Thursday, December 04, 2008

Broke brokers?


Buying and selling of shares in a commission generating business. Like at supermarkets, banking halls, movie theatres, pubs, hotels - foot traffic means customers which translates to income and then hopefully a profit.

But some stockbrokers’ offices have gone back to being relatively quiet and in many cases empty for the most part of the day. Offices opened in the hey day of the Safaricom IPO are now empty desks.

Disocunt expanded furthest and fell first. For the others; are they generating enough income? Will they be able to pay the rent? Staff? Or are their customers trading online? Trading volumes at the NSE are down (as will commission income for all) – and not all of them are investment banks able to generate income from other avenues. Even as they wait for another IPO for a boost, will it make a difference? Co-Op Bank, whose IPO ended last month, handled a significant chink of their applications in house, and did not generate much traffic elsewhere

14 comments:

Maishinski said...

Banks, you have raised an important observation. No investor can dare ignore the reality. Anyone who maintains a brokerage account with a 100% broker is probably in for a rude shock!

Disclaimer: This is my personal subjective opinion (of speculative nature) and should not be mistaken for investment advice.

coldtusker said...

No way... spoke to a broker... there is little business & layoffs have started...

BTW, expect 2-3 brokers to have problems paying their dues & meeting the capital requirements in 2009.

I think the "bank stockbrokers" will survive

CFCFS
Genghis (Chase Bank)
Crossfield (ABC Bank)
NIC Capital

gathara said...

How much, if at all, does the current slump owe to the Safcom IPO? I think the brokers and investing public overextend themselves, getting high on their own supply, and what we have now is a collective hangover. What do you think?

Anonymous said...

Coldtusker:

What about the other bank stockbrokers like Standard Investment Bank whose head is the current NSE Chairman and Dyer and Blair?

These brokers made millions of dollars between 2006 and 2008. I read somewhere that some of them pulled in about $3 million dollars just from fee's. Can anyone verify these amounts?

bankelele said...

Maishinski: I felt the same a about a year ago when we were waiting for a date for Safaricom, and the election was on everyone’s mind and offices were similarly empty

Coldtusker: I guess the industry will change to one where they will have temp staff and offices when volumes go up

Gathara: I must admit I’ve been wrong, for championing for the longest time the licensing of more brokers and opening of more offices. The dynamics have changed, maybe investors will return in a few years, but will some broker be able to hang on in the interim?

DMX said...

I think the best thing to do right now is not to have any cash balances in your brokerage account.

MainaT said...

Brokers and investors all got carried away.

Hangover time.

coldtusker said...

SIB & D&B do not belong to banks. I do not know much about their financial situation...

Question is... which broker is next to fail?

Anonymous said...

SIB and DIB are investment banks aren't they?

Anonymous said...

Deposit taking banks are safer. SIB and DIB are just glorified brokers. What else do they do - except trade in other people's shares?

Anonymous said...

Don't SIB and DIB offer advice to companies that are going public and don't they collect huge fee's from that?

coldtusker said...

Anons... names please...

Anon5.05 see Anon12.17's answer though 'safety' is relative. In Kenya banks ('real' banks not IBs) are regulated better and have higher capital & operational requirements as well as CBK oversight.

Anon7.40... not all of them earned the huge fees. In any event mismanagement, over-expansion, theft can clean up any fees earned!

Kip said...

Indeed stock brokers have gone quiet thanks to low investor confidence since the days of Kengen, Scangroup,Kenya Re amongst others. The Safaricom slide to all time low despite high expectations did not augur well for the market.
Nonetheless the collapse of many stock brockers Francis Thuo, Nyaga and Discount as well as lack of impressive perfomance by others has dealt a blow to these investors whose confidence is waning by the day.
There is need for better regulations and stingent measures to curb ROGUE BROCKERS! out to fleece our money.

MiztaGuugs said...

fact still remains,its a good time to buy,whether ua broker's broke or not.

anyone seen Mbaru's comments?think the guy is high on something cold.should get realistic!
1.there was drought in '05 and the economy grew by 5.*%
2.oil prices have gone down,thus inflation MAY ease.
3.the economy grew by 3.*%in Q2,thus consistency does not flow to render ours a bad situation
4.Cement sales are still growing.
5.solutions can be debatable:
its prosaic for Mbaru to think the govt can buy Saf back by any of the means.Mbaru can also suggest other means of spending by govt.(we know it works to reduce recessional effects)but US lending RWANDA?to buy our goods?
Why not use the Kes.to build that Highway on thika road and then depend on the multiplier?

wish I had more time.

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