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Kestrel Capital pulls out of investment banking business on dry spell

By John Otini
Monday, January 25th, 2021
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In summary

INVESTMENTS: Kestrel Capital has closed its investment banking section to concentrate on stock brokerage on grounds that the arm no longer contributes much to the business.

“It is notified for general information that the licensee appearing in the schedule hereinafter have notified the Capital Markets Authority of their intention to cease operation of their Investment bank activities, and the authority has accepted the request for revocation of their investment bank license,” CMA said in a Kenya Gazette notice.

Kestrel Capital Chief Executive Officer Francis Mwangi did not disclose much about why they are opting out of their investment banking operations, however, he confirmed the firm shall continue operating as a stockbroker.

Stock brokerage 

“Kestrel is retaining its brokerage license which generates a significant proportion of our business, so nothing changes,” Mwangi said.

The Kenyan securities market has been characterised by lack of IPO activities for a long period while increased competition has made it difficult for players to survive.

Investment banks earn fees from providing advice to large organizations coming to issue stocks and shares, and for underwriting these issues, mergers and acquisitions (M&As) as well as trading securities on the financial markets.

Recent data shows that stockbrokers have endured years of tough times due to low trading activities leading to low turnover.

Kestrel Capital (East Africa) Limited booked a massive drop in brokerage commission from Sh 295.5 million to Sh94.9 million in 2019.

Other stockbrokers have suffered similar losses due to a difficult business environment that has seen reduction in retail investors.

Low stockbrokerage business has meant that revenues are no longer strong enough to support investment banking whose businesses tend to be seasonal.

However, players are hoping for a better 2021 after Coronavirus pandemic hit the businesses hard as Kenyans sold their stocks to take care of their basic needs while others kept away due to sustained selloff by foreign investors.

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