Half-year financial reports show that SBG, which is associated with the CfC Stanbic group, had the highest total income and net profit.
The broker crossed the half-year line with Sh342.7 million in total income and a Sh138.66 million profit, nearly doubling the Sh76.6 million net income it made during a similar period last year.
The results left SBG in the enviable position of being the only stockbroker whose half-year profits crossed the Sh100 million mark.
SBG Securities, the firm led by investment banker and former Nairobi Securities Exchange (NSE) chief executive Nkorengamba Mwebesa, has widened its domination of the stockbrokerage business with a 50 per cent rise in income in the first six months of the year that has left it as the clear market leader.
Half-year financial reports show that SBG, which is associated with the CfC Stanbic group, had the highest total income and net profit.
The broker crossed the half-year line with Sh342.7 million in total income and a Sh138.66 million profit, nearly doubling the Sh76.6 million net income it made during a similar period last year.
The results left SBG in the enviable position of being the only stockbroker whose half-year profits crossed the Sh100 million mark.
Renaissance Capital (RenCap), which closed the half year with a net profit of Sh67.4 million, is the second most profitable broker having risen from the fourth position in a similar period last year.
RenCap’s profitability was underpinned by a Sh100 million rise in the broker’s total income arising from higher commission earnings and a Sh25 million boost from advisory earnings.
Kestrel Capital, which has been one of the dominant players, retained the third spot in the earnings list, having clocked Sh38.8 million in net profits.
“The extra business is coming from normal clients, nothing exceptional,” said Kestrel Capital chief executive Andre DeSimone.
African Alliance whose net profits fell by 98 per cent to Sh1.5 million from Sh64.5 million last year slipped from the market leaders’ list.
The steep drop in profitability came on the back of a fall in the broker’s income from Sh240.6 million in the first six months of last year to Sh185.6 million this year.
The firm’s position was made difficult by the fact that its brokerage commission fell 28 per cent to Sh135 million even as expenses rose 15 per cent to Sh182 million.
Standard Investment Bank (SIB) doubled its total income from Sh81.5 million in June 2013 to Sh192.1 million this year but a 179 per cent increase in costs to Sh165 million left the net profit only 10 per cent higher at Sh17 million.
Dyer and Blair, another big player in the market, also combined a high income of Sh304 million — the second highest after SBG — with a huge expenses bill of Sh271 million to close the period with a modest net profit of Sh17.8 million up from Sh6.8 million in June 2013.
Suntra Investments and Apex Africa made big strides in the earnings race to post a net profit of Sh29 million each, representing gains of 588 per cent and 248 per cent respectively.
Both were helped by steep cost-cutting measures but Suntra combined with a rise in investment and interest income that grew from Sh1.2 million in June 2013 to Sh21.8 million this year.
The broker closed the first six months of the year with a total income of Sh50.2 million. The top-earning brokers were equally dominant in the volume of business handled at the NSE, where the turnover touched Sh100 billion during the period as the number of active locals trading shares rose nearly two-fold to over 1.6 million.
RenCap accounted for 16.7 per cent of the total combined sales and purchases at the NSE, according to official market data.
SBG was second with 15.9 per cent of the turnover while Kestrel had 14.1 per cent ahead of African Alliance’s 10.5 per cent and Standard Investment Bank’s 10 per cent.
Higher operating costs, however, continued to cast a dark cloud over the brokers’ profitability and Mr DeSimone reckoned that it was the one factor that prevented the higher trading volumes having a major impact on earnings.
In the first six months of the year, operating costs rose by an average of five per cent even as employee costs fell by an average of 3.8 per cent.
Last year, stockbrokers’ income from advisory and consultancy services fell due to lack of big corporate deals, and together with rising costs, undermined the expected profit gains arising from higher commission earnings.
In 2013 many of them eased the cost-cutting drive that had persisted since 2012 and saw some brokers reduce their employee costs by more than 15 per cent.
Stockbrokers have also had to contend with lower income from bond trading — the market having posted a modest turnover of Sh272.7 billion in the first seven months of the year or 7.9 per cent lower than the same period in 2013.
Bond traders said volatile interest rates and the Treasury’s saturation of the market with primary market bonds had made it hard to build up liquidity in the secondary bonds.
The market has also suffered from constrained liquidity arising from reduced government spending.
“When the government does not spend liquidity is low in the market and this affects markets, including fixed-income, negatively,” Fred Moturi, a fixed-income securities dealer at Sterling Investment Bank, told Business Daily in an earlier interview.
Stockbrokers charge a 0.035 per cent commission on bond trades, thus providing an important revenue stream for the brokers.
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Note: The results are not exact but very close to the actual.
