EFG-Hermes (HRHO.CA), the leading investment bank in the Arab world, reported today its consolidated financial results for the third quarter of 2013, closing the period with a 38% year-on-year rise in net profit after tax and before minority to EGP 116 million on revenues of EGP 528 million.
Revenues in 3Q13 grew 12% year-on-year from the same quarter last year, with a net operating margin of 32%. Revenue from the Investment Bank rose 8% year-on-year, while revenue from the Commercial Bank rose 14% year-on-year in 3Q13.
The Investment Bank recorded an operating profit of EGP 14 million in the third quarter with an improvement of operating margin. This came as GCC operations continue to drive growth of the fee and commission business, with 50% of fees and commissions being generated outside Egypt in 3Q13, up from 43% in the previous quarter.
Management Comment and Outlook
Commenting on the quarter’s results and the firm’s short-to-medium-term outlook, Chief Executive Officer of the Investment Bank at EFG Hermes Karim Awad said:
“I am pleased to report an ongoing recovery in the Investment Bank business, with growth in total revenues and a year-on-year increase in fees and commissions. We are entirely confident that we have the people, systems, product offering and client base we need to capture growth in the period ahead.
The firm’s brokerage business in Egypt retained its market-leading position, while its operations in Kuwait and UAE continue to grow. The team also began the roll-out of its new EFG Hermes Online suite of trading applications for individual investors.
“The firm’s Investment Banking division continues to expand its presence in the UAE,” continued Awad, “having successfully closed its advisory to Dubai Group on the USD 164 million sale of UAE consumer-finance company Dubai First. Also, the firm is in the late stages of advisory on high-profile transactions in the UAE.
“Meanwhile, EFG Hermes Research won its sixth number-one overall ranking on the Euromoney Research Poll, while the Private Equity division continues to study exit opportunities as well as examine opportunities to add AUM.
“Going forward, we will continue to focus on expanding our presence in the GCC region while managing our costs to reach a targeted operating expense level of EGP500 million in 2014. At the same time, we continue to examine opportunities for appropriate exits of our non-core investments with a view to returning most of the proceeds to our shareholders.”
Key Operational Highlights
• Securities Brokerage remained the number-one ranked broker by market share of executions on the Egyptian Stock Exchange and maintained a leading position in a number of other regional markets in 3Q13. The launch of the division’s new online trading platform began with the roll-out of iPhone and iPad trading applications; support for Android handsets will follow, along with revamped desktop and web-based products.
• The region’s top-ranked Research house was informed after the close of the third quarter that it had again been ranked number one overall in the Euromoney Research Poll, the division’s sixth such win in seven years. The division continues to focus on enhancing its product offering covering 121 equities, with further coverage of 11 economies from a macro perspective and eight in terms of regular strategy notes.
• EFG Hermes Investment Banking has more than 10 mandates across multiple sectors split between Saudi Arabia and the United Arab Emirates (including two high-profile regional transactions in advanced stages) and a healthy pipeline of mandates in Egypt. Notably, the admission of BMLE to NASDAQ Dubai in October was the first technical listing, or admission, of its kind on the exchange and the first stock to be admitted to the market since 2008.
• Assets under management (AUM) grew 4.3% at EFG Hermes Asset Management as the business continues to post an outstanding performance that puts all of EFG Hermes’ managed funds at the top of the league tables relative to peers.
• AUM at EFG Hermes Private Equity stood at USD 0.65 billion. The team continues to study potential portfolio exits while examining opportunities to add AUM.
• Net income after tax at Crédit Libanais, the firm’s Commercial Banking arm, rose 14% year-on-year to USD 17.9 million, resulting in an after-tax return on average equity of 12.1%. Operating revenue growth was driven largely by higher fee and commission revenue and higher net interest income as the Bank remains committed to its strategy of containing deposit growth.
