EFG Hermes, a leading financial services corporation in the Middle East and North Africa (Mena), reported today an almost eight-fold increase in net profits to EGP1.6 billion ($87.91 million) for 2016.

EFG Hermes posted revenues of EGP4 billion ($219.78 million), up 279 per cent year-on-year.

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 year.

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 EGP2.7 billion foreign exchange gain in FY2016 following the float of the Egyptian pound, which was the main driver of revenue growth for the year.

Total operating expenses rose 155 per cent YoY to EGP1.9 billion in FY2016, inflated by one-off and exceptional costs booked in the fourth quarter and reflecting, in part, the impact of the float of the Egyptian pound on the group’s non-EGP costs.

Inclusive of one-off and exceptional items, employee expenses as a percentage of revenues came at 35 per cent in FY2016, well below the firm’s 50 per cent target, once again illustrating management’s commitment to maintain cost discipline, it said.

Fee and commission income grew 50 per cent YoY, reaching EGP1.2 billion for the year.

Excluding the one-off impact of the float on revenue from the firm’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 core components at present of the Group’s non-bank financial services platform.

“While we are delighted with the group’s performance in 2016, we are also cognisant that the float of the Egyptian pound in particular — and the prevailing macro environment across our footprint — demand proactive adaptation to new market realities to ensure we have the flexibility we need to continue pursuing our pushes into frontier markets, non-bank financial services and merchant banking. We have maintained strict cost discipline through a number of cost restructuring initiatives undertaken during the fourth quarter of 2016 and that present opportunities for future cost savings, while more importantly increasing the overall efficiency of our management team,” said group chief executive officer Karim Awad.

With the growth in revenues outstripping the rise in operating expenses, the firm reported net operating profit of EGP2.1 billion, up 568 per cent YoY in FY2016, delivering a net operating margin of 53 per cent, the statement said.

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 2Q2016. In the fourth quarter, EFG Hermes divested an additional 1.0 per cent of the bank’s shares, leaving the firm with a 15.1 per cent stake at year’s end.

“We look back at 2016 as a watershed for EFG Hermes as we continue to deliver on our 6 pillar strategy, with a particular emphasis on people, positioning, products, geographical presence and profitability,” Awad added. “Three months into 2017, we continue to develop our merchant banking platform, have expanded our brokerage execution capabilities to include frontier Asian exchanges and are now in the final stages of opening our New York office. We continue to invest in talented professionals to drive growth across our new and existing lines of business with the aim of creating substantial and sustainable new value for our shareholders over the long term.

“Three decades into our journey, we have only scratched the surface of this group’s potential,” Awad concluded.

Furthermore, the Board of Directors recommended a cash distribution of EGP2.75/share subject to the OGM approval. – TradeArabia News Service