Housing Finance(HF) posted 3Q14 performance figures marking a 6.4%y/y rise in EPS to KES 3.05. Loans and advances grew 29.3%y/y while deposits grew 27.8%y/y. NII jumped 43.7%y/y (22.8%q/q) as the lender was able to mobilize cheaper deposits through its retail banking strategy within the year. Deposit interest expense was up 8.9%y/y (1.5%q/q) while interest income on advances rose 28.9%y/y (12.7%q/q). NIR was up 119.1%y/y aided by HF’s subsidiaries, Kenya Building Society and Housing Finance Insurance Agency. Additionally, foreign exchange trading income, which HF started generating in CY14, stood at KES 23.3m compared to KES 17.09m in 1H14. Aided by the growth of Kenya Building Society, we believe the company’s NIR will continue to gain relevance having accounted for 24.1% of total operating income in 3Q14. Total OPEX was up 113.3%y/y on the back of Kenya Building Society’s growth. Salaries were up 38.0%y/y owing to the company’s expansion programme. Going forward, the group will continue to focus on mobilizing deposits from savings and current accounts as opposed to expensive corporate deposits. We believe this strategy will continue to pay off as we anticipate higher net interest income. Additionally, the lender intends to diversify business lines to reduce reliance on interest income. (Company filing, Standard Investment Bank)