EFG Hermes, a financial services corporation in the Middle East and North Africa (MENA), reported its financial results for the fiscal year (FY) 2016, marking an almost seven-fold increase in net profits, up to EGP 1.6bn with revenues of EGP 4bn, up 279% year-on-year (y-o-y).
The corporation noted that robust top-and-bottom-line growth were driven by prudent balance sheet management, a growing contribution from its new non-bank financial services platform, and a business environment that started to show early signs of recovery during the fourth quarter of the FY.
A long dollar position and the sale of most of the Group’s stake in its commercial bank, Crédit Libanais, saw EFG Hermes realise an EGP 2.7bn foreign exchange gain in FY 2016 following the flotation of the Egyptian pound, which was the main driver of revenue growth for the year.
It added that the total operating expenses went up 155% y-o-y, to EGP 1.9bn, in FY 2016, inflated by one-off and exceptional costs booked in the fourth quarter and reflecting, in part, the impact of the flotation on the group’s non-EGP costs. Inclusive of one-off and exceptional items, employee expenses as a percentage of revenues stood at 35% in FY 2016, well below the firm’s 50% target.
Moreover, fees and commissions income grew 50% y-o-y, reaching EGP 1.2bn. Excluding the one-off impact of the flotation on revenue from the company’s lines of business, EFG Hermes’s fee and commission business still grew 34% y-o-y, backed by better performance from most core business lines and strong contributions from EFG Hermes Leasing and Tanmeyah Microfinance.
The group’s CEO, Karim Awad, said that they recognise that the float of the Egyptian pound in particular—and the prevailing macro environment—demand proactive adaptation to new market realities to ensure having the flexibility needed to continue pursuing pushes into frontier markets, non-bank financial services, and merchant banking. “We have maintained a strict cost discipline through a number of cost restructuring initiatives undertaken during the fourth quarter of 2016, and that presents opportunities for future cost savings, while, more importantly, increases the overall efficiency of our management team,” he added.
With the growth in revenues outstripping the rise in operating expenses, the firm reported a net operating profit of EGP 2.1bn, up 568% y-o-y in FY 2016, delivering a net operating margin of 53%.
Meanwhile, the group continues to divest its remaining stake in Crédit Libanais following its sale of a majority stake in the bank and its subsequent deconsolidation in the second quarter of 2016. In the fourth quarter, EFG Hermes divested an additional 1% of the bank’s shares, leaving the firm with a 15.1% stake at year’s end.