[2008-05-28]  CFC profit drops as merger remains on hold
Financial services group CFC has reported a two percent drop in its first quarter pre-tax profits, continuing a trend from last year when overall group profitability for 2007 also fell. The company dipped from KSh1.36 billion in 2006 to KSh1.35 billion this year. Financial statements released by the group also show a sharp increase in loan loss provisions from KSh365 million to KSh741 million this year. The group’s pre-tax profits for the first quarter declined from KSh382 million to KSh373 million, while its gross non-performing loans portfolio went up by 30.4 percent to KSh1.9 billion. The group managing director, Mr. Madhabushi Soundararajan, could not be reached for comment, as he was said to be in day long board meetings. Mr. Soundararajan had however said in an interview earlier this year that the overall group profitability was being evened out by a drop in profitability for its financial services division, CFC FS. The CFC FS comprises of general insurance firm Heritage AII, underwriter CFC Life, an investment bank subsidiary and a stock broking division. Mr. Soundararajan attributed the drop in group profits to last year’s stock market correction that led to an overall drop in equity and bond prices affecting its financial services division. The mid tier financial services group has been in merger negotiations with South Africa’s Stanbic Bank for the last 18 months, and analysts see the increased provisions for bad debts as a sanitization of its books in anticipation of the merger. The deal, which has received almost all regulatory approvals, has been temporarily halted following a court ruling that allowed former Stanbic Bank employees to file a claim for their pension dues with the bank. CFC Bank shares fell from KSh118 each on Friday to KSh114 on Monday and rose to KSh116 yesterday.


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