SBG Securities earnings jump 26pc on record bourse turnover

Nkoregamba Mwebesa, CEO SBG Securities. PHOTO | FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• SBG Securities net earnings rose 26 per cent past financial year to Sh237.8 million.
• The investment bank reported a 30 per cent rise in brokerage commissions to Sh454.53 million on total equity trades of Sh57.1 billion.
• SBG has been pitted against fellow brokers Kestrel Capital and Renaissance Capital in the race to the top of the industry’s earnings table.

SBG Securities net earnings rose 26 per cent past financial year to Sh237.8 million, setting the trend for stockbrokers expected to thrive after a year of record turnover.

The investment bank reported a 30 per cent rise in brokerage commissions to Sh454.53 million on total equity trades of Sh57.1 billion, according to market share data by the Nairobi Securities Exchange.

SBG total income grew by 17.7 per cent to Sh604.3 million, outpacing growth in total expenses which were only 2.8 per cent higher than 2013 at Sh251.8 million.

Employee costs, up eight per cent to Sh176.5 million, took up a large chunk of the firm’s total expenses.

Speaking to Business Daily in a recent interview, SBG Securities chief executive officer Nkoregamba Mwebesa said the company has for the past four years put more focus on corporate clients and is also eyeing more business from the online platform by retail investors.

“Our current execution revenues are 70 per cent versus 30 per cent between corporate and retail. Our branches were not profitable, so we closed them down and we now use a network of agents, online system and relationship managers for the high-net worth clients,” said Mr Mwebesa.

Total market turnover stood at Sh215.72 billion for the year as reported by the NSE, but with stockbrokers earning commissions for both sales and purchases, they booked an actual turnover of Sh431.45 billion.

The market has, however, been slower in 2015 compared to last year on the basis of investor uncertainty over the capital gains tax.

READ: Stock sales fall sharply over CGT

SBG has been pitted against fellow brokers Kestrel Capital and Renaissance Capital in the race to the top of the industry’s earnings table.

Both Kestrel and Rencap recorded higher equity trades in the bourse than SBG last year, worth Sh76.8 billion and Sh59.5 billion respectively. This gave Kestrel a market share of 17.8 per cent, compared to Rencap 13.8 per cent and SBG 13.2 per cent.

READ: Brokers’ foreign trading desks beat stock market barons

The biggest jump at the top came from Standard Investment Bank (SIB), which was fourth in volumes in 2014 at Sh53.7 billion, representing 12.4 per cent share of the market, up from sixth in 2013 when it had 9.8 per cent market share at Sh30.7 billion in trades.

Even as the market intermediaries record high trading volumes, there remains a concern that rising expenses will continue eating into their revenues.

“Cost of operations and compliance continues to grow putting more pressure to increase trading volumes and public listings,” said Kestrel Capital chief executive officer Andre DeSimone.