2q2012 earnings release - london stock exchange2012/08/15 · investor relations 2q2012 earnings...
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INVESTOR RELATIONS 2Q2012 Earnings Release
15 August 2012
EFG HERMES REPORTS SECOND QUARTER 2012
GROUP NET INCOME OF EGP27 MILLION; ON TOTAL
OPERATING REVENUE OF EGP477 MILLON
Cairo, August 15th, 2012 – EFG Hermes reported today Group net income of
EGP27 million in 2Q2012, compared to a net income of EGP35 million in 1Q2012.
The Group operating revenue reached EGP477 million in 2Q2012, up from
EGP433 million a quarter earlier. Total assets stood at EGP54.8 billion at the end
of 2Q2012.
Key Highlights
Group revenue reached EGP477 million in 2Q2012 and Group operating
expenses came at EGP330 million, resulting in a net profit after tax and minority
of EGP27 million.
Investment Bank revenue declined 13% Y-o-Y to EGP195 million in
2Q2012 on the back of lower revenue generated from capital markets and
treasury operations, which fell to EGP8 million in 2Q2012. Fee and commission
revenue rose 3% to EGP187 million, boosted by Investment Banking division
revenue.
The Investment Bank operating expenses was flat Y-o-Y at EGP173
million in 2Q2012, reflecting the management commitment to the cost cutting
measures taken last year.
Credit Libanais net income for the quarter came at USD17.3 million, up
3% Y-o-Y and resulting in a pre-tax RoAE of 17.0%. The Bank’s operating
revenue was driven by solid growth in all revenue lines and particularly fees and
commissions.
Brokerage remained #1 on the Egyptian Stock Exchange (excluding
special transactions) and on the Dubai Financial Market, and maintained a
leading position in a number of other regional markets. Over the quarter,
Brokerage executions declined 20.7% to reach USD4.7 billion in line with the
average regional volumes which declined 17% Q-o-Q.
Asset Management AuMs stood at USD3.1 billion at the end of 2Q2012,
down 6% Q-o-Q, with redemptions accounting for 5% and the market
performance accounting for 1%.
Investor Relations Contacts
Mohamed Arafa
CFO
Tel: +20 2 3535 6120
Hanzada Nessim
Head of Investor Relations
Strategy & Investor Relations
Tel: +20 2 3535 6502
Nada Al-Hamalawy
Associate Vice President
Strategy & Investor Relations
Tel: +20 2 3535 6453
EFG Hermes (Main Office)
Building No. B129, Phase 3,
Smart Village – km 28 Cairo
Alexandria Desert Road, 6 October
Egypt 12577
Investor Relations Contacts:
Tel: +20 2 3535 6710
Fax:+20 2 3535 7017
Stock Exchange & Symbol
Cairo (Reuters code): HRHO.CA
London (Reuters code): HRHOq.L
Bloomberg: HRHO EY
Reuters pages: EFGS .HRMS .EFGI
.HFISMCAP HFIDOM
Bloomberg page: EFGH
EFG HERMES INVERSTOR RELATIONS 3Q2010 Earnings Release 30 November 2010 2
EFG HERMES INVESTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 2
EFG-Hermes Investment Banking closed a major transaction during the quarter raising USD462
million in a private placement for Egyptian Refining Company (“ERC”). The placement is the largest
in Egypt since the end of 2007 and is one of the largest to take place in the region this year.
