EFG Hermes reports increase in net profits in Q2, H1 2017

Reem Hosam El-din
4 Min Read

EFG Hermes, one of the leading financial services corporation in the Middle East and North Africa (MENA) region, reported on Tuesday that it has been able to achieve strong results during the second quarter (Q2) and the first half (H1) of 2017. These strong results were achieved despite the slow market activity in Q2 during the holy month of Ramadan and the feast that followed, Eid Al-Fitr.

According to EFG Hermes, the net profit achieved from the company’s continued operations in Q2 of 2017 after tax and minority interest increased by 718% year-on-year (y-o-y) to reach EGP 395m, while operating revenues climbed 252% in the same period to go beyond the EGP 1bn mark.

“Our strategy to diversify our lines of business has started to create significant value for our shareholders as our non-bank financial operations continued their stellar growth trajectory, with revenues from the platform more than doubling year-on-year in the second quarter,” said EFG Hermes Group’s CEO, Karim Awad. “Meanwhile, our frontier markets and structured products businesses began contributing to our brokerage revenues during the second quarter,” he added.

The business lines of the investment bank have also been able to deliver good results in the aforementioned quarter of 2017, with solid growth recorded in the advisory, brokerage, and asset management businesses that—together with the growth in non-bank financial institutions (NBFI) and treasury operations—helped the group’s revenues go beyond the EGP 1bn mark for the quarter. In the process, fee and commission revenues rose 136% y-o-y to contribute EGP 639m to the top business line of EFG Hermes.

Regarding costs, employee expenses stood at 39% of total operating revenues in Q2 2017. EFG Hermes said it considers this good enough with the employee expenses staying below 50% despite the higher overseas salaries following the flotation of the Egyptian pound, the inflationary pressure, the hiring of new employees to support the development of new businesses, as well as some one-off expenses.

Accordingly, EFG Hermes said it achieved a net operating profit of EGP 462m in Q2 2017, with a 507% y-o-y increase and a net operating profit margin of 46%, up from 26% a year earlier.

EFG Hermes has sold its majority stake in Crédit Libanais (CL). It continues to divest its remaining stake of it following the sale of the subsequent deconsolidation in the second quarter of 2016. In the second quarter of 2017, EFG Hermes removed about 3.65% of CL’s shares, leaving the Firm with a 9.46% stake at the end of the period.

It is worth mentioning that if the non-recurring gain resulting from the sale of CL’s shares during the specified quarter was excluded, EFG Hermes’s net profit after tax and minority interest would have risen by 252% y-o-y in Q2 2017 to EGP 170m.

EFG Hermes is an investment bank specialised in securities brokerage, asset management, investment banking, private equity, and research. It was founded in 1993 in Egypt. The company has offices in Egypt, UAE, KSA, Qatar, Oman, Kuwait, Jordan, and Lebanon with over 800 employees from 25 nationalities. It serves clients from the MENA region, Europe, and the US.

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