Category Archives: NSE stockbrokers

Award Season

Capital Market Awards: These took place late in January 2011 and were organized by Think Business who also organize awards for the banking and insurance industry. The awards gained notoriety when they started a few years ago when the regulator capital markets authority (CMA Kenya) complained about their implied association /endorsement as a result of the name.

Some of the winners this year included;
Custodian of the year: KCB
Bond deal of the year: Housing Finance
Stockbroker of the year: Genghis Capital
Fund manager of the year: Genesis Kenya
Legal transaction advisors: Hamilton Harrison & Matthews
Unit trust: British American (which was launched 5 years ago)
Research team: Kestrel capital
Lead transaction advisor: Dyer & Blair
Investment bank of the year: Dyer & Blair

D & B director Jimnah Mbaru mentioned that they had used Hamilton Harris & Matthew in most of their deals, and had been represented in several deals including NIC (Uganda), Bralirwa (Rwanda), CRDB (Tanzania) and the largest was KPLC in Kenya which was a complex deal. He added that its not just technical know-how that wins them deals (everyone had talented transaction employees) but it’s a more about relationship management and understanding people, politics, social economic (and that many runners up had recruited staff from D&B). But he also spent 5 minutes telling what looked like it was going to be a very funny accounting or golf joke, only that it turned out to be one everyone knows as it ends with a lawyer answering ‘how much do you want 2 + 2 to add up to?’

The CMA awards were mostly deserved, but there are a few glitches that were evident:

– The organizers insisting on presenting awards (best performing NSE company won by British American Tobacco) that were not voted or verified by the auditors (who stated this before the award was given)
– Some categories listed had no entries (IPO of year, Chairman of year, PR transaction advisor), or two winners in same category (CEO of the year shared by Nasim Devji and Martin Oduor Otieno) and some prizes winners not showing up.

Other Awards up for grabs
Poptech: Nominate a Poptech Social Innovation Fellow
Property Awards: Organized by Property Expo Kenya, these take place on February 24 at Sarit centre and will award property developer of the year, real estate agency of the year, mortgage company of the year and real estate journalist of the year

Other Media Awards include
– Diageo Africa Business Reporting Awards
– East African media awards by East Africa Business Council

Online Share Trading in Kenya

Tonight CFC Stanbic Financial Services launched online share trading which they say is the first online share trading platform in the country. The actual ceremony was conducted by Information Permanent Secretary Bitange Ndemo (a Mumias shareholder through CSFS) who noted that while Diaspora Kenyans remitted $2 billion per year, they hand no true seamless mechanism to buy shares – until now.

It’s a light-weight system accessible to CSFS customers to make trade orders – buy, sell, cancel, monitor volumes, settlements, & trade live at the Nairobi Stock Exchange in real time as well as get statements & portfolio valuations.

Disclaimer: I’ve been a long-term investor through CSFS primarily through e-mailing trades, and this has been quite satisfactory. Enabling online share trading is a service which several brokers have promoted, but delivery has been spotty. The CSFS system is available even on Smartphones,and while SMS and mobile money are not highlighted, these will be features to push for and the service is one to try out and see.

Kenya Stockbrokers 2009 Financial Summary

Like at the end of august when they started providing their interim unaudited results Kenya’s stockbrokers and investment banks have continued with this now, and thanks to the CMA/regulator they have largely gone ahead and published their full year audited accounts for 2009 by the March 31 deadline.

Investments Banks: Best were Kestrel Capital (income of 148m and profit of 24m), Standard IB (income 121m, profit 40m) and Afrika IB (income 40m, profit 20m). Shock was CFC Stanbic Financial Services (CSFS) with a basket of income form brokerage, advisory, fund management and interest totaling 137m but still lost 108m after paying salaries of 123m highest in the industry. The same was seen at Renaissance (Income of 113m, lost -147m after paying 106m salaries) Equity IB looks like a mi-step for Equity Bank (high profile staff hires have since departed) and it had virtually no income (6.7m unrealized investments), and lost -57m in 2009. The disclosure separating client cash from bank cash are illuminating, and one can see that IB’s all have high debtors and creditors, resulting in some like Dyer & Blair carrying overdraft positions and the 44m paid in financial costs contributed to the -88m loss. Best off directors are Kestrel, Renaissance, Genesis and overall of the 19, ½ lost money

Stockbrokers Best was Genghis with income of 31 million and broke even with a ½ million profit while, Reliance, and newcomers NIC Capital, Kingdom and ABC Capital all lost money. Ngenye Kariuki did not file as it was placed under statutory management. Most of the five remaining stockbrokers have 251 million in intangible assets to prop up their balance sheets (which range from about 300 to 450 million) and significant amounts of receivables.

