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Future of Equity partnership with Exotix unclear in review

Ms Mary Wamae with the bank’s CEO, Mr James Mwangi. PHOTO | SALATON NJAU | NMG
Ms Mary Wamae with the bank’s CEO, Mr James Mwangi. PHOTO | SALATON NJAU | NMG 

Equity Group #ticker:EQTY remains non-committal on the fate of its joint venture with London-based Exotix Partners as the bank announced it was mulling closure of its asset management unit due to regulatory changes.

The listed firm said while Equity Investment Bank would continue with brokerage services, it was “reviewing” the corporate advisory and wealth management unit after the capital markets regulator stopped managers from offering cash management services.

Mary Wamae, Equity’s director in charge of corporate strategy, said the lender had “gone back to the drawing board” to review operations at the investment bank.

“The brokerage is going on,” Ms Wamae said at an investor briefing Monday.

“On capital advisory we are reviewing the strategy, similar to asset management,” she said.

The Capital Markets Authority in a circular dated August 22, 2016 ordered asset managers to stop offering cash management products — the practice of managing cash for wealthy clients at a fee.

Wealth managers would pool cash from investors to create a formidable financial war chest, which they used to negotiate high interest rates for term deposits or buy commercial papers or short-term government securities.

The wholly owned investment bank in August 2014 signed a partnership with Exotix Partners that saw the two firms work together on research, sales and integrate trading platforms.

The Equity-Exotix pair was ranked the second largest stockbroker at the Nairobi bourse in the half-year to June 2016, group chief executive James Mwangi said.

“Equity has the retail market — about 44 per cent of all CDS accounts. Exotix has the international market,” Mr Mwangi said. He declined to comment on speculation that Exotix was planning to set up its Kenya operations in what would lead to termination of the joint venture.

Exotix announced last week that it was expanding the Nairobi unit, adding it had hired the first of three new analysts.

It hired Faith Waitherero Mwangi, formerly a research analyst at Genghis Capital, covering banking and media, to provide coverage of financials in East Africa.

Exotix CEO Duncan Wales said: “It’s been business as usual as far as our own expansion plans are concerned. We regard Kenya as a very important strategic opportunity.”