Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Press Releases: CfC Stanbic Financial Services Announce KES51m Loss for First Half of 2009

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Kenya: Press Releases: CfC Stanbic Financial Services Announce KES51m Loss for First Half of 2009

Friday, 21 August 2009

Nairobi, 18 August 2009 --- CfC Stanbic Financial Services (CSFS) today announced a KES51m loss for the six months to June this year compared to a profit of KES55.8m made during the same period last year. This was on the back declining revenues of KES.60m, compared to KES205m during the same period last year.

Making the announcement at a media briefing, CSFS Managing Director Nkoregamba Mwebesa said the decrease was largely due to market challenges that have resulted in reduced trading volumes and declining performance at the Nairobi Stock Exchange (NSE) for the first half of the year.

Mr. Mwebesa commented: “The NSE and the general economy have had their challenges this year and this has further been influenced by the global economic situation which has seen reduced participation and investments from foreign investors and Kenyans living in the diaspora. The situation at the NSE was also compounded by some high profile financial scandals and as such the market faced a major confidence crisis during the first half of 2009.”

Mr. Mwebesa said that the trading activity at the NSE has on average plunged by 75% from the normal trend during the five-year bull-run which preceded the downturn. This led to a 76% drop in commission incomes for CSFS. “Our situation is indeed unique because though most global markets suffered a decline in valuations, trading activity only slid on average about 30%, making trading conditions more reasonable. At the lowest point, the overall value of the market was down 56% from June 2008 as measured by the NSE 20 share-index. We are, however, very optimistic. Since the NSE mirrors the national economy and if the current recovery trend is sustained, we expect to see better performance across the board by year end”, said Mr. Mwebesa.

He noted that this is a very challenging business environment for any business that generates the bulk of its income from brokerage commissions derived from trading activity. CSFS recorded a 75% decrease in total income in the period ended 30 June 2009 as compared to the same period last year in-line with market decline.

Mr. Mwebesa said that despite these challenges, the company has maintained a similar operational capacity as it did last year and further increased its capacity in order to strengthen its ability to provide effective services to its clientele in a recovered market. CSFS also continued to maintain its market leadership position with market share of over 8.5% as at the end of the period. Historically, 70% of NSE volumes are driven by the eight top brokers.

“CSFS has greatly invested in the latest technology to ensure the company delivers world class service and responsiveness to client enquiry and also to be compliant with the new compliance demands by the Capital Markets Authority and the NSE.”
The company has also put together a high level team of securities and financial services industry executives to drive delivery of their new strategy while also repositioning market and economic research products.

On the new directive by the Capital Markets Authority (CMA), Mr. Mwebesa said: “This is what this sector needs and it comes at an opportune time when public confidence in the sector is eroded. This will increase transparency and accountability and increase good corporate governance in the industry. We fully embrace and support the new initiative by the regulator because it will help in streamline the industry and bring back the much needed confidence.”

CSFS is the first brokerage to comply with the CMA requirements and is also the first to establish a compliance office to oversee the implementation of the new regulatory requirements.

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