By James Anyanzwa

Nairobi, Kenya: Stockbrokerage firms, investment banks and fund managers have emerged from financial abyss to post record profits last year, thanks to a bullish equities market.

With exceptions of a few that are still paddling through a loss making territory, the robust activities at the Nairobi Securities Exchange (NSE) have sprung a major turnaround to many market intermediaries and repaired their fragile balance sheets.

Last year, NSE defied political jitters to register remarkable growth. The bourse rebounded further last year, becoming the third best performing market globally, after Venezuela and Egypt.

The bourse, which enjoyed a strong rebound from the macroeconomic instability in 2011, faced a strong year last year, where a total of Sh27.2 billion was raised through successful Rights Issues with three new listings by Longhorn Kenya, CIC Insurance and Umeme Ltd.

This resulted in strong shareholder value growth due to the strong profit growth recorded by listed companies.

There was also a switch back to equities by local investors as money market yields reduced with the decline in short term interest rates.

Foreign investor activity accounted, on average, for 49 per cent of total traded equity value, with the strong participation motivated by the strong gains in the market due to relatively low valuations.

Good year

“Last year was a good year and particularly with foreign business, which constituted 60-70 per cent of the total business. Anybody who had a foreign desk did very well,” James Wangunyu, the managing director of Standard Investment Bank (SIB) told The Standard yesterday.

“Nearly every sector was performing well — banking, agriculture and construction. There were a lot of economic activities which translated to better commissions.”

Wangunyu was also cautiously optimistic that the stock market would maintain an upward momentum this year if political stability was maintained following a peaceful election.

“This year is still good, but will be governed by what is happening around. If political stability exists then it will be a good year because investors are just waiting to come in,” said Wangunyu.

Stakeholders have expressed concerns over the lackluster performance of the market over the last five years, and the sluggish pace of implementing a number of ambitious projects meant to deepen the market. Market intermediaries have begun unveiling their full-year financial performance ahead of the March 31 deadline.

The move is part of the Capital Market Authority (CMA)’s new rules aimed at restoring public confidence and rebuilding a culture of transparency amongst the market intermediaries.

A glimpse at the financial results already published by some players indicates significant growth in profitability across the board.

Bearish market

This is compared to losses suffered during the 2011 financial year, owing to a bearish market characterised by rising operational costs, falling revenues, stiff competition for limited consultancy contracts and fluctuating trade volumes at the NSE.

According to the audited financial statements of a cross-section of market intermediaries, Standard Investment Bank (SIB)’s reaped Sh28.73 million in pre-tax profit (PTB) up from Sh11.29 million realized in the previous year. The company’s brokerage commissions ascended to Sh171.44 million from Sh104.55 million.

CBA Capital posted Sh3.36 million profit from a loss of Sh2.44 million, while Sterling Capital’s earnings rose to Sh31.37 million from Sh11.64 million in a similar period. Sterling’s brokerage commission jumped to Sh111.97 million from Sh72.94 million