Egypt’s EFG Hermes Holding reports EGP1.5bn in net profit in 2021

Egypt’s EFG Hermes Holding reported its financial results for 2021, with the group’s top line surpassing the EGP6bn mark for the first time, reflecting a 12 per cent hike year-on-year (YoY). The company’s net profit after tax and minority interest was EGP1.5bn, another 12 per cent YoY gain.

The robust financial performance was supported by several lines of business across the group, coupled with the consolidation of aiBANK (November and December figures) following the completion of a 51 per cent acquisition of the bank’s shares in the fourth quarter of the year. aiBANK revenue helped buoy performance, contributing EGP306m to the group’s top line in 2021.

EFG Hermes Holding’s Group CEO Karim Awad said: “I am extremely pleased with our performance this year. We’ve continued to gain ground by capitalising on compelling opportunities and hitting milestones operationally across all our lines of business despite prevailing market headwinds. Our non-bank financial institutions (NBFI) platform delivered yet another year of solid results: leading microfinance player Tanmeyah continued to make up the lion’s share of revenue while our BNPL powerhouse valU saw total transactions more than double during the year. The Sell-side business also delivered outstanding results, with the Investment Banking division reporting an all-time high top line figure after having closed a record number of transactions in a single year. Together, these achievements have allowed us to maintain our standing as the leading financial services player in frontier emerging markets (FEMs).”

The firm’s sell-side revenues climbed 44 per cent year to EGP1.8bn, with each division delivering strong standalone results. The Investment Banking division, with the team concluding a record 40 deals worth an aggregate $7.9bn in the equity capital markets, debt capital and mergers and acquisitions spaces. As a result, revenues from the division hit EGP494m — an over twofold increase compared to the previous year.

In February, the company’s Investment Banking division completed its advisory services on Macro Group Pharmaceuticals’ EGP1.3bn IPO.

Read: EFG Hermes completes advisory on Macro Group’s $83m IPO

The Brokerage division also made a marked contribution to sell-side revenues, reporting top line growth of 29 per cent year-on-year to EGP1.3bn driven by positive performance in Egypt, the UAE (specifically Abu Dhabi), as well as by Structured Products.

Meanwhile at the group’s buy-side operations, revenues fell 23 per cent YoY to EGP636m on the back of a 77 per cent YoY drop in revenues from the Private Equity division. This was due to the high base effect associated with EGP342m in one-off incentive fees booked following the exit of Vortex III last year. On a quarterly basis, the division’s revenues gained 140 per cent YOY. Nonetheless, Asset Management performed well during the year, growing revenues 45 per cent YoY to EGP528m, driven by Frontier Investment Management Partners’ (FIM) performance fees booked in the final quarter of the year.

EFG Hermes Holding FY21 revenues cross EGP 6 billion mark for the first time; net profit gains 12% Y-o-Y to EGP 1.5 billion pic.twitter.com/Yc2XRNy0XV

— EFG Hermes (@efghermes) March 24, 2022

Revenues from the group’s Holding & Treasury activities contracted 31 per cent YOY to EGP1.3bn, pressured by realised/unrealised losses on seed capital compared to strong gains booked in the previous year. Treasury activities’ revenue and foreign exchange gains supported the division’s top line.

The solid performance generated by the investment banking, brokerage, and asset management divisions failed to cushion the dip in revenues from Private Equity and Holding & Treasury Activities. As a result, the investment bank saw its top line inch down 6 per cent YoY to EGP 3.8bn during the year.

Companies under the NBFI platform showed strong financial and operational performance that drove the group’s overall positive results. The NBFI platform reported revenues worth EGP2bn, climbing 41 per cent year-on-year, with outstanding portfolios up a significant 39 per cent YoY to EGP13bn. Tanmeyah, which accounts for 72 per cent of the platform’s revenues, reported a top line of EGP1.4bn during the year, up 31 per cent YoY on the back of strong sales and geographical expansion across Egypt. valU also delivered a remarkable performance this year, with revenues surging 171 per cent YoY to EGP302m due to numerous partnerships signed with leading merchants in vital sectors as well as innovative products launched. The platform’s factoring business, which falls under EFG Hermes Corp-Solutions, also gained significant ground this year, with revenues surging 117 per cent YoY to EGP58m, as the business further capitalised on synergies with the investment bank. The leasing business, which also falls under EFG Hermes Corp-Solutions, reported revenues of EGP215m, up 16 per cent YoY.

Group operating expenses grew 9 per cent YoY to EGP3.9bn after the consolidation of aiBANK, whose operating expenses came in at EGP156m and accounted for 50 per cent of the total increase. Additionally, employee expenses climbed 20 percent YoY to EGP 2.8bn on the back of a scale-up in the NBFI businesses and variable expenses related to the increase in revenues from core operations. Meanwhile, other general and administrative expenses were largely flat, mainly due to lower operating expenses at the investment bank and particularly lower expected credit losses and provisions at the NBFI platform.

“Today, the world is grappling with the end of quantitative easing and continuing inflationary pressure in addition to major geopolitical headwinds. As I look back, I am confident now more than ever that our strategies over the last five years — from expansion into FEMs, to the diversification into NBFIs, and the entrance into the commercial banking space — have not only borne fruit but have given us the ability to withstand very tough and turbulent market conditions,” said Awad.

These results bode a positive outlook in 2022 for the company, which received a non-binding offer from UAE lender First Abu Dhabi Bank for a potential cash acquisition of a majority stake.

Read more: First Abu Dhabi Bank makes offer to acquire majority stake in EFG Hermes Holding