Stockbrokers normally earn a commission of between 1.5 and 1.8 percent per equities trade, while bond trades attract a commission of 0.03 percent per trade.
Stockbrokers enjoyed a 31 percent jump in trading commissions in the first half of the year ended June on increased volumes of bond trades on the Nairobi Securities Exchange (NSE), easing the impact of falling advisory fees on their profits.
Financial reports filed by the market intermediaries show that they made Sh946.4 million in commissions over the six-month period, up from Sh721.2 million in the first half of 2023.
The secondary bonds market at the NSE saw trades worth a record Sh782 billion in the half-year period, compared to Sh309.9 billion in the corresponding period of 2023.
On the other hand, the value of shares traded in the equities market fell by 19.9 cent to Sh47.5 billion from Sh59.2 billion in the first half of 2023.
Stockbrokers normally earn a commission of between 1.5 and 1.8 percent per equities trade, while bond trades attract a commission of 0.03 percent per trade.
Other market players such as the NSE, the Capital Market Authority (CMA) and the Central Depository and Settlement Corporation (CDSC) also take a slice of the commissions, meaning that their earnings for the half-year were also boosted by the higher commissions revenue.
“This (exceptional bond performance) was largely driven by issuances of incentivised infrastructure bonds that attracted both local and international flows in both primary and secondary markets,” the NSE said in a commentary of its financials.
“The decline in equity turnover was attributed to the Sh22 billion equity block transaction in the first half of 2023, and the impact of international investors reallocating capital to high yielding government bonds.”
Dry Associates Investment Bank and Kestrel Capital led their peers in income from brokerage commissions at Sh172.6 million and Sh115.4 million respectively, with the latter also enjoying the highest growth in this revenue line year-on-year at 115 percent. This pointed to strong performance from their bond trading desks.
Despite the higher commissions, the intermediaries reported a 5.8 percent fall in their collective net profits to Sh344.2 million due to a fall in advisory income and higher expenses.
Advisory income declined by 47 percent to Sh156.4 million, attributed mainly to the absence of a one-off large transaction that had been booked by SBG Securities in the previous year when the firm helped midwife the Sh22 billion purchase of additional EABL shares by the brewer’s British parent Diageo in March 2023.
This transaction netted SBG Securities and its parent Stanbic Bank Kenya an income of nearly Sh1 billion. SBG had booked a net profit of Sh154 million in the first half of 2023 on account of advisory fees of Sh183.6 million, but the profit fell to Sh14.7 million this year after advisory earnings declined to Sh1.9 million. Expenses meanwhile rose by 11 percent to Sh1.66 billion for the industry.
The most profitable trading firm was NCBA Capital with a net profit of Sh110.8 million, although this represented a decline of 2.5 percent from Sh113.6 million in the first half of 2023.
The firm benefitted from diversifying its business, as the bulk of its top line revenue came from fund management fees of Sh302.7 million, while traded commissions and advisory fees together contributed Sh86 million to its total income of Sh422 million.
Only four out of 22 investment banks and stockbrokers made a net loss in the period under review, down from 12 in the first half of 2023.