Private Equity AuMs stood at USD970 million, with no exits taking place during the quarter.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 3
A. GROUP PERFORMANCE
I. Performance Indicators and Financial Highlights
Table 1: Key Operating Indicators
2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Total Brokerage Executions USD mn 4,677 5,872 5,682 -20% -18%
Investment Banking Fees EGP mn 84 12 48 593% 75%
Assets under Management: USD mn 4,083 4,284 4,778 -5% -15%
In Private Equity USD mn 970 976 1,122 -1% -14%
In Asset Management USD mn 3,113 3,308 3,656 -6% -15%
Deposits USD mn 6,536 6,423 6,017 2% 9%
Loans USD mn 2,130 2,049 1,871 4% 14%
Group Net Income EGP mn 27 35 80 -23% -66%
Source: EFG Hermes and Crédit Libanais data
Table 2: Investment Bank/Commercial Bank Financial Performance – 2Q2012
EGP (mn) Investment Bank Commercial Bank
2Q12 1Q12 2Q11 Q-o-Q Y-o-Y 2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Total Operating Revenue 195 166 223 17% -13% 282 267 243 6% 16%
Total Operating Expenses 173 163 173 6% 0% 157 133 126 18% 25%
Net Operating Profit 21 3 50 553% -57% 125 134 117 -7% 6%
Net Operating Margin 11% 2% 22%
44% 50% 48%
Net Profit After Tax & Minority Interest (29) (30) 22 1% N/M 56 65 58 -13% -3%
Source: EFG Hermes management accounts and Crédit Libanais data
Table 3: Group Financial Performance – 2Q2012
EGP (mn) Group EFG Hermes
2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Total Operating Revenue 477 433 466 10% 2%
Total Operating Expenses 330 296 299 12% 10%
Net Operating Profit 146 137 167 7% -12%
Net Operating Margin 31% 32% 36%
Net Profit After Tax & Minority Interest 27 35 80 -23% -66%
Source: EFG Hermes management accounts
Table 4: Financial Performance – 1H2012
EGP (mn) Investment Bank Commercial Bank Group EFG Hermes
1H12 1H11 Y-o-Y 1H12 1H11 Y-o-Y 1H12 1H11 Y-o-Y
Total Operating Revenue 361 391 -8% 549 486 13% 910 877 4%
Total Operating Expenses 336 336 0% 290 248 17% 626 584 7%
Net Operating Profit 25 55 -55% 259 238 9% 284 293 -3%
Net Operating Margin 7% 14%
47% 49%
31% 33%
Net Profit After Tax & Minority Interest (59) (4) N/M 121 122 -1% 62 118 -47%
Source: EFG Hermes management accounts
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 4
II. Group Revenues
Table 5: Group Revenue
EGP (mn) 2Q12 1Q12 2Q11 Q-o-Q Y-o-Y 1H12 1H11 Y-o-Y
Investment Bank 195 41% 166 38% 223 48% 17% -13% 361 40% 391 45% -8%
Fees & Commissions 187 39% 125 29% 181 39% 49% 3% 312 34% 345 39% -10%
Capital Markets & Treasury
Operations 8 2% 41 10% 41 9% -81% -81% 49 5% 46 5% 7%
of which:
Net Interest Income* 10 2% 13 3% 12 3% -18% -14% 23 3% 27 3% -14%
Returns on Investments** (3) -1% 29 7% 29 6% N/M N/M 26 3% 19 2% 35%
Commercial Bank 282 59% 267 62% 243 52% 6% 16% 549 60% 486 55% 13%
Total Revenue 477 100% 433 100% 466 100% 10% 2% 910 100% 877 100% 4%
* Net of bank interest paid, bank charges, FX differences and intercompany revenue (expenses) ** Represents realized & unrealized gains/losses on trading portfolio and dividend income
Source: EFG Hermes management accounts
Group revenue rose 2% Y-o-Y to EGP477 million in 2Q2012 on the back of higher revenue generated from
the Commercial Banking activities. The Commercial Bank revenue rose 16% Y-o-Y in 2Q2012, offsetting the
13% decline in revenue generated by the Investment Bank. In 2Q2012, the Commercial bank revenue
represented 59% of the Group revenue and the Investment Bank represented the remaining 41%.
The Commercial Bank revenue rose 16% Y-o-Y to EGP282 million in 2Q2012, driven by solid growth in all
revenue lines and particularly fees and commissions. The Investment Bank revenue fell 13% Y-o-Y to
EGP195 million in 2Q2012 on the back of lower capital markets & treasury operations revenue which
declined 81% Y-o-Y. The sharp decline in capital markets & treasury operations revenue is attributed to a
strong comparable 2Q2011, which included dividend income from SODIC.
On a Q-o-Q basis, the Group revenue rose 10% supported mainly by an improvement in the Investment
Bank fee and commission revenue which rose 49% Q-o-Q. The Commercial Bank revenue also rose over
the quarter, adding 6% Q-o-Q.
