EFG-Hermes Says Q1 Net Profit 6.8% Down

EFG Hermes Group (HRHO.CA) released its consolidated financial results for the first quarter of 2012, reporting net profit after tax and minority of EGP35 million on total consolidated operating revenues of EGP433 million.

Group revenues rose 6% year-on-year to EGP433m, supported by a 10% rise in the Commercial Bank revenue, which offset a 1% decline in revenue from the Investment Bank, underscoring the importance of the Group’s universal banking strategy in challenging regional conditions.

Revenues for the quarter split as 62% contributed by the Commercial Bank and 38% by the Investment Bank.

The Investment Bank fees and commissions declined 24% to EGP125 million amid market conditions regionally and internationally that prompted fewer Investment Banking transactions and lower Brokerage revenues as institutional investors opted to remain on the sidelines. Notably, revenues from capital markets and treasury operations rose 782% year-on-year to EGP41million.

“The quarter just ended was marked by both regional and global turbulence similar to that which we witnessed in 2011,” noted EFG Hermes Chief Executive Officer Hassan Heikal. 

“Against that backdrop, we have maintained a sharp focus on cost control that has allowed us to preserve profitability and our market leadership while forging a new strategic partnership with QInvest that will allow us to leverage our market presence and human capital across new markets in concert with QInvest’s financial strength and client base.”

EFG Hermes Securities Brokerage once more closed the year as the largest broker in the Arab world, with executions higher than the regional uptick in trading volumes the previous quarter. In Egypt, the Division remains the clear number-one broker with executions 76% higher than its nearest competitor. Across the board, individual investors accounted for 71% of total trading activity as institutional investors remained largely on the sidelines. Also in the quarter, Brokerage received a license from the Emirates Securities and Commodities Authority to offer margin trading in the UAE to its regional clients, a development that will enhance its leadership position in those key markets. 

The Investment Banking Division experienced an expectedly quiet quarter in which it advised on the de-merger of Orascom Telecom SAE, a first-of-its-kind transaction in Egypt. 

The Asset Management Division saw AUM relatively steady, with a 1% increase q-o-q to $3.3bn in Q1/2012. A net outflow of 6% from fixed income and equity funds was led by redemptions on local money market funds (accounting for 72% of outflows in the quarter) and was offset by improved market performance. 

Private Equity AUMs stood at $976 million as the Division began focusing on fundraising for InfraMed in the GCCwhile simultaneously screening for investments in Egypt, Turkey, Morocco and Jordan in the energy and healthcare sectors.

EFG Hermes Research closed Q1/2012 with coverage of 134 companies representing 57% of the aggregate regional market capitalisation and was named Best Research House in the Middle East at The Banker Middle East Product Awards.

At the Commercial Bank, Crédit Libanais reported net profit of $18.3m, the highest earnings recorded in the past 12 months, representing a rise of 75 year-on-year and nearly 34% quarter-on-quarter.

Crédit Libanais reported 3.7% quarter-on-quarter growth in total loans to $2.05 billion, while total deposits grew 2.1% q-o-q to $6.42 billion. 

“We are particularly pleased with the performance of the Commercial Banking Platform both year-on-year and quarter-on-quarter, a development that underscores the long-term importance of our universal banking strategy as it helps offset capital market volatility,” noted EFG Hermes Chief Executive Officer Yasser El Mallawany. 

“Loans, deposits and total assets all grew within budget and we look forward to growth in net interest income in the coming months, market conditions permitting.”

Revenues in Q1/2012 split as 62% from the Commercial Bank, 29% fee and commission income from the Investment Bank, and 10% revenue from capital markets and treasury operations.