Equity woos investors with instant payment for share sales

Money Markets

Equity Bank chief executive James Mwangi during a past briefing at the lender's Upper Hill offices in Nairobi. PHOTO | FILE 

By John Gachiri

In Summary

• Equity Investment Bank in the next few weeks plans to launch a service that will allow customers to be paid once a sale order goes through.
• Normally, customers are paid up to three days after the transaction although some stockbrokers are able to shorten this period for specific clients because at any given day they know how much working capital is available in their account.
• The lender also hopes to use the securities as collateral for customers taking loans.

Equity Bank is set to introduce instant payment for share sales in an aggressive fight for a piece of the brokerage and custodial business.

The lender, through its subsidiary Equity Investment Bank, in the next few weeks plans to launch a service that will allow customers to be paid once a sale order goes through.

“You should be able to get your money on the same hour or day that you sell your shares,” said Equity Group Holdings chief executive James Mwangi in an interview.

Normally, customers are paid up to three days after the transaction although some stockbrokers are able to shorten this period for specific clients because at any given day they know how much working capital is available in their account.

Equity Investment Bank said it is introducing the service to add value for its customers.

The lender also hopes to use the securities as collateral for customers taking loans.

Mr Mwangi said the custodial business enables the bank to lend using stocks and bonds, which are more liquid than other forms of securities like land, as collateral. “This will enhance our ability to lend,” he said.

Equity Investment Bank is also targeting the small and medium enterprise (SME) sector where there is increasing demand for services such as capital financing and consultancy on corporate governance structuring.

Apart from Equity, NIC, Co-operative Bank, KCB Group, CBA and Chase Bank are the other lenders that have investment banking units.

The Equity investment banking unit was brought back to life in July 2014 when the bank went on a talent hunting spree among local and foreign financial services firms.

Equity had entered investment banking in 2008 after buying a trading licence from Juanco Investment Bank and appointed Maina Mwangi, a seasoned investment banker, as its chief executive. But the unit closed shop in 2009 after business failed to pick up.

Other players are also pushing for shortening of the time customers are paid once they execute orders.

Earlier in the year, the Central Depository and Settlement Corporation (CDSC) said it planned to introduce a system to make all trading at the Nairobi Securities Exchange (NSE) to be settled on the same day.

The system is expected to go live by September. According to CDSC the new system should result in increased trading at the bourse that would result in more trades for customers.

Equity turnover at the NSE stood at Sh215 billion in 2014, a 38 per cent increase from Sh155 billion posted in 2013.