Two of Kenya’s large stock brokerage firms Kestrel Capital and Renaissance Capital (Rencap) have reported a drastic fall in profit after tax on the back of dropping share prices and market turnover at the Nairobi Securities Exchange (NSE).
Both Kestrel and Rencap said yesterday in public filings that their 2015 half-year profits took an acute hit following reduced brokerage commissions and related income arising out of the long bear run on the NSE.
Kestrel Capital and RenCap said their net profit for the six months to June declined 96.8 per cent and 85.7 per cent respectively.
The NSE has generally been on the decline this year with bourse data showing that the number of trades fell by 31 per cent to 158,790 in the six months to June 2015, from 232,212 the same period last year.
NSE 20 share index is down nearly 15 per cent in the year to date. Brokers are paid commissions as a percentage of the traded price such that higher stock prices and turnover increase their income.
Kestrel Capital’s profit dropped on account of reduced income and higher finance costs. The firm reported profit after tax of Sh2.3 million in the six months to June 2016 compared to Sh73.8 million recorded in a similar period last year as its revenues took a hit.
Kestrel’s total income slumped 46.6 per cent in the six months to June this year to Sh203 million compared to Sh382 million in a similar period in 2015.
The company, meanwhile, said its commissions from brokerage dropped 26.7 per cent in the period under review to Sh189 million from Sh258 million last year.
RenCap said its profit after tax for the six months to June fell 85.7 per cent to Sh25.8 million compared to Sh181 million posted in a similar period last year. Its total income dropped 33.2 per cent to Sh176 million in the six months to June this year compared to Sh265 million in a similar period last year.
RenCap’s fees from brokerage commissions fell 1.2 per cent during the half-year period to Sh138.5 million compared to Sh140 million posted during a similar period last year. The brokerage recorded nil exchange gains in the period under review compared to Sh78 million in a similar period last year.
The lower turnover and reduced frequency of trading by retail investors pointed towards lower profits for the period for NSE firms. Kestrel and Rencap together with Equity Investment Bank are presently the top three stockbrokers trading at the NSE controlling over 50 per cent of the equities market, on the basis of data for the first six months of this year.