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M-Akiba, derivatives market costs pull NSE earnings down to Sh77.8 mn

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NSE chief executive Geoffrey Odundo. FILE PHOTO | NMG

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Summary

  • Half year earnings dropped on higher expenses from developing infrastructure for derivatives market.
  • The NSE paid a one-off consultancy fee for ongoing development of a derivatives market, exchange traded funds and marketing of M-Akiba.]
  • NSE says it suffered a 8.96 per cent drop in interest income to Sh47.13 million due to the rate cap law.

Self-listed Nairobi Securities Exchange's (NSE) #ticker:NSE after-tax profit for the six months to June 30 fell by 5.1 per cent largely due to one-off expenses from developing infrastructure for new products, the firm reported on Tuesday.

Half-year net earnings dropped for the second year in a row to Sh77.77 million compared to Sh81.96 million a year earlier.

Higher expenses were largely driven by one-off consultancy fees the NSE says it paid for ongoing development of the derivatives market, exchange traded funds and marketing of mobile-based bond M-Akiba.

“This (derivatives) is an international market, so we had to on-board a consultancy expert to help us develop key aspects of the market, more so around calculators, contracts, stress-tests, procedures and so on. We accommodated the entire cost in the half-year of this year,” NSE chief executive Geoffrey Odundo told investors at a briefing Tuesday.

“We also put in some money there (M-Akiba) towards infrastructure development and also supporting marketing. These are one-off expenses we don’t expect to see a recurrence of them,” he added.

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Income rise

Total income rose 3.74 per cent in the six-month period to Sh346.8 million, largely boosted by a Sh8.4 billion expansion in equity turnover to Sh82 billion.

The NSE raked in a Sh196.8 million equity transaction levy, an 11.37 per cent growth over Sh176.7 million realised in the same period last year on improved shares prices.

Earnings from bond transactions dipped to Sh16.7 million from Sh18.4 million previously on reduced corporate activity, with only EABL #ticker:EABL having raised Sh6 billion in the second tranche of its offer.

Administrative expenses, however, rose by Sh18.88 million to Sh254.66 million year-on-year eating into net income.

NSE also suffered a 8.96 per cent drop in interest income to Sh47.13 million because of rate cap regime, it said, adding that it invested 73 per cent of its cash assets in deposits.

Mr Odundo said the first quarter of the year was tough with knock-off effect from last year's reduced activity following enforcement of the interest rate law which hit performance of banking stocks hardest.

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“The long-term economic outlook remains favourable, despite the effects of a more prolonged drought in 2017, the recently concluded General Election, the potential upside of interest rates in the United States and the geo-politics issues in Europe,” the NSE said in a statement.

The board has not recommended an interim dividend payout.

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