Category Archives: NSE investor awareness

Simple Nairobi stock trades with EFG Hermes One

Background: Kenya’s top stockbroker, EFG Hermes has set out to expand from its institutional investors and also target retail customers. They launched their EFG Hermes One app in July 2021 allowing Kenyan investors to purchase shares on the Nairobi Securities Exchange (NSE) anytime on their mobile phones.

First Impressions: To get started, one had to go through the Kenyan regulatory requirements of KYC (know your customer). While the process is extensive for investors, with a lot of forms, ID, address and other details, new clients can scan and email documents, including photos to EFG Hermes.

Once you’re done, download the app and log-in with the credential to start trading. One fund an investor using mobile money (M-Pesa pay bill) and selects their share account (CDS) to get credited.  

For any issues, there are quick responses via email from EFG Hermes Kenya client services on issues like registration and trades. 

How It Works: Investors can view equities, and their portfolios with up-to-date prices, and also see their cash balances. They can place trades, set the prices and the expiry dates and see the commission/fee calculation before executing any buy or sell trades.

One useful feature of the app is that it allows trading of “odd lots”. This is something not available at many brokers who still only allow  investors to buy or sell shares in multiples of a hundred (100) shares – yet many investors end up with odd lots as a result of selling other shares in ’00s or getting bonus issues.

another odd feature from the stockbroking industry is T+3 days/ again this is somewhat standard and after you sell shares, it will take about two days for funds to reach your account after that one indicated at the account opening where the funds will be sent. 

For now, the Kenya app only allows trades of equities on the NSE, but in future may have more issues – bonds, derivatives, REIT’s, ETF’s regional and international products from EFG Hermes in different markets and assets classes and also as the NSE comes up with more products for retail investors such as day-trading and short-selling.

Verdict: It enables investors to trade from anywhere securely and tracks their trades and portfolios with up to date prices. The app is really small, just 10 MB, and does not use a lot of data to run. Many retail investors have other apps, laptops and sources to analyze what trades to make, and they can turn to the One app which can also be used to place trades after hours to execute when the NSE opens.

At the end of the month, investors get emailed a statement by EFG Hermes of trades during the month. This is a useful record to keep and they should cross-check with the one that comes from the CDSC.  

The EFG Hermes One app is available in the Google Android and Apple App stores.

EFG Hermes launches online trading in Kenya

Kenya’s leading stockbroker, EFG Hermes has launched One, a new online platform that enables retail investors to trade shares on the Nairobi Securities Exchange (NSE).

EFG Hermes One, the equities trading platform will be available to clients of the stockbroker. The One app has been very successful in other markets, notably in Vietnam and the firm hopes to capitalize on the high mobile phone density in Kenya, reported at 108%. 

Speaking at the launch, the CEO of the NSE Geoffrey Odundo said that Kenya has an active retail investor base as seen with M-Akiba, a government bond issued and traded on mobile phones that drew 500,000 investors. He added that the new NSE platform has the ability for “day-trading” and “short-selling” and those would be products that appeal to retail investors.

Muathi Kilonzo, Head of Equities at EFG Hermes Kenya said that retail investors across the globe showed great activity in powering different equities and investments markets while the world was slowed by Covid-19.

Ali Khalpey, the CEO of Frontier Markets, said EFG Hermes started in Egypt 35 years ago and had grown to have 5,500  employees and offices in Egypt, Dubai, Nigeria, Kuwait, USA, Oman, UK, Kenya, Jordan, Saudi Arabia, and Pakistan offering stockbroking, investment banking, asset management, securities brokerage, research, and private equity services.

In 2017, EFG Hermes launched a greenfield operation in Kenya that has grown to be the top stockbroker by value traded on the Nairobi Securities Exchange in 2021. Last year it was acclaimed as the top frontier research institution and the best broker in Kenya and Nigeria. It produces highly prized research reports on frontier markets with recent ones on Kenyan banks, the silicon savannah potential and digitizing COVID-19 stimulus initiatives.

Download the One app from the Apple app store and Google play store, register to be an EFG Hermes client, and get on board after a regulator-mandated, know-your-customer (KYC) process.

Family Bank to raise Notes

A few weeks after retiring a bond issue e early, Family Bank has launched a new medium-term notes (MTN) program.

Family Bank has got approval from the Capital Markets Authority (CMA) to borrow up to Kshs 8 billion over the next five years to go towards growing its capital base, launch new products, and support lending mainly to MSME’s (micro, small, medium enterprises) . The first tranche will be Kshs 4 billion. 

This announcement is a welcome sign for the Nairobi corporate bond scene that has been shrinking for the last few years. Last week East African Breweries (EABL) announced it was retiring its bond program, and earlier, in April 2021, Family Bank had paid back Kshs 2 billion to its noteholders – concluding a Kshs 10 billion borrowing multi-currency program of fixed and floating rate bonds that it had launched in 2015.   

CEO Rebecca Mbithi said she was confident of the bank’s upward trajectory as Family is the fourth largest bank in the country by branch network, with 92 branches. The bank has recorded net compounded growth of profit-after-tax of 21% in the last five years, with assets growing annually by 7% and deposits by 14%. In the first quarter of 2021, it had a 71% increase compared to its earnings last year. 

Transaction advisors for the MTN program are NCBA Investment Bank and Genghis Capital. Other partners are PricewaterhouseCoopers (reporting accountants), MTC (note trustees), Mboya Wangong’u & Waiyaki (legal)  and Tim-Sky Media (PR). 

EDIT June 8: Family Bank Bond details are out.

