Moses Michira
12 August 2010
Standard Investment Bank more than tripled its net profits for the first half of 2010 helped by increased activity at the Nairobi Stock Exchange (NSE), which highlights the growing profitability among investment banks and stockbrokers in the changing fortunes at the bourse.
The investment firm on Wednesday announced a profit of Sh17.8 million for the six months to June compared to Sh5 million in the same period a year earlier, reflecting a 248 per cent rise on increased activity in the bond and equities market.
Capital market intermediaries have reported good results for the first half of the year as they recover from a subdued market that pushed them into losses in 2009.
"There has been increased interest in stocks since the beginning of the year from both institutional and retails investors that has boosted our brokerage commission earnings," Mr James Wangunyu, the managing director of Standard Investment Bank, said.
It nearly doubled its brokerage commissions from Sh34 million in the first half of 2009 to Sh61 million in the six months to June 2010, boosted by buoyant equities market.
Market turnover - which generates commissions for the brokers--amounted to Sh42.8 billion in the first half of 2010 compared to 16.4 billion in 2009.
Market conditions
"We are very bullish about the general market conditions, but declining returns from bonds are likely to see investors leaving," Mr Wangunyu said, adding that the interest in stocks, spurred by the August 4 vote, would offset the bond losses.
The firm like most investment banks failed to earn advisory fees in the first half, which analysts attributed to the small number of deals in the first half of 2010.
Compared to last year when Kenya's capital markets generated a Sh36 billion investment opportunity for those with cash through corporate bonds, nothing has come from this market segment since the beginning of the year.
But Kenyan companies have stepped up their fundraising plans in the second half of the year with offers of nearly Sh50 billion expected from listed firms.
These offers include the just concluded Kenya Commercial Bank's Sh15 billion rights issue, TPS Serena (Sh1.2 billion rights issue) and Standard Chartered Bank (Sh2.5 billion rights issue).
The investment bank has clinched the lead advisory roles in the three offers including the sale of five sugar companies - offering it fertile ground to grow its fees income in the second half.
"We are now involved in several transactions as lead advisors and the fees would be reflected in the end of year results," said Mr Alistair Gould, an investment manager with the bank.