EFG Hermes Holding, the leading investment bank franchise in Frontier Emerging Markets (FEM), reported a strong set of net profits for the year 2021. For the first time, the group’s revenues have crossed the EGP 6 billion mark, resulting in the value of EGP 6.1 billion, a 12 percent increase while the net profit is EGP1.5 billion, a 12 percent hike as well.
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 percent acquisition of the bank’s shares in 4Q21. aiBANK revenue helped buoy performance, contributing EGP 306 million to the Group’s top line in FY21.
EFG Hermes Holding’s Group CEO Karim Awad says, “I am extremely pleased with our performance this year. We’ve continued to gain ground by capitalizing 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 FEM.”
The Firm’s sell-side revenues climbed 44 percent Y-o-Y to EGP 1.8 billion in FY21, with each division delivering strong standalone results. It was an outstanding year for the Investment Banking division, with the team concluding a record 40 deals worth an aggregate of $7.9 billion in the ECM, DCM, and M&A spaces. As a result, revenues from the division hit EGP 494 million — an over twofold increase compared to the previous year. The Brokerage division also made a marked contribution to sell-side revenues, reporting top-line growth of 29 percent Y-o-Y to EGP 1.3 billion 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 percent Y-o-Y to EGP 636 million in FY21 on the back of a 77 percent Y-o-Y drop in revenues from the Private Equity division. This was due to the high base effect associated with EGP 342 million in one-off incentive fees booked following the exit of Vortex III last year. Quarterly, the division’s revenues gained 140 percent Y-o-Y. Nonetheless, Asset Management performed well during the year, growing revenues 45 percent Y-o-Y to EGP 528 million, driven by Frontier Investment Management Partners’ (FIM) performance fees booked in the final quarter of the year.
Revenues from the Group’s Holding & Treasury Activities contracted 31 percent Y-o-Y to EGP 1.3 billion, pressured by realized/unrealized 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 percent Y-o-Y to EGP 3.8 billion during the year.
2021 was another exceptional year for companies under the NBFI platform, with each showing strong financial and operational performance that drove the Group’s overall positive results. The NBFI platform reported revenues worth EGP 2 billion, climbing 41 percent Y-o-Y, with outstanding portfolios up a significant 39 percent Y-o-Y to EGP 13 billion. Tanmeyah, which accounts for 72 percent of the platform’s revenues, reported a top line of EGP 1.4 billion during the year, up 31 percent Y-o-Y on the back of strong sales and geographical expansion across Egypt. valU also delivered a remarkable performance this year, with revenues surging 171 percent Y-o-Y to EGP 302 million 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 percent Y-o-Y to EGP 58 million as the business further capitalized on synergies with the Investment Bank. The leasing business, which also falls under EFG Hermes Corp-Solutions, reported revenues of EGP 215 million, up 16 percent Y-o-Y.
Group operating expenses grew 9 percent Y-o-Y to EGP 3.9 billion after the consolidation of aiBANK, whose operating expenses came in at EGP 156 million and accounted for 50 percent of the total increase. Additionally, employee expenses climbed 20 percent Y-o-Y to EGP 2.8 billion 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 G&A expenses were largely flat, mainly due to lower operating expenses at the Investment Bank and particularly lower ECL and provisions at the NBFI platform.
EFG Hermes Holding’s net profit after tax and minority interest came in at EGP 1.5 billion, up 12 percent Y-o-Y largely driven by the continued upward trajectory of the NBFI platform as well as aiBANK, which contributed EGP 38 million to the bottom line.
Awad concluded that with the chosen strategies of expansions into FEMs, diversification into NBFIs, and entry into the commercial banking platform, the Group has the ability to withstand any turbulent market conditions, major geopolitical headwinds, and inflationary pressure.
