EFG Hermes Posts Impressive Financial Results

Karim Awad

Cairo, Egypt, November 15, 2018// — EFG Hermes, a leading financial services corporation in Frontier Emerging Markets (FEM), reported today its results for the third quarter of 2018.

The Group’s revenues grew to reach EGP 1.03 billion for 3Q18, up 24% Y-o-Y, despite the traditionally slow summer season and Eid Al Adha holidays.

Furthermore, revenues would be up 64% Y-o-Y in 3Q18, if the company excludes non-recurring items in the comparable quarter. Net profit after tax and minority interest reached EGP 279 million for the quarter, an increase of 18% Y-o-Y.

Fee and commission revenues were the main driver of the Group’s profitability during 3Q18, growing at 79% Y-o-Y to post EGP 847 million. This increase was supported by accelerated growth at almost all the Group’s lines of business.

EFG Hermes’ Non-Bank Financial Institutions (NBFIs) platform maintained its remarkable rate of expansion, growing at 81% Y-o-Y to post revenues of EGP 286 million in 3Q18, with Tanmeyah Micro Enterprise Services (Tanmeyah) being the main contributor to the increase.

Revenues from NBFIs contributed approximately 28% to the Group’s top-line in 3Q18, up from 19% during the same quarter last year.

EFG Hermes’ sell-side businesses – encompassing securities brokerage, research, and investment banking – grew at a rapid rate in 3Q18, with revenues climbing 128% Y-o-Y to reach EGP 440 million.

This was driven primarily by an 864% Y-o-Y expansion at the Group’s Investment Banking Division, which executed a record-breaking nine deals during a single quarter.

“EFG Hermes is approaching the end of 2018 with strong momentum. The Firm has delivered excellent top-line gains and these have translated into a flourishing bottom-line,” said EFG Hermes Group CEO Karim Awad.

“Our investment banking team has managed to close a record number of deals across multiple geographies in the quarter, despite the challenging markets.

EFG Hermes has now maintained its top position in MENA equity capital markets as ranked by transaction fees for the seventh consecutive quarter, an unprecedented success.”

Revenues from the Group’s buy-side businesses were unchanged compared to the same period last year, coming at EGP 121 million in 3Q18. The Asset Management Division saw its revenues climb by 11% Y-o-Y, but this was offset by a decline in revenues from Private Equity as the same quarter last year included substantial fee income from its Vortex platform.

Revenue from the Group’s capital markets and treasury operations reached EGP 184 million in 3Q18. Setting aside non-recurring gains booked during the same quarter last year, revenues from the Group’s merchant banking activities and treasury operations continue to support capital market and treasury operations revenue growth.

Employee expenses remain at 42% of operating revenues in 3Q18, comfortably below management’s 50% target.

“Management’s efforts to diversify the Group’s offerings are yielding ever-increasing benefits. The premiere NBFIs platform is delivering rapidly growing returns and is contributing a larger share to the Group’s profitability,” Awad added.

Although the market is yet to realize its true value and long-term growth prospects, we are committed to seeing our diversification strategy through to its logical conclusion by exploring new avenues for growing our NBFIs’ platform. The Group’s factoring operations have had a highly encouraging start and we expect to report positive results on that front soon,” he noted.

Group-level net operating profit posted EGP 348 million for 3Q18. Net profit after tax and minority interest stood at EGP 279 million, up 18% from its level during 3Q17.

The Group’s Investment Bank recorded a net profit after tax and minority interest of EGP 222 million in 3Q18, expanding 6% Y-o-Y on the back of strengthening operations and growing fee and commission revenue, and despite a strong comparable quarter, which included a number of non-recurring gains.

The third quarter of the year saw the Group’s NBFIs platform deliver a net profit after tax and minority interest of EGP 57 million, more than doubling (106% Y-o-Y) on the back of strong revenue growth.

The Group continues to divest its remaining stake in Crédit Libanais, with an additional 0.5% of the Bank’s shares offloaded during the quarter, leaving the Group with an 8.8% stake at the end of the quarter.

“Looking forward to 2019, we will expand our range of NBFIs products even further. We have already seen what gaining a foothold in that sector can do in terms of building a more sustainable bottom-line and feel the market still has room for more offerings.

Management also remains focused on extending the Firm’s geographic reach,” said Awad. “The Group expects to have cemented its on-the-ground presence in Nigeria by 2019, and will seek to use Africa’s largest economy as a springboard to opportunities across the West-Africa region.

Beyond Africa, management is diligently studying opportunities for involvement in other dynamic markets, with an eye on South-East Asia especially,” he said.

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