EFG Hermes, a financial services corporation in Frontier Emerging Markets (FEM), has posted a strong 2019 full-year result, as its revenues rose by 20% to £4.8 billion. The net profit of the firm also expanded by 36% year-on-year (Y-o-Y) to hit £1.4 billion, which was supported by strong results at both the Group’s Investment Bank and NBFI platforms.
The Group closed 2019 with a net profit after tax and minority interest of £1.4 billion in FY19, up 36% Y-o-Y, on the back of a 20% Y-o-Y expansion in revenues to £4.8 billion.
Revenue growth for the year was supported by both the Group’s Investment Banking platform, which reported a 12% Y-o-Y rise in revenues to £3.6 billion, and non-bank financial services (NBFI) platform, which saw its revenues reach £1.2 billion, up an impressive 52% compared to the same figure for 2018. Growth at the NBFIs platform was primarily driven by the Group’s microfinance solutions provider, Tanmeyah, which saw its top line reach the £1.0 billion mark in FY19, up 66% Y-o-Y.
“I am particularly satisfied with our progress in expanding our NBFI’s product offering,” said EFG Hermes Holding Group CEO, Karim Awad. “Today, our NBFI footprint encompasses leasing, microfinance, fintech-enabled consumer finance, mortgage finance, factoring and will soon include insurance, giving us greater flexibility to overcome challenges posed by global and regional market conditions and support profitability.”
Accounting for 71% of the Group’s revenues in FY19, fee and commission income grew 23% Y-o-Y to £3.4 billion supported by revenues generated by fees and commissions’ three verticals.
The Group’s sell-side businesses reported a 9% Y-o-Y rise in revenues to £1.5 billion in FY19. The expansion came on the back of a 16% Y-o-Y rise in revenues by the Brokerage division which reached £1.2 billion driven by higher revenues generated by the Group’s Saudi Arabian, Kuwaiti, Emirati and Frontier operations and the Group’s Structured Products. EFG Hermes’ Investment Banking division saw a 10% Y-o-Y decline in revenues to £328 million, despite a higher and more diversified deal count for the year. Award continued:
“The year was filled with milestones for our sell-side platform. Our brokerage division continued to hold on to its number one spot in terms of market share in Egypt, Abu Dhabi, Dubai, Nasdaq Dubai, and Kuwait, while further expanding its presence in Nigeria, Kenya, and Pakistan.
“In parallel, our investment banking team successfully advised on multiple IPOs both in the MENA region and across the wider FEM space, with the division selected as a joint bookrunner in Saudi Aramco’s historic IPO.
“In the final quarter of the year, in line with our strategy to enhance the Group’s DCM capabilities, our DCM-dedicated team successfully completed both Egypt’s first short term securitization transaction and its first short-term bond transaction. The successful conclusion of these two transactions demonstrates our ability to promptly capitalize on changing regulation and incessantly lead innovation across the Egyptian finance industry.”
Buy-side recorded revenues of £624 million in FY19, up 15% Y-o-Y. The solid year-on-year growth was supported by the sale of Vortex Energy’s wind assets in 1Q19, which saw the Group’s Private Equity division report revenues of £341 million, up 133% versus last year’s figure. On the other hand, Asset Management revenues decreased 29% Y-o-Y to £283 million.
Capital markets & treasury operations, which represented 29% of the Group’s revenues in FY19, saw revenues rise 14% Y-o-Y to £1.4 billion in FY19, largely on the back of higher interest income and realized capital gains.
Group operating expenses rose 17% Y-o-Y to £3.0 billion in FY19, with the rise attributable to higher salaries following a rise in Tanmeyah’s headcount versus last year, an increase in the variable portion of employee expenses in line with revenue growth, and higher operating expenses across both the entire NBFIs platform and Tanmeyah in particular.
In light of the recent political situation and events in Lebanon, and in an effort to reflect a prudent stance amid a very fluid situation; EFG Hermes undertook a 36% haircut (FV re-assessment) to its investment in Credit Libanais through OCI in the FY19 financial statements. In the coming period, EFG Hermes’ management will continue to assess the evolving situation in Lebanon and will take further actions if necessary.
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