EFG-Hermes (HRHO.CA) the leading investment bank in the Arab world, released on Wednesday its consolidated financial results for the full year 2012, reporting net income before taxes and minority interest of EGP211 million on total consolidated operating revenues of EGP1.8 billion.
Noting that, it posted net profits of EGP 295.1 million for 2011.
Full-year results reflect very challenging macro and market conditions across multiple core markets, in light of which the firm’s results indicate remarkable resilience and underscore EFG Hermes’ ability to remain profitable in the face of any further macro headwinds.
Group revenues rose 8% Y-o-Y in FY2012, driven by a 4% rise in Investment Bank revenues to EGP694 million, reflecting an increase in revenues booked by capital market and treasury operations throughout the year. Commercial Bank revenues increased 11% Y-o-Y to EGP1.1 billion in FY2012.
Revenues for the full year split as 62% contributed by the Commercial Bank and 38% by the Investment Bank.
At the Investment Bank, total revenues rose 4% Y-o-Y in FY2012 to EGP694 million, driven by a 26% rise in capital markets and treasury revenues on the back of a 104% rise in returns on investment — both on a full-year basis.
Fee and commission revenues rose 1% Y-o-Y to EGP592 million in FY2012, supported by strong revenue generated in 4Q2012, fee and commission revenues surged 40% Y-o-Y in 4Q2012, primarily on the back of contributions from Asset Management and Brokerage.
EFG Hermes Securities Brokerage again closed 2012 as the largest broker in the Arab world, maintaining its number-one position in Egypt and a number-two ranking in Kuwait while retaining leading positions in other key regional markets. EFG Hermes Brokerage executions were flat Y-o-Y at USD18.6 billion, in line with the total market volumes which rose a meagre 2.4% Y-o-Y (excluding Saudi Arabia).
The Investment Banking Division actively worked on five high-profile transactions in 2012 while continuing to build a healthy transaction pipeline with an emphasis on Saudi Arabia, Jordan, Lebanon and the UAE. The Division was the sole advisor to Orascom Telecom SAE in 1Q2012 on its demerger, a globally significant transaction, and went on to close in 2Q2012 a USD510 million private placement for the Egyptian Refining Company that stands as the largest equity raising in Egypt since 2007. In the third quarter, Investment Banking advised Al Mokhtabar Laboratories on its merger with Al Borg Group, closing the largest M&A transaction in Egypt last year and the largest in the healthcare industry in the Arab world.
At the Asset Management Division, AUM rose 4.2% Y-o-Y to USD3.4 billion amid improvement in markets performance. The Division continues to prioritize the maintenance of a diversified client base while attracting more long-term and institutional clients. EFG Hermes Asset Management has maintained balance in its client base, split between institutional, foundation / pension / insurance, and sovereign wealth fund clients.
Asset Management continues to lead the market with the widest product offering and multiple top-ranked funds. Notably, Asset Management was named “Egypt Asset Manager of the Year” for the second time in three years in the Mena Fund Manager Performance Awards 2013.
Private Equity AUM stood at USD0.68 billion at the end of the year. In FY2012, investment funds managed by EFG Hermes, in a consortium alongside Mannai Corporation, acquired Damas, the largest jewelry retailer in the Arab world. The USD445 million transaction was the first take-private transaction backed by a financial sponsor in the GCC. Also in FY2012, the InfraMed Fund, invested in Iskendurum Port in Turkey, where it is supporting the construction of the largest container operations port in the Eastern Mediterranean under a 36-year concession.
In June 2012, InfraMed invested, through its wholly owned subsidiary InfraRev Holding, USD 100 million in Orient Investment Properties Ltd., a holding company with a majority position in the Egyptian Refining Company (ERC). This equity injection represents an effective ownership of 15.6% in Orient and, in turn, 7.5% in ERC. ERC is an energy-sector project developed by Cairo-based private equity firm Citadel Capital.
EFG Hermes Private Equity continues to maintain its focus on providing strong support to management teams at the portfolio companies in which it invests.
EFG Hermes Research closed FY2012 with coverage of 138 companies, representing approximately 61% of the Arab world’s aggregate market capitalization. The team launched a client-facing portal (Research Online) offering clients full access to its research products last year and closed the year for the fifth time atop the league tables at the Euromoney MENA Research Poll.
At the Commercial Bank, Crédit Libanais outperformed its peer group in loans and deposits growth, with the former increasing 13.1% year-on-year and the latter 10.6%, growing by this total assets 11% Y-o-Y to USD8 billion. Net income after tax eased 5.6% in FY2012 to USD61.2 million, closing the year with a return on equity of 12.9% despite a high cost-to-income ratio (largely on the back of one-off general expenses) and capital adequacy ratios well above the regulatory minimums.
Looking ahead, Management will maintain an emphasis on further expansion of activities across the region alongside a sharp focus on cost control and cash preservation, positioning the firm to capture the upside presented by any improvement in market conditions on the back of both a continued expansionary fiscal outlook in the Gulf Cooperation Council countries and a return of political and economic stability in Egypt.
Finally, the execution of the joint venture with QInvest, approved by shareholders in September 2012, awaits final regulatory approval.
EFG-Hermes Holding reported financial results posting a net profit of EGP 211.1 million for the period from 01/01/2012 till 31/12/2012.
