EFG Hermes*, the leading investment bank in the Arab world, released today its consolidated financial results for the third quarter of 2012, reporting net income of EGP 45 million on total consolidated operating revenues of EGP 471 million.
Group revenues rose 19% Y-o-Y in 3Q2012, driven by an 18% rise in Investment Bank revenue to EGP 176 million, reflecting an increase in revenues booked by capital market and treasury operations in 3Q2012. Commercial Bank revenue rose 20% Y-o-Y to EGP 295 million in 3Q2012, driven by growth in net interest income and trading income. In 9M2012, Group revenue rose 9% Y-o-Y to EGP 1.4 billion.
Revenues for the quarter split as 63% contributed by the Commercial Bank and 37% by the Investment Bank.
At the Investment Bank, fee and commission income was essentially flat Y-o-Y in 3Q2012, while revenues from capital markets and treasury operations rose 243%. On the fee and commission side, a 34% Y-o-Y rise in revenues from Securities Brokerage offset decline in contributions from the Asset Management, Investment Banking and Private Equity businesses.
Revenue and earnings growth in the third quarter were supported by both the fundamental soundness of the firm’s universal banking strategy and the Group’s sharp emphasis on cost control. Despite continued regional and international economic headwinds, the third quarter was a solid one for both the Investment Banking and Commercial Banking platforms, leaving management cautiously optimistic in its outlook on both the fourth quarter and 2013.
EFG Hermes Securities Brokerage again closed the quarter as the largest broker in the Arab world, maintaining its number-one position in Egypt and Kuwait while retaining leading positions in other key regional markets. Across the Arab world, total market volumes fell 31.3% Q-o-Q, largely on the seasonal effect of the late summer holiday period, the Holy Month of Ramadan and the subsequent Eid break. Nevertheless, EFG Hermes Securities Brokerage revenues climbed 22% Q-o-Q on the back of stronger executions in Egypt.
The Investment Banking Division continued to build its transaction pipeline with an emphasis on Saudi Arabia, Jordan, Lebanon and the UAE following its advisory to Al-Mokhtabar Laboratories on its merger with Al-Borg Group in a transaction that would create the largest medical diagnostics business in the Middle East and South Asia. The transaction stands as the largest M&A deal in Egypt year-to-date and the largest in the healthcare industry in the Arab world in 2012.
The Asset Management Division saw AUM rise 7% Q-o-Q to USD 3.3 billion on the back of both improving markets performance (5.4 percentage points of the improvement in AUM) and net cash inflows (1.6 percentage points). The Division continues to prioritize the maintenance of a diversified client base while attracting more long-term and institutional clients.
Private Equity AUMs stood at USD 0.69 billion at the end of the quarter. 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 3Q2012 with coverage of 138 companies (up one from the end of the previous quarter) and covering around 60% of the Arab world’s aggregate market capitalization. The team launched a client-facing portal (Research Online) offering clients full access to a three-year archive of research products.
Notably, EFG Hermes Research topped Euromoney’s prestigious MENA Research Poll for the fifth time.
At the Commercial Bank, Crédit Libanais reported an after-tax return on average equity of 13.7% — the third highest among its industry peers in Lebanon — on the back of a resilient performance despite ongoing regional turmoil. The bank’s 9.1% Q-o-Q decline in net income after taxes to USD 15.7 million reflects geopolitical, competitive and seasonal factors as well as government-imposed salary rises and one-off arrears tax charges.
The bank’s loan portfolio quality is one of the highest in the Lebanese market and it continues to maintain healthy capital adequacy ratios well over the required regulatory minimums. Crédit Libanais is an invaluable contributor to the Group’s consolidated results.
