Investment banks see profit leaps with recovery of economy

Afrika and Kestrel Investment banks have posted 978 and 139 per cent increases in pretax profits respectively on increased activity at the bourse and recovery in the economy in the first half of the year.

“Business picked up very well during the first half of the year and this helped grow profits” said Mr Abdul Khambiye, Chief Financial Officer at Kestrel Capital.

Increased volumes at the bourse resulted in Afrika posting a 25 per cent increase in brokerage commissions of Sh24 million up from Sh19 million while Kestrel’s commissions stood at Sh192 million up from Sh69 million last year, a 178 percent increase.

Low bond interest rates in the second quarter have not affected brokerage commissions at the two investment banks.

“Reduced interest rates have not really affected the business because volumes traded have gone up at the exchange and this has been helping our commissions” said Mr. Khambiye at Kestrel Capital.

The stock exchange has however experienced subdued activity between July and August but the investment banks expect business to pick up in the last quarter of the year.

“After the promulgation of the new constitution we are expecting business to pick up again especially in the fourth quarter” Mr. Khambiye.

Other investment banks that have reported their half year results such as Suntra, Apex Africa and Dyer & Blair have also posted significant gains in brokerage commissions and profits before tax.

According to the Central Bank, the economy posted a 4.4 per cent growth in the first quarter of the year, with the financial, mining, manufacturing, agricultural, wholesale and retail all expanding between 3.7 and 11.9 per cent.

Optimism in the economy has continued through the second quarter and as a result companies at the NSE across these sectors performed well over the first half of the year posting improved returns.

Most counters at the exchange have recorded significant gains with the NSE 20 Share Index returning 33 per cent in the first half of this year.

Volumes traded at the exchange also increased and equity turnover for the period between January and July stood at Sh61 billion, almost double the Sh38 billion that was traded between January and December last year.

The bond market turnover for the same period tripled last years to stand at Sh338 billion on account of the Automated Trading System (ATS) and immobilisation of all bonds at the exchange.

At the end of last year, turnover stood at Sh110 billion.