Death of a stockbroker

Amid other revivals

No stockbroker is collapsing!

Part II
The whole stock broking industry is due for a shake-up. Arguably CFC is the only stockbroker with the capacity to serve a myriad of customer stock broking requirements.

Now, one other leading Kenyan Bank has applied for a stock broking license, which is expected to be granted later this year. And if one of the big Kenyan banks (Barclays, KCB, Stanchart) decides to enter the market, this could herald the death of the traditional stockbroker.

Banks are always looking to grow their fee income and the sums are here. Imagine if every time a customer withdrew or deposited funds from his/her account, the bank earned a commission of 1.5% of that amount. That’s what a stock broking license means as brokers get paid their commission when investors buy or sell shares regardless of their investors gain or loss.

Revival

EA Safari Air: The airline will launch twice daily flights to Mombasa starting on August 1 at a price of 8,900 shillings plus tax. No response from Kenya Airways who have had a virtual monopoly on that route.

Equity Bank: The listing of 90.5 million shares of Equity Bank at the stock exchange has now been approved. listing on August 7

KBS: A few Kenya Bus vehicles are back on the road this morning. The buses are refurbished, painted over, with new seats, and look much cleaner and better maintained than when the company shut down earlier this month.

Kenya Re Another IPO expected, probably in 2007 will be that of the Kenya Reinsurance Company (Kenya Re) from www.stock-detective.co.ke.

Scangroup: IPO opens today, with 69 million shares up for grabs.

Uchumi: One month after I made, what I thought was, my last Uchumi purchase, I was back to buy some Afya apple juice. Afya is one of the brands of Kevian Kenya owned by Kimani Rugendo, a dynamic Kenyan entrepreneur and businessman, and who as a supplier, has led the Uchumi supplier’s movement that successfully lobbied the government to revive the chain.

The stores have reopened with the same euphoria and fanfare that followed the rights issue last year. The question is can this be sustained and will customers be shopping, and suppliers be stocking, at Uchumi 3 or 6 months from now?

Also, the Minister of Trade announced that an Uchumi shareholders meeting will be held this Friday at KICC.

65 thoughts on “Death of a stockbroker

  1. Anonymous

    Bankelele,
    Pls pls let us know which bank this is!

    We have cash in our client accounts and we dont want to lose all that cash. e.g. i have a few 100k in cash with Dyer & Blair and if it is the one with problems I’d like to know so that i move my cash.

    But this raises another issue… why r kenyans so conservative when reporting matters!? And i offer this as a constructuive criticism. Why say “One of the oldest stock brokers” instead of the actual name of the broker. And whey one of the banks instead of the actual banks name. Once can furtheremore say “XYZ Bank is rumoured to…”.

    Especially on a blog where one has more leeway… and you Bankelele, like the a certain bank/corporation/company instead of explicitly mentioning the entity’s name.

    As i said, i offer the criticism in good faith as this is one of my favourite blogs.

    My guess is the affected broker is Dyer & Blair… and with that said i’m walking over to draw all my cash.

    Anyone else, see you in the reception @ D & B.

    Asante.

  2. dropmyload

    Does Uchumi deserve to be revived? A few observations:
    – A relative went to Uchumi Sarit to purcahse champagne before it shut down. A shelf stocker suggested they exchange labels on the bottles to get a price reduction, and pay him a small fee for his “services”. She refused.
    – A friend supplies Uchumi. He advised that before they shut down, he needed to bribe certain officials in accounts to get his cheques released. he also mentioned they are required to bribe from the point of having their goods accepted by Uchumi.
    – Another friend recently started supplying Uchumi after paying the required bribes. He visited Ngong Road and found his product was not on the shelves. The shelf stacker then advised him that he was required to bribe again to have his product make it to the shelf. The bribe would be shared by the stacker and someone refereed to as “mzee”.

    With all this going on, what really are we reviving? Uchumi is a den of corruption and bad management, and really Kenyans do not need to protect such an institution.

  3. Nelie

    I echo anonymous – more info please! Who’s this that’s not delivering?
    I have worked with three stock brokers – including CFC – and they all sucked!
    When KenGen was falling, I asked CFC to sell at 35 and they held them and sold 30

  4. bankelele

    Anonymous: No stockbroker is collpasing. Your client money at Dyer & Blair and ALL other brokerages is safe. I was lamenting the very poor service at one of the more promising ones.

    Dropmyload: Uchumi revival as a national prority is debatable. The past behaviour of Uchumi employees as you describe it is was probably typical (but extreme!) of any company where employees are very worried about their future

    Nelie: Have said it many times – customer service for retail investors at all brokers is very poor, and needs to be improved.

  5. Ms K

    Oh brilliant about the EA Safari Air. Can you imagine I called my travel agent last week and Msa return was 11k!!! I was so annoyed!! I wish KR would refurbish their trains.

    KBS are back? I haven’t heard that one.

    So how are you mister?

  6. Anonymous

    hi guys,
    can someone fill up the appl forms for scanad from the downloaded file?will they accept it?or it should be from their original form, went to the bank & they said not yet arrived.

  7. bankelele

    Ms K: Am ok, but far from the sunny sands.

    EAsaf: It takes courage to challenge KQ who may retaliate with price cuts.