For 1H2012, Group revenue rose 4% Y-o-Y to EGP910 million, driven by 13% Y-o-Y increase in revenue
generated by the Commercial Bank. Non-interest income, including fee and commission income and trading
income, was the main driver for this increase. The Investment Bank revenue declined 8% Y-o-Y, as fee and
commission revenue declined 10% Y-o-Y in 1H2012 on the back of lower 1Q2012 revenue.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 5
III. Group Operating Expenses
Table 6: Investment Bank/Commercial Bank Operating Expenses – 2Q2012
EGP (mn) Investment Bank Commercial Bank
2Q12 1Q12 2Q11 Q-o-Q Y-o-Y 2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Total Operating Revenue 195 166 223 17% -13% 282 267 243 6% 16%
Total Operating Expenses 173 163 173 6% 0% 157 133 126 18% 25%
Net Operating Profit 21 3 50 553% -57% 125 134 117 -7% 6%
Net Operating Margin 11% 2% 22%
44% 50% 48%
Employee Expenses 117 106 115 11% 1% 92 88 78 5% 17%
Employee Expenses/Operating Revenue 60% 64% 52%
33% 33% 32%
Employee Expenses/Operating Expenses 68% 65% 67%
58% 66% 62%
Other Operating Expenses 56 57 58 -2% -3% 65 45 48 44% 38%
Other Operating Expenses/Operating
Revenue 29% 34% 26%
23% 17% 20%
Other Operating Expenses/Operating
Expenses 32% 35% 33%
42% 34% 38%
Source: EFG Hermes Management Accounts
Table 7: Group Operating Expenses – 2Q2012
EGP (mn) Group EFG Hermes
2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Total Operating Revenue 477 433 466 10% 2%
Total Operating Expenses 330 296 299 12% 10%
Net Operating Profit 146 137 167 7% -12%
Net Operating Margin 31% 32% 36%
Employee Expenses 209 193 194 8% 8%
Employee Expenses/Operating Revenue 44% 45% 42%
Employee Expenses/Operating Expenses 63% 65% 65%
Other Operating Expenses 122 103 105 18% 15%
Other Operating Expenses/Operating Revenue 25% 24% 23%
Other Operating Expenses/Operating Expenses 37% 35% 35%
Source: EFG Hermes Management Accounts
Table 8: Group Operating Expenses – 1H2012
EGP (mn) Investment Bank Commercial Bank Group EFG Hermes
1H12 1H11 Y-o-Y 1H12 1H11 Y-o-Y 1H12 1H11 Y-o-Y
Total Operating Revenue 361 391 -8% 549 486 13% 910 877 4%
Total Operating Expenses 336 336 0% 290 248 17% 626 584 7%
Net Operating Profit 25 55 -55% 259 238 9% 284 293 -3%
Net Operating Margin 7% 14% 47% 49% 31% 33%
Employee Expenses 223 229 -3% 179 154 16% 402 383 5%
Employee Expenses/Operating Revenue 62% 59% 33% 32% 44% 44%
Employee Expenses/Operating Expenses 66% 68% 62% 62% 64% 66%
Other Operating Expenses 113 107 6% 111 94 18% 224 201 12%
Other Operating Expenses/Operating Revenue 31% 27% 20% 19% 25% 23%
Other Operating Expenses/Operating Expenses 34% 32% 38% 38% 36% 34%
Source: EFG Hermes Management Accounts
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 6
Group operating expenses rose 10% Y-o-Y to EGP330 million in 2Q2012, driven by higher costs on the
Commercial Bank side, which rose 25% Y-o-Y to EGP157 million. The Investment Bank operating expenses
was flat Y-o-Y at EGP173 million. Group operating expenses were split 52/48 between the Investment and
the Commercial Bank.
The increase in the Commercial Bank expenses was driven by higher employee expenses and other
operating expenses, rising 17% Y-o-Y and 38% Y-o-Y, respectively. The higher other operating expense is
partially attributed to a tax charge of USD1.0 million booked in 2Q2012. On the Investment Bank side,
employee expenses were broadly unchanged, up 1% Y-o-Y, and the other operating expenses declined 3%
Y-o-Y, reflecting the management continuous efforts to keep all costs down.
