EFG-Hermes Q3 revenues climb 28%

Egyptian investment bank EFG-Hermes registered a 25 percent year-on-year rise in revenues to reach 294 million Egyptian pounds ($18.8 million), it said in a statement on Tuesday.

“Improved revenue mix diversification with strong contribution from the non-bank financial institution platforms turning healthy growth levels in the third quarter of 2016.”

Earnings from continued and discontinued operations reported 151 million pounds, up 25 percent year-on-year, reflecting the adjustment of impairment charges booked during the first quarter, associated with the sale of Crédit Libanais.

In addition to revenues of 145 million pounds from the EFG’s core investment bank platform, this quarter’s revenue mix includes a 70 million-pound contribution from the company’s greenfield leasing business and from microfinance player Tanmeyah, consolidated in the second quarter of this year.

“Our stated strategy to build Egypt’s premier non-bank financial institution (NBFI) is bearing fruit as contributions from both EFG Hermes Leasing and Tanmeyah underpin growth to our top line,” said EFG Hermes Group’s chief executive Karim Awad.

“Meanwhile, our traditional investment bank activities continue to post solid results with our brokerage operations witnessing healthy growth levels over the previous year, maintaining our position as the Arab world’s largest securities brokerage operation.”

The firm closed the third quarter as the number one-ranked broker on five regional exchanges – including Egypt, Dubai, Nasdaq Dubai, Abu Dhabi, and Kuwait – and ranked second in Oman.

Meanwhile, EFG Hermes’ investment banking division closed three transactions during the quarter, including the minority stake sale of B. Tech, setting up a Depository Receipts programme as the sole financial advisor for Domty, and the sale of Abraaj Group’s 80 percent stake in Jordan Aircraft Maintenance Limited (JorAmCo), also as sole financial advisor.

For the third quarter of 2016, additional costs associated with the new businesses, Leasing and Tanmeyah, coupled with a prevailing inflationary environment and the devaluation of the Egyptian pound in the first quarter increased the firm’s operating expenses 37 percent year-on-year to 219 million pounds. Nevertheless, careful attention to cost discipline kept employee expenses — which constitute the bulk of operating expenses — at 47 percent as a percent of revenue in the third quarter. As a result, net operating profit for the period stood at 76 million pounds, up 7 percent over the comparable period last year.

“The final months of 2016 will see us make important headway on our previously stated strategic goal of expanding our product base, with two major product launches scheduled before year’s end that will enhance our revenue and improve profitability metrics,” Awad added.

“In the days ahead, EFG Hermes will announce a strategic alliance with a global player which will both push new revenue lines and serve to expand our access to new markets. Our strategy for geographical diversification will also gain further traction as our acquisition of Pakistan’s IFSL finalizes and as we seek licensing in another frontier market. Similarly, we are pushing forward with opening our office in New York to better serve our institutional clients in the United States.”

“EFG Hermes meanwhile will continue to enhance its positioning in existing markets, pushing new products, adopting a prudent merchant banking model, and maintaining strong cost controls as we create value for all our stakeholders,” Awad concluded.

The company also continues to divest its remaining stake in Crédit Libanais following the sale of its 44.3 percent holding in the bank and the subsequent deconsolidation in the second quarter. During the third quarter, EFG Hermes offloaded an additional 3.3 percent of the bank’s shares, thus leaving the firm with a 16.1 percent stake of Crédit Libanais shares at the end of the period.