AED 1,7bn Increase at 24%Truth Consultancy
AED 9bn is the Capital Invested in Brokerage Firms by the End of 2014
Date of Publication: Tuesday, 23 June, 2015
– Bassam Abd-El-Samie’ (Abu Dhabi)
The total amount of the money invested in stockbrokerage firms operating locally climbed to AED 8.8bn by the end of 2014, compared to AED 7.1bn by the end of 2013. This represents an increase of AED 1.7bn at 23.9% according to a study by Truth Economic Consultancy Company.
Reda Mosallam, the GM of the Company, said that “the study, which covered 49 stockbrokerage firms in Abu Dhabi and Dubai markets, indicated a rise in the balances of stockbrokerage firms by the end of the last year by AED 2.1bn to reach AED 5.5bn by the end of 2014. Such rise represents 61%.”
The other current assets item increased by AED 32m to reach AED 93m by the end of 2014, compared to AED 61m by 53% rise.
Conversely, some asset items decreased during the base period; as the accounts receivable such as receivables decreased by AED 474m to reach AED 2.8bn by the end of 2014, compared to AED 3.3bn by the end of 2013.
Mosallam pointed out that the decrease in companies’ accounts receivable give them the opportunity to cut the costs related thereto such as the collection costs or the advantages conferred for acceleration of payment. There is 17% rise in the accounts payable to reach AED 5.3bn, compared to AED 4.5bn.
The value of short-term loans decreased by the end of 2014 by AED 48m to reach AED 141m, compared to AED 93m by the end of 2013.
The total amount of the capital of the stockbrokerage companies registered in the Emirates Securities and Commodities Authority (ESCA) increased by AED 216m to reach AED 2.2bn at the end of 2014, compared to AED 1.9bn by the end of 2013. This increase represents 10%, which is principally caused by the rise in the capital of the brokerage firms trading on margin basis.
Mosallam hinted that reserves of different types soared compared to 2014; and this is due to producing profits by stockbrokerage firms in 2014 and deducting part of them for hedging and future investments.
The total rights of stockholders in the stockbrokerage companies increased at the end of 2014 by 40% to reach AED 3.3bn compared to AED 2.3bn at the end of 2013.
According to the combined comparative income statement of (2013-2014), it turned out that the brokerage firms working in the UAE achieved a dramatic increase in their total revenues from commissions to reach AED 1.3bn by the end of December, 2014; such rise represents AED 703m at 107%.
By mulling over the total expenses of stockbrokerage firms working locally, we find that they increased during the fiscal year 2014 by 44% to reach AED 570m by the end of 2014, compared to AED 394m by the end of 2013.
The other revenues item increased during 2014 to reach AED 805m, compared to AED 268m at 200% rise. The total profit of stockbrokerage companies working locally climbed to AED 85m at 52% by the end of 2014 representing AED 29m rise.
The net profits yielded by stockbrokerage companies, as per the combined income statement of 2014, reached about AED 883m, compared to AED 343m in the fiscal year 2013 representing a rise of AED 540m at 157%.
The return on the paid up capital soared to 40% by the end of 2014, compared to 17% by the end of 2013 due to the rise in the capital of stockbrokerage firms in 2014.
The return on equity (capital + reserves + profits carried forward) of stockbrokerage firms registered in the ESCA for the fiscal year 2014 reached about 26%.
Furthermore, as per the Truth’s study, stockbrokerage firms are advised to merge in order to have strong stockbrokerage firms consolidating the experiences of such small businesses. Accordingly, the merged brokerage companies can face future difficulties, achieve growth, and better the profitability level.
In addition, as per the study, stockbrokerage firms are asked to increase their solvency ratios by building reserves and provisions in order to be able to face unexpected crises. They should attract capitals by gaining investors’ confidence and increasing their ability to manage risks through diversification of their investment portfolios.