For 1H2012, Group operating expenses rose 7% Y-o-Y to EGP626 million due to the increase in the
Commercial Bank operating expenses which rose 17% Y-o-Y. The increase in the Commercial Bank
operating expenses is attributed to higher employees’ costs and higher other operating expenses, rising
16% Y-o-Y and 18% Y-o-Y, respectively. The Investment Bank operating expenses was flat Y-o-Y in
1H2012.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 7
B. THE INVESTMENT BANK
I. Investment Bank Revenue Table 9: Investment Bank Revenue
EGP (mn) 2Q12 1Q12 2Q11 Q-o-Q Y-o-Y 1H12 1H11 Y-o-Y
Fees & Commissions 187 96% 125 82% 181 81% 49% 3% 312 86% 345 88% -10%
Capital Markets & Treasury
Operations 8 4% 41 18% 41 19% -81% -81% 49 14% 46 12% 7%
of which:
Net Interest Income* 10 5% 13 17% 12 5% -18% -14% 23 6% 27 7% -14%
Returns on Investments** (3) -1% 29 1% 29 13% N/M N/M 26 7% 19 5% 35%
Total Revenue 195 100% 166 100% 223 100% 17% -13% 361 100% 391 100% -8%
* Net of bank interest paid, bank charges, FX differences and intercompany revenue (expenses)
** Represents realized & unrealized gains/losses on trading portfolio and dividend income
Source: EFG Hermes Management Accounts
The Investment Bank total revenue declined 13% Y-o-Y to EGP195 million in 2Q2012, mainly attributed to
exceptional revenue booked in capital markets and treasury operations in 2Q2011.
Capital markets & treasury operations declined 81% Y-o-Y to EGP8 million, as 2Q2011 was a strong
comparable quarter which included exceptional dividend income of EGP28 million received from SODIC.
Fees and commission revenue rose 3% Y-o-Y to EGP187 million in 2Q2012, on the back of strong revenue
booked by the Investment Banking division which off-set the decline in revenue generated by other
business lines, namely Brokerage, Asset Management and Private Equity.
On Q-o-Q, the Investment Bank revenue rose 17% Q-o-Q, driven by strong fee and commission revenue
which rose 49% Q-o-Q. This is mainly attributed to revenue generated from Investment Banking division.
The Investment Bank revenue declined 8% Y-o-Y to EGP361 million in 1H2012 on lower revenue generated
from fees and commissions business, which fell 10% Y-o-Y to EGP312 million in 1H2012. The decline in fee
and commission revenue is driven by lower revenue generated from Brokerage, Asset Management and
Private Equity.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 8
Fee and Commission Revenue
Figure 10: Brokerage Av. Daily Commission Figure 11: Asset Management AuMs
*In 1Q2011, av. daily comm. in Egypt is calc. on 25 trading day
Source: EFG Hermes Source: EFG Hermes
Fee and commission revenue rose 3% Y-o-Y and 49% Q-o-Q to EGP187 million in 2Q2012, driven by higher
revenue generated from the Investment Banking division.
Brokerage revenue declined 18% Y-o-Y to EGP51 million in 2Q2012, broadly in line with the decline in
regional volume and executions. Asset Management revenue declined 19% Y-o-Y to EGP26 million on the
back of lower regional funds/portfolios management fees. Private Equity revenue declined 34% Y-o-Y to
EGP25 million on lower management fees and the disappearance of incentive fees. Investment Banking
revenue rose 75% Y-o-Y to EGP84 million on strong advisory fees booked during the quarter.
