 each on Thursday.