Fund managers: best was Stanbic Investments with income of 398m and profit of 124m, and then Genesis with income of 126m and profit of 31m then Co-Op Trust with profit of 19m. Other higher income earners, but who lost cash in the year included AIG income of 192m (lost -46m), British American Asset Managers 122m (-38m), Old Mutual Investment Group 168m (-5m) and Old Mutual Assets Managers 150m (-35m). Overall of the 14 asset managers, 50% were profitable including Aureos, Co-Op Trust, ICEA Asset Managers, Investeq while Stanchart and Zimele just about broke even. Unit Trusts Old Mutual Investment Group 7.6 billion (5 funds), BAAM funds manger about 5.7 billion (5 funds) , African Alliance (IB) 1.4 billion (5 funds), ICEA 782 million (3 funds, Stanchart 303m (2 funds), and Zimele 390m (2 funds), Dyer & Blair IB 50m (2 funds), Standard IB 11m (3 funds) Fund managers recently formed their own fund managers association lobby group separating themselves from KASIB for stockbrokers and investment banks.

Investment advisors: only one left is Tsavo after Dry has converted into an investment bank and Jani have withdrawn their license. Tsavo had commission income of 13m and a profit of 6m

Conclusion: The pictures has not been pretty, but this painful period of disclosures will hopefully lead to an improvement of their governance and management to stop the pattern of having one stockbroker collapsing every year by highlighting issues of high receivables and payables, insider borrowing, directors pay etc.

With the improved activity at the stock market in 2010, the pattern should be better than what they reported. This is a good time for IPO’s and for companies to raise funds 2010-2011 for reasons known elsewhere and this will benefit the stockbrokers who will perhaps have a better 2010 than 2009.

Tech Moment: Nairobi iHub for Innovation and more

iHub Nairobi: Our fabulous friends at Ushahidi are in the news for their recent technological endeavors which have been used in earthquakes rescue & relief in Haiti and Chile. But back here in Kenya, is something even more momentous, which is the unveiling & launch of the Nairobi iHub on March 3 2010.

It’s the culmination of many months of talks, visualizing the concept to plan, searching for appropriate buildings and finally the hard work of transforming an empty room to an innovation hub via teams of volunteers, advisers, and technicians while side-stepping others who were already hogging the free internet. Congratulations!

Other Tech Events in Nairobi this month:

The Pan Africa Media Conference from18-19 March 2010, a rather top heavy conference (lots of Current & Ex African presidents and leaders) but which has interesting speakers and panelists like Dr. Mo Ibrahim, H.H. the Aga Khan, Chris Kabwato (Highway Africa) Guy Berger (Rhodes University SA), Rose Kimotho (MD Kameme FM), Ory Okolloh (Ushahidi) Matthew Buckland (Media 24), Patrick Quarcoo (Radio Africa) and a talk on New Media – the possibilities, limits, and risks offered by blogs, SMS, MMS, social networks.

The Kenya ICT Board has
– A meeting for mobile developers (follow up from #MWEA10) on March 2
– BPO/ITES Centre of Excellence on March 4
– Tandaa Symposium on Local Digital Content on March 8

The ICANN Nairobi conference takes place from 7-12 March 2010.

The Nairobi 1% event takes place on March 12.

The Institute of Software Technologies launch their new brand, IT training center, and premises on March 11.

E-Fraud News: The Business Daily has a write up today about Kenyan banks combating fraud to protect their customers even as they roll out new technology channels for their customers to access more convenienct services from the banks.

In the blog world there have been some recent tales of e-fraud and bank fraud:

Room Thinker received the latest 411 letter from Tim Geithner at the US Department of Treasury
Wanjiku lost some money through old fashioned inter bank transfer
Idd Salim warned of the dangers of SMS banking fraud as a ticking time bomb warning that SMS can be intercepted on its way from your phone to telecom, changed & edited, delayed, deflected & even deleted before it ever gets to bank.
Gmeltdown writes about a recent mpesa fraud> and there’s even a related facebrook group but thankfully this is very rare occurrence among the millions of Mpesa customers.

You don’t know my name: Seems I spoke to soon in lamenting registrars mistreating retail investors in a bid to clean up their records, cut fraud, and authenticate investor information. My own stockbroker CFCStanbic (formerly CFCFS) wants the same of me, asking via an ominous warning letter, about Know Your Customer requirements, that (after about 5 years of trading through them) to confirm my identity as an individual. I’m as an individual supposed to provide copies my documents (CDS account opening form, my ID, 2 colour photos, PIN copy, utility bill, bank statement or pay/slip which will be certified by their panel of lawyers). There are also additional requirements for partnerships, informal groups, trust accounts, accounts for minors (birth certificate & parents ID’s) sole proprietors, foreign corporate, companies and Diaspora investors (certified passports, photos, utility bills, bank/c.card statement)

Compliance with the new KYC will enable me to continue transactions with them after March 31, but there’s’ no mention of what will happen if there’s no compliance by the March 26 2010 deadline.

