Stanbic Holdings-owned investment bank SBG Securities saw its net profit for the half year to June 2024 fall by 91 percent to Sh14.7 million in the absence of the one-off advisory income booked last year from midwifing the acquisition of additional EABL shares by the brewer’s British parent Diageo.
SBG had booked a net profit of Sh153.9 million in the first half of 2023 on the back of advisory fees of Sh183.6 million, but this year that line of business has only earned Sh1.9 million.
Offer documents on the Diageo share purchase listed Stanbic Bank and its affiliate SBG Securities --the two forming part of Stanbic Holdings-- as the financial advisers. Stanbic was also the paying bank, and SBG the sponsoring broker and lead acceptance agent.
Stanbic booked an income of nearly Sh1 billion from the transaction, which was one of the single largest seen in Kenya’s capital markets history.
In the deal that was concluded in March 2023, Diageo bought an additional 118.39 million EABL shares at a unit price of Sh192, valuing the offer at Sh22.7 billion. The purchase helped raise its stake in the Nairobi Securities Exchange (NSE) listed brewer to 65 percent from 50.03 percent.
“SBG securities, was 91 percent down year-on-year but not a problem. This is the business that led the intermediation of the big transaction (EABL/Diageo) that I spoke to from last year,” said Stanbic Bank Kenya chairman Joe Muganda at the lender’s half year financial briefing on Thursday.
“It is also a business that is investing in new, diversified opportunities, and therefore a 91 percent reduction for a business that is coming off such a strong big base is okay.”
SBG’s other main revenue line of brokerage commissions recorded an increase of 44.5 percent to Sh75.4 million, easing the negative impact of the fall in advisory fees.
The company’s total income meanwhile dipped by 57.2 percent to Sh122.5 million, while it cut its expenses by 3.7 percent to Sh101.13 million.
The growth in brokerage commissions in the first half of this year reflects the sharp jump in bonds turnover at the NSE from Sh309.6 billion in the first half of 2023 to a record Sh781.8 billion, as per Capital Markets Authority (CMA) statistics.
Equity turnover in the first half of 2024 stood at Sh47.5 billion, down from Sh59.2 billion a year earlier when the EABL transaction accounted for nearly half of total traded value.
Market intermediaries normally earn a commission of between 1.5 percent and 1.8 percent from equities trades, and 0.03 percent for each bond trade they handle for clients.