  • The first tranche aims to raise Kshs 3 billion (about $27.8 million) in Kenya shillings or other currencies, with a 1 billion green-shoe option.
  • Maturity is 5.5 years.
  • The rate is fixed at 13% p.a. or floating (at the T-bill ±2.5%).
  • Funds may be used to expand branches, for on-lending, ICT investments, capital strengthening or regional markets entry.
  • Bond opens on 8 June, closes on 22 June,
  • The minimum investment amount is Kshs 100,000 (about $927)
  • Interest payments will be twice a year.
  • Bonds will be listed at the NSE from June 2021 to December 2026.

EDIT: June 24: The first tranche of the notes was fully subscribed and attracted bids for Kshs 4.41 billion. Family Bank was then granted approval by the CMA to exercise a green shoe option for Kshs 1 billion above Kshs 3 billion tranche size.

The entire first note tranche will pay investors at a fixed rate of 13%, paid semi-annually and will be listed on the Nairobi Securities Exchange on June 30, 2021.

EDIT June 30: Trading of the first tranche of Family Bank bonds at the Nairobi Securities Exchange (NSE) started this morning.

Bank Chairman, Wilfred Kiboro reiterated that Family plans to list its shares on the NSE and that activities like the successful bond listing, which raised Kshs 4.42 billion from investors, will increase the attractiveness of the bank.

Stanbic Uganda 2021 AGM

Stanbic, the largest bank in Uganda held its shareholders’ annual general meeting this morning. Beamed online, the 15th AGM of the bank was held virtually and shareholders were invited to register, watch the stream online and vote on the resolutions.

Excerpts

  • The bank is listed on the Uganda securities exchange and has 22, 000 shareholders
  • Much was made about Flyhub, their new financial services and innovation subsidiary created to compete with fintechs.
  • Shareholders could get their meeting packs on their phones, with the notice and annual report. Also, they could ask questions, and over 90 were received ahead of or during the AGM.
  • There is some board restructuring in Uganda as they separate banks from holding companies. As such, no directors retired at the AGM this year
  • Shareholders voted to adopt the meeting notice, new directors, audited report, and non-executive director fees
  • They voted to approve a dividend (Ushs 2.15 per share) for 2019 that was paid in April 2021. They also voted on a dividend for 2020 (Ushs 1.86 per share) that is in abeyance. The board has applied to the Bank of Uganda to pay the 2020 dividend but that has been refused as the regulator wants banks to withhold discretionary payouts and preserve capital during Covid-19. As such the board did not recommend this item.
  • Shareholders could vote the whole morning, and, just before the end of the meeting, the results were displayed instantly.

Another good thing is Stanbic recently solved a pain point for cross border investors, and allowed them to register and receive dividends by mobile money – such as Safaricom M-Pesa, instead of cheques.

It was the closest thing to attending the AGM of a foreign bank held in Nairobi.

KPMG on Kenya Taxes in 2021

KPMG East Africa has a summary of some tax proposals in the Finance Bill that will be used to plug the country’s ambitious Kshs 3.6 trillion 2021/22 budget.

Here are some excerpts

For investors

  • Depositories are to enhance the identity of investors i.e buyers and sellers of securities.
  • Creation of post-retirement medical funds in retirement benefits schemes.
  • Clarifies the definition of an infrastructure bond.
  • A capital markets tribunal shall deal with matters before it within 90 days.
  • Moving from 16% to exempt after July 1, 2021, are the transfer of assets into real estate investment trust (REIT’s) and asset-backed securities.

Competition

  • Opens up reinsurance to players other than Kenya Re to certify reinsurance contracts.
  • Opens the door to private electricity companies; no longer required to offer their supply to the national grid and they are eligible for investment deductions. Also, if government licenses them, they can compete with KPLC.

Prosecutions

  • Tax cases will not stop where there is an ongoing criminal or civil case.
  • Abolishes the amnesty on rental income tax before 2013 (which had since expired).
  • Rewards for informing on tax dodgers; The Kenya Revenue Authority (KRA) can reward up to Kshs 500,000 (up from 100,000) for information and up to 5% or Kshs 5 million of taxes recovered.
  • Taxpayers are to keep records for 7 years and KRA can assess claims of up to 7 years from the date of a taxpayer’s last return.

Digital Taxes and market

  • PIN’s required for digital marketplace transactions.
  • Digital service tax is removed from residents (only applies to non-residents).
  • Non-resident businesses can maintain records in convertible currencies (not necessarily Kenya shillings).

Large investors

  • To stop base erosion and profit shifting, multinationals / ultimate parent companies are required to file a report on their activities (revenue, profit, taxes paid, employees, assets, cash) in Kenya within 12 months of their financial year-end.
  • Ends group VAT registration for groups of companies; each entity will report its own VAT on transactions.
  • To encourage large investments, there is an exemption for import declaration fee (IDF) and railway development levy (RDL) for investments over Kshs 5 billion or with the approval of the Treasury Cabinet Secretary.

Value Added Tax

  • Introduces VAT on bread.
  • Several items move from 16% to exempt, which means the Treasury CS can exempt them on request. These include infants foods, medical ventilators, lab reagents, gas masks, x-ray equipment, anti-malaria kits and doses, and artificial body parts.
  • Also moving from 16% to exempt, are vehicles for oil & mining companies, and equipment for solar & wind generation.

Other

  • A 20% betting tax returns after being briefly for a year.
  • Bank loan fees no longer incur excise duty.
  • Remove a requirement for VAT regulations to be approved ahead by Parliament; instead they will be shared with legislators under the statutory instruments Act.
  • Withholding tax in oil and mining sectors will be 10%
  • Removes the 10 year limit on carrying tax losses
  • Excise tax goes up on motorcycles and is introduced on jewellery and nicotine substitutes.
  • Reintroduces excise duty on locally-manufactured sugar confectionery and white chocolate that was removed in 2019.