EFG Hermes, the leading financial services corporation in Frontier Emerging Markets (FEM), revenues grew by 20% year-over-year (Y-o-Y) to EGP 1.6bn in the second quarter of 2021 (2Q21).
The group reported on Wednesday its second quarter results for 2021, showing an outstanding performance from the Investment Bank and the NBFIs platform, delivering a solid 66% Y-o-Y increase in revenues from fees and commissions to EGP 1.1bn in 2Q21.
“Our second quarter results showcase EFG Hermes’ ability to swiftly capitalize on improved market conditions and drive strong growth across our core business operations,” said EFG Hermes Holding’s Group CEO Karim Awad. “At our Investment Bank, we successfully captured the upturn in market activity and continued to deliver best-in-class financial services to both our sell-side and buy-side clients. Meanwhile, at our NBFIs platform, we achieved remarkable progress on all strategic initiatives and delivered impressive growth across all business lines, especially at valU, our innovative Buy-Now-Pay-Later (BNPL) fintech platform. valU successfully reached an outstanding portfolio size exceeding the EGP 1bn mark and has continued to play a pivotal role in the Group’s efforts to further penetrate Egypt’s thriving fintech space.”
The Group’s NBFIs platform delivered a 62% Y-o-Y revenue increase to EGP 483m in 2Q21. The Group’s microfinance company, Tanmeyah, recorded a revenue increase of 60% Y-o-Y to EGP 367m driven by increased sales and a growing loan portfolio.
Meanwhile, growing contributions from the Group’s leading Buy-Now Pay-Later fintech platform, valU – which successfully tripled its revenues Y-o-Y to EGP 63m – also supported the NBFIs platform in 2Q21. The NBFIs platform’s factoring revenues grew nearly three-fold to EGP 11m, primarily due to an expansion in its client portfolio in 2Q21, while Leasing revenues declined 11% Y-o-Y to EGP 42m, as the comparable quarter included EGP 7m of securitization gains.
At the Group’s Investment Bank, sell-side revenues increased by 69% Y-o-Y to EGP 493m driven by solid performance from the Investment Banking division as well as Brokerage in 2Q21. Investment Banking revenues increased by a strong 176% Y-o-Y to EGP 161m driven by higher advisory fees generated from a surge in deal count. Meanwhile, Brokerage revenues increased by 42% Y-o-Y to EGP 333m driven by solid revenues generated across the majority of markets where the division operates.
Parallel to this, buy-side revenues increased by 70% Y-o-Y to EGP 159m due to a strong performance from the Asset Management division in 2Q21. Revenues at the Group’s Asset Management operations more than doubled to EGP 142m on account of higher management and incentive fees booked by FIM. The division’s solid performance offset the 39% Y-o-Y decline to EGP 17m in 2Q21 revenues at the Private Equity division, which came due to lower assets under management following the Vortex III exit in September 2020.
At EFG Hermes’ Capital Markets and Treasury operations, revenues declined by 27% Y-o-Y to EGP 475m in 2Q21 due to exceptionally strong unrealized gains in the comparable period last year.
“Since the start of the year, our NBFIs platform achieved multiple operational milestones, most notable of which includes Tanmeyah’s loan portfolio reaching EGP 3.3bn, its highest level since inception. I am also pleased to report that as of May 2021, EFG Hermes’ factoring business was ranked in first place with a market share of 20.4% and an outstanding portfolio that exceeded EGP 1bn. Parallel to this, our Investment Banking division delivered a remarkable performance in 2Q21, successfully advising on eight transactions during the quarter worth an aggregate value of $946m. Our robust pipeline is testament to the firm’s ability to weather the challenging external environment and provide outstanding advisory services to its local and regional client base,” added Awad.
EFG Hermes’ net operating profit grew by 33% Y-o-Y to EGP 630m in 2Q21 as revenue growth outpaced that of expenses during the period. The Group’s operating expenses increased by 13% Y-o-Y to EGP 981m due to higher employee expenses – primarily at Tanmeyah – in 2Q21. Moreover, employee expenses as a percentage of revenues stood at 45% in 2Q21, well below the firm’s 50% threshold. The Group recorded a 24% Y-o-Y increase to EGP 406m in net profit after tax and minority interest in 2Q21. Bottom-line growth was primarily driven by improved profitability at the Group’s NBFIs platform in 2Q21.
“Heading into the second half of the year, we remain cognizant of the potential for a new wave of COVID-19-related challenges and geopolitical headwinds which impact the pace of economic recovery across global markets. Nevertheless, we take comfort from our increasingly diversified business operations and the agility of our people, which allow us to continue capitalizing on new opportunities and carry our growth momentum forward despite the challenges,” concluded Awad.