EFG Hermes says Q3 revenues grew two-fold
EFG Hermes reported on Wednesday a 95 percent year-on-year growth in group revenues in the third quarter of the year.
The growth was driven by strong results booked by the Investment Bank and Non-Bank Financial Institution (NBFI) platform as well as the consolidation of aiBANK revenues during the period.
This filtered through to a Group net profit before tax of 650 million Egyptian pounds ($26.6 million), up 70 percent year-on-year in the third quarter of 2022 and reflecting buoyant performance by each of the Group’s lines of business.
“Despite a challenging global economic backdrop fueled by rising inflationary pressures, global supply chain constraints, and the recent devaluation of the Egyptian pound, the Group reported an impressive set of results for the period on the back of our tried-and-tested business model and diversity of our operations.” EFG Hermes Holding’s Group CEO Karim Awad said.
“On the Investment Bank side of the house, we continued to showcase the success of our world-class advisory services and innovative product offerings, having executed a total of eight M&A, debt, and equity capital market transactions, including two milestone cross-border acquisitions.”
The NBFI platform continued to go from strength to strength, forging value-accretive partnerships, acquisitions, and investments during the quarter on its way to becoming a full-fledged financial service ecosystem, Awad added.
“With Tanmeyah’s acquisition of Fatura as well as valU’s acquisition of Paynas, the vertical is consistently growing its offering and powering synergies across its brand universe.
“As for our commercial banking business, aiBANK’s consolidation continued to prop up Group performance as revenue from the bank climbs with every quarter.”
EFG Hermes’ net operating profit also grew 70 percent year-on-year to 716 million pounds, while the Group’s net profit after tax and minority interest fell 5 percent year-on-year to 337 million pounds due to an increase in taxes and higher minority interest that resulted from the consolidation of aiBANK.
Group operating expenses surged 108 percent year-on-year to 1.6 billion pounds in the third quarter, driven by the consolidation of aiBANK expenses and higher operating expenses at the Investment Bank and the NBFI platform due to rising inflationary pressures and the devaluation of the Egyptian pound during the period.
Investment Bank
As for the performance of the Investment Bank, the business booked a solid revenue increase of 60 percent year-on-year to 1.1 billion pounds on the back of strong performances from all verticals in the third quarter. Sell-side revenues increased 42 percent year-on-year to 597 million pounds, dual-driven by growth at the Investment Banking and Brokerage divisions in third quarter. Investment Banking revenues soared 96 percent year-on-year to 209 million pounds due to a pipeline of lucrative transactions executed by the division, having closed eight milestone transactions during the quarter valued at $1.6 billion.
These include advising on Abu Dhabi Ports Group’s first investment in Egypt in two maritime and terminal operating companies and the Public Investment Fund of Saudi Arabia’s acquisition of a minority stake in Egypt’s leading consumer electronics provider, B.Tech, to name a few. Meanwhile, Brokerage revenues rose by 24 percent year-on-year to 388 million pounds on the back of more robust executions in the GCC during the third quarter.
Parallel to this, buy-side revenues increased 31 percent year-on-year to 130 million pounds in the third quarter, driven by higher management fees that fueled a 40 percent year-on-year growth in Asset Management revenues to 97 million pounds, as well as a 12 percent year-on-year increase in Private Equity revenues to 33 million pounds in the third quarter. Meanwhile, despite lower interest income, revenues from Holding and Treasury activities grew more than two-fold to 363 million pounds in the third quarter, driven by higher FX gains and lower unrealized losses during the period.
NBFI Platform
As for the NBFI platform, the business booked a top-line increase of 29 percent year-on-year to 664 million pounds in the third quarter, driven by solid performance from the Group’s Buy-Now, Pay-Later (BNPL) lifestyle enabling fintech player valU as well as the leasing and factoring platform EFG Hermes Corp-Solutions.
valU’s revenues grew 57 percent year-on-year to 153 million pounds, with the company ranking second in terms of market share at 29.3 percent YTD as of August 2022.
At EFG Hermes Corp-Solutions, the leasing business booked a stellar revenue increase of 125 percent year-on-year to 110 million pounds in the third quarter, primarily due to a net securitisation gain of 64 million pounds during the period.
As of August 2022, EFG Hermes Corp-Solutions’ leasing business ranked third YTD in terms of market share, which hit 10.5 percent, while its factoring business recorded a market share of 15.7 percent, ranking second.
aiBANK
At aiBANK, revenues increased 3 percent quarter-on-quarter to 580 million pounds, driven by growing interest income stemming from an 11 percent quarter-on-quarter increase in gross loans to 21 billion pounds in the third quarter. aiBANK’s loan-to-deposit ratio climbed to 46 percent in the third quarter, from 44 percent the previous quarter. Net profit after tax declined to 113 million pounds in the third quarter compared to 149 million pounds in the second quarter, primarily due to a fall in income from associates and other revenue streams during the period.
“Our results over the past period confirm the Group’s ability to deliver on the goals it set for the year’s final stretch, perfectly positioning us to end 2022 on an excellent note. The acquisition of aiBANK will propel our ambitions to become a financial service powerhouse in our home market of Egypt.” Awad stated.
“At the same time, our NBFI platform is building what we envision will become an end-to-end provider of financial services, empowering people and businesses at every stage of their growth. Simultaneously, the Investment Bank will leverage the outstanding track record both the buy- and sell-side of the business have built over the years to maintain our standing as the advisory partner of choice.”
“These three verticals anchor our ability to capitalise on attractive opportunities on all sides of the house. In saying this, the resilience and unwavering commitment of our talented and hard-working people are what drive EFG Hermes’ growth story and what will cement our position as the premier provider of market-leading financial services throughout our footprint.” Awad concluded.