This time around: Kenya Stockbroker collapse, Report leaks, Credit Reference Live

Time for another this time around post which looks at stories that recur in the business environment

Mars Group Kenya: The an anti-corruption watchdog group is the wikileaks for Kenya, re-publishing hitherto top-secret government reports at their website.

Mars Group research and produce their own reports, but their archives contain a growing list of reports of corruption in Kenya that is worth checking out. This week they have reports done by PricewaterhouseCoopers for the government of Kenya on the collapse of Triton Oil Company and on the misuse of funds for Maize famine relief in 2008. Last month they also released the report on the sale of the Grand Regency hotel. The Triton report shows that:
– At Kenya pipeline company (KPC) the oil collateral agreement was poorly drafted and ambiguous. Also managers had great discretion, procedures were lax /there was inter-departmental conflict (oil was released without verification) and documentation was poor (since documents would get lost at KPC, financers would exchange documents then present them all to KPC at once)
– Triton was aggressive with financing and would arrange for shipment before they got financing. They were stuck at some point and KCB entered into a finance agreement for goods when the ship was already in Kenya
Bad banking Ecobank have no claim against KPC, while the Fortis claim against Triton is suspect. Also Glencore had stopped financing Triton in June 2008 as they were suspicious about KPC fuel stock claims
– KCB and other financiers did not cooperate with the PWC investigators
– The debt owed to KCB may be substantially lower than KCB claims and they have provided little information to assist in verification of the Triton debt.
– Kenya anti-corruption commission should investigate further staff named in the report

GoK Bond The Government of Kenya is going to raise Kshs 14.5 billion for infrastructure via a third infrastructure bond. How does that compare to a similar bond a year ago?
2009: Kshs 18 billion ($240 million), interest rate 12.5%, minimum bid Kshs 100,000 (~$1,250), maturity 8 years, principal repaid in 2015, 2017, 2021. Funds used for road, geothermal, water projects
2010: Kshs 14.5 billion ($188 million), interest rate 9.75% tax exempt, minimum Kshs 100,000, maturity 8 years, principal repaid in 2016, 2018. Funds used for water, sewer, irrigation, road, and geothermal projects

The 2009 bond was over-subscribed and the only notable difference in 2010 is the lower interest rate offered. The CBK has decided the high cost of loans offered by commercial banks and perhaps by offering the same banks a lower return on government bonds; they will offer more competitive borrowing rates to the public

Credit Reference: February has also seen the licensing of Kenya’s first credit reference bureau – CRB Africa by the bank regulator, the Central Bank of Kenya. Following this, commercial banks have apparently commenced sharing information with the agency. Some of the rules governing sharing of data were highlighted when the credit reference rules were gazetted almost two years ago. These include
– Bureaus may share info only with a customers’ permission (which happens when you sign for a loan)
– They may only share information for business decision making (evaluate credit prospects) and must keep track of all information they share
– Customers are entitled to one free report a year, and within 30 days of a negative referral.
– If a customer complains, and bureau not able to complete an investigation of disputed information within a month, information will be deleted as request by customer
So what information will they compile?
For individuals: Name Citizenship ID / PIN Postal/ Telephone Credit history (as reported) Court judgments (as reported) Referees
– For companies: Company registration details postal/physical/telephone Credit history (as reported), Court judgments (as reported), Guarantees
Shareholdings/directorships

Stockbroker collapse: This month saw the placing of another stockbroker under statutory management – this time its Ngenye Kariuki Stockbrokers [Last year in March it was Discount stockbrokers that was placed under statutory management]

Despite strong defense from the Kenya Association of Stockbrokers & Investments Banks – KASIB who say the brokers problems were manageable and did not warrant the intervention of the authorities the broker was in a weak financial position.
A summary by Faida Investment Bank, based on the published un-audited results of Ngenye Kariuki showed this
Half year June 2008 versus 2009
June 08 income 35m, expenses, 21 million, pre-tax profit of 10 million
June 09 income 3 million, expenses 10, pre-tax loss of 11 million

Share capital of 50 million, capital reserves of 251 million (which many brokers draw from the sale price in 2006 of Francis Thuo stockbrokers) [and the same amount appears as an intangible asset) at June 2009, the broker had an overdraft position of 63 million and receivable of 127 million which KASIB is laying at the feet of Citibank for withholding funds from the 2008 Safaricom IPO that are owed to several stockbrokers.