Barclays opens trading arm as margins thin

Thursday January 21 2016

On Thursday last week, Mumias closed at Sh1.95 per share from a traded volume of 865,800 shares. On Friday, the stock opened at Sh2 before reverting to Sh1.95. Nevertheless, enhanced production of ethanol would generally increase revenues for the company. PHOTO | FILE

East Africa has agreed to fast-track the unification of the four bourses via an online portal allowing cross-trading in securities. PHOTO | FILE 

By BRIAN NGUGI
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Barclays Bank of Kenya subsidiary, Barclays Financial Services limited Wednesday commenced trading on the Nairobi Securities Exchange, (NSE) following what it termed as “extensive system testing and integration,” since its admission as a trading participant.

Poor performance at the Nairobi Securities Exchange has seen brokerages firms report weak earnings even as more banks go for the pie.

Co-operative Bank’s brokerage arm Kingdom Securities reported a drop in profitability for the first half of 2015 due to the reduced trading commission income at the bourse. Revenues mainly comprises brokerage commissions, interest and advisory income.

Kingdom Securities reported Sh2.6 million net profit, slightly more than a quarter of Sh9.9 million posted over the same period in 2014.

Drop in profitability

SBG Securities, the brokerage arm of CfC Stanbic Bank, also reported a seven per cent drop in 2015 half-year profitability.

The brokerage posted a net profit of Sh126 million for first six months of 2015 compared to Sh135 million a similar period in 2014.

However, Genghis Capital, a subsidiary of Chase Bank, managed to increase its profitability in the first half of 2015.

Its net profits increased by 60 per cent to stand at Sh22 million from Sh14 million, buoyed by an increase in both brokerage commissions and advisory income.

Capital gains tax and the weakening of the shilling have been cited as the main causes of the bourse’s poor performance last year.

“Barclays Bank is only the most recent example of ''commercial'' Banks seeking to open a direct Channel to the Securities Exchange. Equity Investment Bank has already arrived and Kenya Commercial Bank surely will be not far behind. I think the banks are seeing a demand pull where customers are seeking access and whilst the various iterations are different the story is really about putting balance sheet to work,” said Nairobi based analyst Aly Khan Satchu.