Table 12: Fee and Commission Revenue – 2Q2012
(EGP mn) 2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Brokerage: Egypt 36 19% 40 32% 46 25% -11% -22%
Brokerage: UAE 4 2% 7 5% 5 3% -46% -28%
Brokerage: KSA 2 1% 3 2% 2 1% -15% 6%
Brokerage: Oman 1.4 1% 1 1% 1 1% 3% 6%
Brokerage: Kuwait 7 4% 10 8% 7 4% -26% 0%
Brokerage: Jordan 0.9 0% 1 1% 1 1% -4% -23%
Total Brokerage 51 27% 62 49% 63 34% -17% -18%
Asset Management: Egypt 10 5% 9 7% 10 6% 13% -8%
Asset Management: Regional 17 9% 16 13% 22 12% 7% -25%
Total Asset Management 26 14% 24 19% 33 18% 9% -19%
Private Equity 25 13% 27 21% 38 21% -6% -34%
Investment Banking: Egypt 84 45% 12 10% 0 0% 593% N/M
Investment Banking: Regional 0 0% 0 0% 48 26% N/M N/M
Total Investment Banking 84 45% 12 10% 48 26% 593% 75%
Fees & Commissions 187 100% 125 100% 181 100% 49% 3%
Source: EFG Hermes Management Accounts
192
410
277 291 275 261
152
206
270
119 82 71
130 98
-
50
100
150
200
250
300
350
400
450
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
USD ('000)
3.7 4.0
4.4 4.4 4.5 4.1
4.6 4.7
3.7 3.7
3.2 3.3 3.3 3.1
0.0
1.0
2.0
3.0
4.0
5.0
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
USD (bn)
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 9
For 1H2012, fee and commission revenue declined 10% Y-o-Y to EGP312 million. Brokerage revenue fell
14% Y-o-Y to EGP113 million on lower execution and brokerage fees. Asset Management revenue declined
24% Y-o-Y to EGP51 million on the back of lower management fees. Private Equity revenue declined 35%
Y-o-Y to EGP52 million on lower management fees and the disappearance of incentive fees. Investment
Banking was the only division to recognize higher revenue Y-o-Y in 1H2012, revenue rose 42% Y-o-Y to
EGP96 million on strong advisory fees booked during 2Q2012.
Table 13: Fee and Commission Revenue – 1H2012
1H12 1H11 Y-o-Y
(EGP mn)
Brokerage: Egypt 76 24% 88 26% -14%
Brokerage: UAE 10 3% 14 4% -25%
Brokerage: KSA 5 1% 7 2% -34%
Brokerage: Oman 3 1% 5 1% -41%
Brokerage: Kuwait 17 6% 15 4% 17%
Brokerage: Jordan 2 1% 3 1% -33%
Total Brokerage 113 36% 131 38% -14%
Asset Management: Egypt 18 6% 20 6% -11%
Asset Management: Regional 33 10% 46 13% -29%
Total Asset Management 51 16% 67 19% -24%
Private Equity 52 17% 79 23% -35%
Investment Banking: Egypt 96 31% 20 6% 391%
Investment Banking: Regional 0 0% 48 14% N/M
Total Investment Banking 96 31% 68 20% 42%
Total Fees & Commissions 312 100% 345 100% -10%
Source: EFG Hermes Management Accounts
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 10
Fee and Commission Revenue – Brokerage
Most regional markets ended 2Q2012 in the red, losing the steam they gained earlier in 1Q2012. The MSCI
EM Index lost 10.0% Q-o-Q in 2Q2012 and S&P Pan Arab Comp ML Index slipped 10.9% Q-o-Q over the
same period. Volumes declined, falling an average of 17% Q-o-Q (11% Q-o-Q excluding KSA) over the
quarter. EFG Hermes Brokerage executions were in line with the decline in volumes, falling 20.3% Q-o-Q to
USD4.7 billion compared to USD5.9 billion a quarter earlier. Consequently, Brokerage revenue declined
17% Q-o-Q to EGP51 million in 2Q2012.
Brokerage revenue breakdown across different customer segments was broadly unchanged over the
quarter. Revenue generated from the retail business (which includes online, call center, branches, VIP
individuals and HNWI), accounted for 70% of total brokerage revenue in 2Q2012 versus 71% in 1Q2012.
Western institutional client accounted for 20% of total Brokerage revenue at the end of 2Q2012 versus
19% in 1Q2012. Regional institutional clients accounted for the remaining 10%.
