Interview: EFG Hermes' Karim Awad shares the diversified strategy driving the company’s success
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Interview: EFG Hermes’ Karim Awad shares the diversified strategy driving the company’s success

Interview: EFG Hermes’ Karim Awad shares the diversified strategy driving the company’s success

The group CEO, chairman of the executive committee, and member of the board of EFG Hermes Holding, shares the company’s key milestones

EFG Hermes Holding has transformed itself from a pure-play investment bank into an Egyptian universal bank and the leading investment bank franchise in FEM. Tell us about the highlights and milestones of this journey.
I joined the company in 1998 and became group CEO in October 2013. Since taking over the management team, the first milestone – towards our transformation into the firm we are today – was shedding non-core assets including divesting our majority stake in the Lebanese bank, Crédit Libanais, in 2016. It was an asset that represented a big portion of our balance sheet. However, the bank – which was Lebanon focused – didn’t have synergies with our limited operations in the country. This step increased our cash reserves, de-risked our position in the country, and helped us return some cash to our shareholders. It also marked a significant pivot in our business and operations.

We organically increased the focus on our non-bank financial institutions (NBFI) platform, EFG Hermes Finance, which we launched in 2015, introducing our leasing business, EFG Hermes Leasing. We also added more complementary businesses supporting non-banking activities. In 2016, we acquired a majority stake in Tanmeyah Microenterprise Services, the largest private microfinance company in Egypt. Tanmeyah offers financial services and promotes financial inclusion through micro-enterprise lending and very small enterprise lending as well as other financial solutions available through its extensive branch network. In 2018, we established valU, a buy-now-pay-later (BNPL) fintech platform, which was the first MENA BNPL offering access to a wide network of retail, e-commerce and service providers across a diverse array of categories, including home appliances, electronics, healthcare and education.

In 2021, the company acquired a 51 per cent stake in Arab Investment Bank (aiBANK). This marked our strategic entry into Egypt’s dynamic commercial banking sector and the transformation of our Egyptian operations into a universal bank with a FEM focused investment bank, a commercial bank, and a successful NBFI platform. Our efforts to geographically diversify our investment bank business have seen us set up operations in Pakistan, Bangladesh, Vietnam, Kenya, Nigeria, the UK, and the US. Today, we have a team of over 6,509 employees, offering a multitude of financial services to the MENA region and FEM.

What are some of the key services and products that are driving the company’s success today?
We are excited about a number of things we are doing, particularly in reference to our operations in the UAE. The UAE is a key market for us and this year marks our 20th anniversary since we set up operations in 2002. We are proud to be part of the shift we are seeing in the country’s capital markets over the past few years, as more offerings come in from Abu Dhabi and Dubai. We were involved with three key initial public offerings (IPOs) coming out of Abu Dhabi, including ADNOC Drilling, Yahsat and Fertiglobe on the Abu Dhabi Securities Exchange in 2021, and more recently, the DEWA IPO, which will list on Dubai Financial Market. Saudi Arabia is similarly an important market for us. In 2021, we were involved with three IPOs, including ACWA Power on Tadawul, and we continue seeking both potential IPO advisory deals and more merger and acquisition work as Saudi Arabia’s market grows further.

In Egypt, valU, our BNPL platform, has taken the market by storm since its launch. It’s a pioneering brand, and we are proud we established it from scratch. There’s a fantastic team running this franchise and we are excited about seeing it grow and expand further.

What are some of the factors that have helped the company’s rapid growth and expansion?
People are the key factor driving the company’s growth. Our strategy is built on six pillars, with the first being people. We believe in hiring the right people, training them well, and promoting people from within the organisation, when we can. It not only nurtures their growth but also preserves our work culture and values. Secondly, our ability to cross-sell across an expanding network of financial services has increased during the past years, as we continue to grow each of our business lines and to play our role in increasing financial inclusion and job creation across frontier emerging markets. This model continues to reap great benefits for our shareholders by providing greater visibility on profitability and future dividend distribution as well as potentially significant upside through contemplated partial exits of some of our growing subsidiaries.

Tell us about EFG’s financial results for 2021.
Despite prevailing market headwinds, we have seen growth across all our divisions. It proves that our business model is resilient, with our strategy being on point. The firm has continued to gain ground by capitalising on great opportunities and achieving milestones operationally across all our lines of business. The group’s revenue surpassed the EGP6bn mark for the first time in 2021, reflecting a 12 per cent year-on-year rise. Net profit after tax and minority interest was EGP1.5bn, another 12 per cent rise over the previous year’s figures.

Our NBFI platform delivered another year of solid results: Tanmeyah, continued to make up the lion’s share of revenue while valU saw total transactions more than double during the year. The sell-side business also delivered good results, with our 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 a major financial services player in frontier emerging markets.

First Abu Dhabi Bank (FAB) recently offered to buy a controlling stake in EFG Hermes. How has this reinforced the strength of your brand across the regional and international financial ecosystem?
We have tremendous respect for FAB, its management team and the bank’s future-forward strategy. The offer came as a validation that we are on the right track. We believe there are a lot of synergies that can be created by a shareholder such as FAB and what we do at EFG Hermes Holding.

What are the company’s plans  for the year?
We have plans to increase our market share in Saudi Arabia on a number of fronts. We’ve hired a new CEO to lead our Saudi operations and drive growth, particularly in the investment banking division. We are looking to export valU to new markets. As we’ve done traditionally, we first established our investment bank business in Egypt, and once it reached a certain scale; we introduced it to other markets. We feel valU is also ready for that move.
Going forward, we will continue growing our investment banking business across other markets as well as the commercial bank business that we recently bought into.

What are some of the key trends across the global investment landscape and how is EFG Hermes leveraging these for further growth?
The current year could pose challenges for some parts of our business because of the unpredictable market conditions. However, the diversity we’ve built into our business over the past seven to ten years will help mitigate risks, and sustain and drive growth across our divisions. We also see countries in the GCC doing well, as they build on higher oil prices and budget surpluses.  This is complemented by capital markets moving in the right direction and new exciting offers coming on board. We are also very excited about prospects in Egypt. Ongoing fiscal and economic reforms introduced by the government present a strong medium-term growth outlook for Egypt. We are also looking at capital markets showing positive momentum, which will continue to drive our growth in this market.

What are the sectors that look promising in the current climate?
We are optimistic about consumer-driven sectors such as food and beverages and pharmaceuticals on the long-term. The region’s tech sector, particularly with all the development we are seeing in the industry, holds great promise. In fact, one of our subsidiaries, EFG EV Fintech, has been actively investing in tech startups and companies.  We are seeing companies in that thriving sector, not just in Egypt, but also across the Middle East making great headway as they scale up, bringing a new breed of stocks into the stock markets for new and experienced investors. Sectors such as oil and gas, and commodities will do well based on the current scenario.

What’s your take on crypto- currency and its place in the future of finance?
I’ve learned over the years that it’s not prudent to write off certain trends. While it is relatively new and has a small share of the financial market, cryptocurrency is rapidly gaining mainstream support.
Many banks that were skeptical about it at one point are now changing their outlook, with cryptocurrency gaining traction among their clients. Going forward, cryptocurrency will become more mainstream and entrenched in the global economy.

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