Equity calls up Francis Thuo investors

Equity Bank has invited Francis Thuo investors to transfer their electronic investment accounts to the lender’s investment banking arm as it seeks to take full control of the collapsed broker’s business.

Transfer of the share accounts to Equity will help investors to unlock their wealth since they require a licensed intermediary to either buy or sell their shares at the stock market.

Equity Bank acquired the collapsed broker three months ago, taking over its liabilities and its seat at the Nairobi Securities Exchange for a reported Sh150 million.

“Investors who hold CDS accounts through Francis Thuo are kindly requested to visit EIB to facilitate the transfer of their accounts from Francis Thuo to EIB or another broker or custodian bank of their choice,” said Equity Bank’s company secretary Mary Wamae.

Francis Thuo had an estimated 80,000 clients before collapse, but majority of them transfereed their CDS accounts to other intermediaries after collapse of the broker and placement under statutory management in 2007.

Acquisition of the remaining Francis Thuo clients would give Equity Investment Bank (EIB) a boost in customer base and market presence — though there is no public estimate of how many these investors are.

“We have approved the acquisition of Francis Thuo by Equity Bank on condition that if there are outstanding liabilities, they must be settled by the new owner,” Paul Muthaura, acting chief executive of the Capital Markets Authority (CMA) said upon approval of the takeover transaction.

Equity’s investment arm has been an agent for four or five brokers — a multi-million shilling business that they now stand to lose. In the nine months to September, the bank’s investment arm reported an after-tax profit of Sh31 million down from Sh47 million an year ago.

The bank is making a second attempt of reviving the investment business after a flop in 2009 owing to failure to secure corporate deals.

Weight of illiquidity

On revival, the bank’s management had indicated that the investment arm would be used to support the lender’s growing customers by offering financial advisory services; but it seems to have moved away from that strategy with the acquisition of Francis Thuo.

It is expected that the lender will ride on its huge branch network in the country to build customer numbers on the ones inherited from Francis Thuo.

Francis Thuo collapsed under the weight of illiquidity in 2006 and had fought protracted legal battles with the NSE to retain the seat it sold to EIB.

Equity Investment Bank reported intangible assets of Sh166 million in its quarterly financials. The line is used by stockbrokers to indicate their valuation of the set at the NSE.