EFG-Hermes, the leading investment bank in the Arab world, today reported record revenues and net income for the first half of 2008.
In the first half of the year to June 30, 2008, the firm reported total consolidated revenues of EGP 1.53 billion, up 56% over the same period last year. Revenues in the second quarter of this year grew 64.7% over 2Q 07 to EGP 871.3 million and were predominantly booked through investment banking operations.
Meanwhile, net profit after tax and minority interest surged 34.2% to EGP 757.7 million in 1H 08 compared to EGP 564.5 million in the same half last year, with a 61.7% profit margin.
“EFG-Hermes posted its best half-year results ever despite volatility in major regional markets due to an ongoing correction and the global economic slowdown,” says EFG-Hermes CEO Yasser El-Mallawany. “The firm’s performance in the second quarter is a testament to the group’s strength and market leadership across the region, a fact underscored by our becoming the first investment bank in the region to simultaneously close two large IPOs.”
Total revenues booked from the Investment Bank** reflect 94.7% growth over 2Q 07 to EGP 741 million, excluding unrealized incentive fees for the quarter totaling EGP 97.4 million, with total revenue from the Investment Bank nearly doubling over 1H 07 to EGP 1.26 billion, a level that is 68.1% of the full-year 2007 level.
“Across the region, we are reaping the fruits of our strategy of adding new markets, products and clients,” notes EFG-Hermes CEO Hassan Heikal, adding, “We are particularly pleased with the breakdown of operating revenues in the first half, which reflect our strategy of focusing on the larger and more stable asset management business as a core driver going forward.”
In the first half, asset management (including both listed and private equity) accounted for 32.7% of total operating revenues. Brokerage accounted for 38.9% and investment banking for 10.7%, while the trading book accounted for 18%.
Operational Highlights and Business Segment Review for First Half 2008
Group
Regional operations accounted for 35.3% of total fee and commission income in 1H 08, up from 21.8% in 1H 07.
EFG-Hermes’ shareholding structure remains dominated by institutional shareholders. The top 50 shareholders own 72.4% of the firm’s equity and include 34 Western institutions.
July 2008 saw the launch of several training and development programs across the Group, including but not limited to the Executive Development Program and the annual three-month Investment Banking Program.
In the second quarter, the Principal Account diversified with investments in Egypt, the UAE, Kuwait, Saudi Arabia and Qatar. Total realized capital gains booked from the Principle account during 2Q 08 stood at EGP 124 million.
Brokerage
The Brokerage Division’s operations in Egypt and the UAE (on the DFM and ADSM) maintained their number-one positions in 2Q 08. Meanwhile, the Division’s operation in Saudi Arabia became the number-one independent (non-bank) broker in the Kingdom in June 2008.
The online and VIP (high-net-worth) segments are fast growing.
The firm has begun integrating the operations of Oman’s Vision Securities, of which EFG-Hermes acquired 51% plus management rights in April 2008, into the platform.
Research
The second quarter of 2008 saw a surge in the Research Department’s output as it increased coverage of Saudi stocks, published its first Saudi Yearbook and initiated coverage of Qatari stocks.
Eiji Aono took over as Head of Research at the beginning of 3Q2008, bringing with him eight years of experience as a top-ranked equity analyst at major firms in London.
Investment Banking
In May of this year, the bank closed both a USD 273 million IPO for Maridive Oil Services and a USD 343 million offering for leading real estate developer Palm Hills Development, both on the Egyptian Stock Exchange. The Palm Hills IPO included a listing of global depository receipts on the London Stock Exchange.
In 2Q 08, the Investment Banking Team continued to build the pipeline on both the equity raising and M&A sides.
Asset Management
Total assets under management were stable at 1Q 08 figures at USD 7.7 billion. The total redemptions on money market funds of USD 2.4 billion were partly replaced by long term and more stable funds into the equity funds (a total of UDS 1 billion).
Since the beginning of 2008, the Division has continued expanding its product range through the inclusion of management of MENA portions of Asian funds as well as products structured around existing funds.
The Asset Management team has also launched the EFG-Hermes Saudi Arabia Equity Fund.
The firm has been awarded two mandates for new funds to be launched in the third quarter of 2008 and has continued to diversify and grow its client base to include more regional family offices, Scandinavian banks and regional sovereign wealth funds.
The MENA Special Opportunities fund has been named “Best Newcomer” by Terrapin’s Hedge Funds World.
Private Equity
Funds under management increased to USD 1.1 billion.
Revenues from private equity increased over both 2Q 07 and 1Q 08, totaling EGP 31 million in the second quarter of 2008.
A new team of professionals from a renowned international investment bank joined Private Equity in the second quarter, and the Division established a physical presence in the UAE.
The Horus III Fund undertook several new investments.
The division also launched the Horus Tourism Company, which is expected to close in the third quarter of 2008.
The Private Equity Division is currently in a “building” phase: funds under management are being accumulated and invested, with the more lucrative cycle of divestment (one in which success fees are earned) yet to come.