Figure 14: Brokerage Revenue by Desk
*2Q2012 Revenue Breakdown Source: EFG Hermes
Retail, VIP &
HNWI
70%
Regional
Institutions
10%
Western
Institutions
20%
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 11
Egypt
Figure 15: Egypt Executions and Market Share
Source: EGX, EFG Hermes
Egypt’s Hermes Financial Index (HFI) lost 3.2% Q-o-Q, while volumes rose 31.2% Q-o-Q amid choppy
trading. The two rounds of the presidential elections together with a number of political events impacted
the political scene during the quarter and weighted down on the market performance, while the
improvement in the market volumes was mainly attributed to the sale of Mobinil shares to France Telecom
in May, which accounted for almost half of the total market turnover during the quarter, and which if we
exclude, volumes would decline 33% Q-o-Q.
Second quarter saw increased foreign institutional activity contributing positively to our market share and
supporting our ranking. If we exclude the Mobinil shares sale to France Telecom transaction, our market
share would reach 30.4% with a number one ranking place (based on total market volumes our market
share declined to 21.3% with a second place ranking).
Egypt Brokerage revenue declined 11% Q-o-Q to EGP36 million in 2Q2012. Egypt brokerage contribution to
the Group’s brokerage revenue came at 70% in 2Q2012 from 65% a quarter earlier.
114.8
55.6
25.9
15.5 19.0
43.0
18.4
91.3
19.9 26.0
11.1 14.6 11.3 13.6 10.5 10.4
8.8 8.3
55.1%
32.3%
33.6%
37.2%
40.9% 39.8%
27.6%
53.4%
24.5%
25.1% 18.4%
26.0%
42.5%
32.3%
44.3%
53.4%
26.8%
21.3%
0%
10%
20%
30%
40%
50%
60%
0
20
40
60
80
100
120
140
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Executed by EFG-Hermes Market Share
EGP billions
EGP (bn)
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 12
UAE
Figure 16: UAE Executions and Market Share
Source: DFM, ADX, EFG Hermes
The UAE markets saw thin trading during 2Q, with volumes falling 42.2% Q-o-Q on the Dubai Financial
Market (DFM) and 32.2% Q-o-Q on the Abu Dhabi Exchange (ADX). Performance followed suit, with the
Dubai Financial Market General Index (DFMGI) declining 11.9% Q-o-Q and the ADI slipping 4.1% over the
quarter.
On the DFM, EFG Hermes Brokerage managed to execute some special transactions for foreign institutional
clients and saw higher retail and GCC institutional clients’ activity, despite the declining volumes in 2Q. This
resulted in higher market share and ranking, reaching 14.1% and 1st place ranking on DFM compared to
10.4% and 5th place a quarter earlier.
Trading on the ADX was dominated by HNW individuals speculating on selected stocks which affected EFG
Hermes market share in 2Q2012. The decline in EFG Hermes execution came higher than the decline in the
total market volume, pushing our market share to 11.3% in 2Q2012 compared to 14.1% in 1Q2012.
However, our ranking improved to 3rd place versus 4th place a quarter earlier.
In May, EFG Hermes started testing the margin trading by offering the service to existing clients. We
believe that its impact should be more obvious when the markets volumes pick up.
In 2Q2012, revenue from UAE brokerage operations reached EGP4 million; a 46% Q-o-Q decline. This
drags UAE’s contribution to the Group’s total brokerage revenue to 7% from 11% in 1Q2012.
18.9
25.1 26.9
10.2
4.0
8.9 7.4 8.4
4.9 4.0 3.4 4.0 2.8 2.3 1.4 1.1
3.3 2.2
20%
16%
25%
16%
9% 10%
11% 11% 10%
13%
17%
15% 16%
12%
15% 14%
10%
14% 17%
15%
23%
21%
15% 12%
18% 18% 19% 20%
24% 25%
14%
12% 13%
11%
14%
11%
0%
5%
10%
15%
20%
25%
30%
0
5
10
15
20
25
30
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Executed by EFG-Hermes Market Share in DFM Market Share in ADX AED (bn)
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 13
Saudi Arabia
Figure 17: KSA Executions and Market Share
Source: Tadawul, EFG Hermes
The Saudi Stock Market (Tadawul) took a breath in 2Q2012, with turnover declining 17.9% Q-o-Q and
Tadawul All Share Index (TASI) dropping 14.4% over the quarter.
