EFG Hermes, the leading investment bank in the Arab world, reported an EGP188m net profit after tax and minority interest on total operating revenues of EGP747m in 2Q14, the second consecutive quarter in which the firm has reported strong results. Total operating revenues were up 48% year-on-year, driving impressive growth in net earnings and marking a significant turnaround from a net loss of EGP80m recorded in the same quarter last year.
Core Investment Bank operations in the second quarter were the primary drivers of this impressive quarterly growth as Investment Bank revenues surged to close nearly 2.5x higher than 2Q13. Notably, management’s continuing focus on growing operations in the Gulf Cooperation Council (GCC) countries is beginning to bear fruit, with 45% of the Investment Bank’s fee and commission revenues (excluding capital markets and treasury operations) coming from regional operations.
Growth across the Investment Bank platform was broad-based, with the primary fee-generating arms all delivering solid performances in 2Q14: Egyptian and regional advisory business executions rose at Investment Banking; the Asset Management division generated strong incentive fees; and there was an improvement in the ranking and market share of the Securities Brokerage business in most markets in which it operates to go along with improved market liquidity.
The recovery in Investment Bank revenues was accompanied by a continued focus on cost control that saw the platform’s employee-cost-to-income ratio fall to 39% in 2Q14, far below the 74% rate recorded in the same period of last year. As a result, top-line growth has continued to filter down to strong rises in net operating profit and net income. Despite seeing its operations impacted by a difficult geopolitical environment during the quarter, Crédit Libanais nevertheless contributed c. EGP41m to EFG Hermes’ group net profit after taxes and minority during 2Q14.
Management remains confident and optimistic about the future of the Group and has adopted a strategy that aims to drive growth and develop shareholder value in the coming years.
The strategy is based on five main pillars and will focus on:
•Consolidating our leading market share in Egypt;
•Improving our positioning in the GCC markets in which we are present;
•Diversifying our products offering by introducing new services that are complementary to our current suite;
•Carefully expanding our geographical presence in markets that offer growth;
•Continuously improving our profitability metrics.
Key Operational Highlights
•Securities Brokerage was once more the number-one ranked broker by market share of executions on the Egyptian Exchange (EGX) and substantially grew its market share regionally, particularly in the United Arab Emirates. Brokerage executions closed 2Q14 at $14.3bn, 72% higher than the same quarter of last year. Accordingly, revenues rose 80% year-on-year to EGP137m in 2Q14. The Dubai and Abu Dhabi exchanges were together the primary contributors to the brokerage commission pot, representing 39% of total commissions.
•Investment Banking closed multiple transactions in Egypt and the GCC during 2Q14 while building a healthy pipeline for 2H14 and 1H15. In Egypt, the Division closed the first initial public offering in Egypt since the 2011 Revolution as it took public the Arabian Cement Co. (ACC) in a transaction with total coverage of c.13.5x and demand raised in excess of $1.5bn. Investment Banking also finalized the placement of a minority (10.9%) stake sale in GB Auto, acting as Financial Advisor and Sole Global Coordinator and Book Runner, and acted as an advisor to EFG Hermes Holding on the sale of part of its stake in Egyptian real estate company SODIC. In the GCC, was a member of the syndicate that finalized the landmark IPO of Emirates REIT on the Nasdaq Dubai, the first IPO in Dubai since 2009, raising a significant portion of the $450m of the total demand for the offering. The Division also concluded a minority stake sale for the National Feed and Flour Production and Marketing Company (NFFPM) in the UAE.
•AUM at Asset Management stood at $3.1bn at the end of 2Q2014, with very strong performances (in both absolute terms and relative to peer groups) across its wide range of equity and fixed-income products. The Division is in the final stages of several product development initiatives that it aims to bring to market in the coming months.
•Meanwhile, AUM at Private Equity stood at $0.7bn. Following up on the company’s new strategy, the team is actively reviewing new growth-capital oriented investment opportunities as well as negotiating potential exits from existing portfolio. The divison remains committed to the energy sector with a focus on renewables via the private and PPP routes. Additionally, InfraMed continues to seek attractive infrastructure opportunities in the region.
•The firm’s award-winning Research house covers 129 equities representing c. 60% of the aggregate regional market capitalization, with further coverage of 11 economies from a macro perspective and eight in terms of regular strategy notes.
For further information, please contact:
EFG Hermes Media
Email: [email protected]
May El Gammal
Head of Marketing
Email: [email protected]
Thursday, August 14- 2014 @ 13:31 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.