    Good news, new KR should start on August 1, but likely with goods trains only – and yes some KBS are running today, with new paintjobs.

    Anonymous: Forms should be at brokers from today, but maybe not online. Forms contain code digits, which matter, as they determine which broker will earn commission

  8. sassy

    Dyer and Blair is ok and safe but their services are poor- they tend to concentrate more on institutional investors but for small timers when you place an order by the time they execute it will take a while.
    I know one brokerage which is under scrutiny for offloading sizeable Uchumi shares 2 days before they announced the collapse- (The chief dealer is contemplating early retirement.) i generally believe that brokerages are safe their services just stink and need urgent change.

  9. Prousette

    Uchumi will still have problems as long as it is run like a Gok office. I believe there are many loyal customers who would want to build it up but they will need to pull up their socks and boots while at it!!

    The scenario described by dropmyload above is shocking to say the least.

    Been looking out keenly for the new KBS none seen yet.

  10. Anonymous

    Skwota>
    Dear Anonymous & Sassy,

    D&B i believe is quite okey infact I understand that they are underwritting the ScanGroup IPO and are involved in the Listing of Equity bank next month. Sassy do what i did request for online access therefore you won’t have to visit their offices, i normally place my orders online then confirm after 3 days whether they have been executed…try it out it works

  11. Ken

    A brokerage wont go down unless it looses a huge chunk of it’s corporate investors (The guys who buy stocks worth millions) and this wont happen soon.
    I think the CMA should come in and deny banks licences, but have the stockbrokers style up. This is a service sector that is just begining to look rossy.
    Can you imagine writting an e-mail to a bank official to trade a stock, I have to bitch and call and send more than 20 e-mail just to get my banks (KCB, Stanbic and co-op) to reply to my e-mail.
    As it is most banks have their lobbies full of customers, how will they cater with the extra paperwork and customer base, plus the issue of offering investment advice to newbie investors.
    Besides if a bank is quoted on the exchange it shouldnt be a broker.

  12. Mashatall

    banks good point on stockbrokers, most of them cannot deliver good service.My take is that with the new electronic exchange in place, clearing of trades will be much easier, and the NSE will be open for more hours, generating more volumes and a higher turnover.The brokers that will fold will be the ones that will not install a good IT system, to handle clients portfolios and for the back office.
    The finance ministry ought to come out with a law, that separates commercial banks from investment banks, does one exist yet? In the US their roles are clearly defined and no big banks have brokerage operations. I shudder at the thought of BBK getting into the game, we would have to pay all kinds of punitive charges just to be able to invest in the market.
    banks are in panic mode, coz wananchi are becoming more sophisticated in their finacial dealings, and are no longer parking their money in current or savings accounts. We now have unit trusts,stocks and also informal investment clubs where we earn better returns and we are willing to take the risk. Even individual retirement accounts wil drain the banks further, so i predict more banks will enter the fray so that they can generate more profits.Stanchart acquiring part of First Africa is a perfect example.

  13. bankelele

    sassy: I agree that most stockbrokers concentrate on institutional investors. What happened to the investigation of the last-minute Uchumi parachuters?

    Prousette: New team looks serious, but agin so did Mastersen-Smith and we believed him (we also believed Thairu when he said [several times] that Uchumi had finaly hit rock-bottom and was now posied to turn upwards) ! Also, I saw 3 KBS buses this morning

    Anonymous Skwota: We all seem to have to follow through for orders (takes several days [and phone calls ]most times to execute a single trade

    Ken: No brokerage is going down, but several customers [I know] have moved accounts citing non-existent service as the reason. I don’t think the CMA is even aware that customers are complaining otherwise they would investigate the capacity of each broker to serve investors.

    Mashatall: the volume of NSE shares [post-Kengen]has over-whelmned many brokers. If banks like CFC want to operate brokers, they will have to form subsidiaries. CMA has fixed commission and fees that brokers can earn. I agree investors are flocking to equities rather than wastign cash away in savings accounts. Bonds are still mysterious and real estate too pricey for most.

  14. coldtusker

    @Mashatall – Stop fibbing & slowing the road of liberalisation!

    The Glass-Steagall act of 1932 was repealed by the Glamm-Leach-Bliley Act of 1999.

    In the US, a Bank can own a Broker. A Broker can own a Bank! They need to make sure they are sufficiently capitalised & follow the regulations & guidelines. Most banks are monitored by FDIC.

    Citibank – BOTH commercial operations & runs a investment bank & stockbrokerage!

    JP Morgan Chase – Chase Bak (commercial) & JP Morgan Investment Bank

    The above are just the larger entities. There are lots of others!

    E-Trade started as a broker & then started a bank!

    Nigeria has over 100 stockbrokers.

    The CAM & NSE should keep a tight leash on the brokers BUT allow more coz competition will lower prices & improve service.

    Look at Telkom’s drive to improve customer service while expanding the product range BECAUSE of competition from Safaricom/Celtel, Popote, etc!

  15. Anonymous

    hey banks, just a question unrelated to the topic. do you think the next focus for real estate is gonna be eastlands (gentrification) reason is that this area. have infrastructure and i guess if i was an investor i could tear down this old buildings and put up new higher density blocks. – are this properties still owned by city council ? and would city council be willing to sell this property to current residents. is there a potential win win situation for current residents