Egypt’s EFG Hermes Q2 revenues climbs 20% y-o-y

Egypt’s EFG Hermes reported on Wednesday a 20 percent year-on-year growth in revenues for the second quarter of the year to 1.6 billion Egyptian pounds ($101.8 million).

The group attributed the growth to an outstanding performance from the EFG’s investment bank and the non-bank financial institutions (NBFIs) platform, delivering a solid 66 percent year-on-year increase in revenues from fees and commissions to 1.1 billion pounds in the April to June 2021 period.

“Our second quarter results showcase EFG Hermes’ ability to swiftly capitalise on improved market conditions and drive strong growth across our core business operations,” EFG Hermes Holding’s Group chief executive Karim Awad said in a statement.

“At our Investment Bank, we successfully captured the upturn in market activity and continued to deliver best-in-class financial services to both our sell-side and buy-side clients.”

“Meanwhile, at our NBFIs platform, we achieved remarkable progress on all strategic initiatives and delivered impressive growth across all business lines, especially at valU, our innovative Buy-Now-Pay-Later (BNPL) fintech platform. valU successfully reached an outstanding portfolio size exceeding the EGP 1 billion mark and has continued to play a pivotal role in the Group’s efforts to further penetrate Egypt’s thriving fintech space.” Awad added.

EFG’s NBFIs platform delivered a 62 percent year-on-year revenue increase to 483 million pounds in the second quarter of 2021. Its microfinance company, Tanmeyah also recorded a revenue increase of 60 percent year-on-year to 367 million pounds driven by increased sales and a growing loan portfolio.

“Meanwhile, growing contributions from the Group’s leading Buy-Now Pay-Later fintech platform, valU – which successfully tripled its revenues Y-o-Y to EGP 63 million – also supported the NBFIs platform in 2Q21.” EFG statement read.

The NBFIs platform’s factoring revenues grew nearly three-fold to 11 million pounds, primarily due to an expansion in its client portfolio in the second quarter. However, its leasing revenues declined 11 percent year-on-year to 42 million pounds, as the comparable quarter included 7 million pounds of securitisation gains.

At the EFG’s Investment Bank, sell-side revenues increased by 69 percent year-on-year 493 million pounds driven by solid performance from the Investment Banking division as well as Brokerage in the second quarter of the year.

Investment Banking revenues jumped 176 percent year-on-year to 161 million pounds driven by higher advisory fees generated from a surge in deal count. Brokerage revenues surged 42 percent year-on-year to 333 million pounds driven by solid revenues generated across the majority of markets where the division operates.

Parallel to this, buy-side revenues increased by 70 percent year-on-year to 159 million pounds due to a strong performance from the Asset Management division in the second quarter of 2021.

Revenues at the Group’s Asset Management operations more than doubled to 142 million pounds on account of higher management and incentive fees booked by FIM. The division’s solid performance offset the 39 percent year-on-year drop to 17 million pounds in the second-quarter revenues at the Private Equity division, which came due to lower assets under management following the Vortex III exit in September 2020.

At EFG Hermes’ Capital Markets and Treasury operations, revenues fell by 27 percent year-on-year to 475 million pounds due to exceptionally strong unrealized gains in the comparable period last year.

“Since the start of the year, our NBFIs platform achieved multiple operational milestones, most notable of which includes Tanmeyah’s loan portfolio reaching EGP 3.3 billion, its highest level since inception.” Awad noted.

As of May 2021, Awad further said EFG Hermes’ factoring business was ranked in first place with a market share of 20.4 percent and an outstanding portfolio that exceeded 1 billion pounds.

“Parallel to this, our Investment Banking division delivered a remarkable performance in 2Q21, successfully advising on eight transactions during the quarter worth an aggregate value of $946 million.

“Our robust pipeline is testament to the firm’s ability to weather the challenging external environment and provide outstanding advisory services to its local and regional client base,” he stated.

EFG Hermes’ second-quarter net operating profit grew by 33 percent year-on-year to 630 million pounds as revenue growth outpaced that of expenses during the period. Its operating expenses increased by 13 percent year-on-year to 981 million pounds due to higher employee expenses – primarily at Tanmeyah – in the second quarter.

Employee expenses as a percentage of revenues stood at 45 percent in the second quarter, well below the firm’s 50 percent threshold.

EFG recorded a 24 percent year-on-year growth to 406 million pounds in net profit after tax and minority interest. Bottom-line growth was primarily driven by improved profitability at the Group’s NBFIs platform in the second quarter.

“Heading into the second half of the year, we remain cognizant of the potential for a new wave of COVID-19-related challenges and geopolitical headwinds which impact the pace of economic recovery across global markets.” concluded Awad.

“Nevertheless, we take comfort from our increasingly diversified business operations and the agility of our people, which allow us to continue capitalising on new opportunities and carry our growth momentum forward despite the challenges,”