Despite retail trading dominating the market and commercial banks through their brokerage arms
accounting for the majority of trading volumes, EFG Hermes maintained its market share at 0.3%.
EFG Hermes KSA brokerage revenue reached EGP2 million in 2Q2012, lower 15% Q-o-Q and represented
4.2% of the Group’s total brokerage revenue.
Oman
Figure 18: Oman Executions and Market Share
Source: Muscat Securities Market, EFG Hermes
Volumes on the Muscat Securities Market (MSM) declined 16% Q-o-Q in 1Q2012 and the Muscat Securities
Index (MSM30) was flat in 2Q2012.
The decreased in foreign and GCC institutional activity in the Omani market was reflected in our market
share. EFG Hermes market share declined from 16.3% in 1Q2012 to 14.2% in 2Q2012 and fifth place
ranking versus fourth place a quarter earlier.
Revenue generated from Oman brokerage stood at EGP1.4 million, up 3% Q-o-Q and bringing its
contribution to total brokerage revenue to 2.7%.
5.8
9.3
8.5
3.7
2.9 3.2
1.3
2.6 1.9
3.1
2.1 2.8
3.6
1.4 0.8 0.9
1.6 1.6
1.6%
2.4%
1.1%
1.0%
0.7%
0.6%
1.1% 1.0%
1.2%
1.6% 1.6%
1.4%
0.4% 0.4%
0.3% 0.3% 0.3%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
0
2
4
6
8
10
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Executed by EFG-Hermes Market Share
EGP billions
SAR (bn)
156.0
204.0 212.0
81.0 67.0
135.0
108.0 98.0 81.0
72.0 56.8
65.2
94.4
38.5 27.7 27.9
43.6 41.5
16.9% 14.4%
29.9%
24.3%
19.2%
17.5%
17.2% 18.8%
21.5% 21.4%
23.3%
18.1%
21.8%
17.5% 19.2%
14.9% 16.3%
14.2%
0%
5%
10%
15%
20%
25%
30%
35%
0
50
100
150
200
250
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Executed by EFG-Hermes Market Share
EGP billions
OMR (mn)
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 14
Kuwait
Figure 19: Kuwait Executions and Market Share
Source: Kuwait Securities Exchange, EFG Hermes
After the rally seen in 1Q2012, the Kuwait Stock Exchange (KSE) took a breath. Volumes fell 25.7% Q-o-Q
and the KSE Index lost 6.1% over the quarter.
The firm’s market share was slightly higher at 27.8% versus 27.4% in 1Q2012; and maintained our 2nd
place ranking in 2Q2012.
Kuwait Brokerage revenue declined 26% Q-o-Q to EGP7 million. Kuwait Brokerage contribution to the
Group’s total brokerage revenue was 14.5% this quarter.
Jordan
It was another weak quarter for the Amman Stock Exchange (ASE) with the index declining 5.4% Q-o-Q
and volumes falling 12.2% during the quarter.
EFG Hermes market share declined to 4.7%, mainly due to very low trading volumes by foreign investors in
2Q2012, who constitute the majority of EFG Hermes client base. Meanwhile, the local client base activity
improved over the quarter, yet failed to offset the decline in foreign clients’ executions.
Revenue booked from Jordan Brokerage slipped 4% Q-o-Q to EGP0.9 million, and represented 1.7% of total
brokerage revenue in 2Q2012.
3,102
2,807
1,897
1,472
976
2,832
1,496
1,160
1,612
773 691 777 582
395 238
314
658 495
26.3%
26.2% 26.9%
23.5%
29.1% 30.2%
27.3%
36.0% 35.4%
27.4% 27.7% 29.7%
28.5% 24.0%
23.4%
25.1%
27.4% 27.8%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Executed by EFG-Hermes Market Share
EGP billions
KWD (mn)
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 15
Research
Figure 20: Research Coverage Universe
Source: EFG Hermes
The Research department coverage reached 137 companies at the end of 2Q2012, distributed across the
region (Egypt 25, UAE 23, KSA 49, Kuwait 9, Oman 13, Qatar 9, Lebanon 4, Morocco 3 and Jordan 2).
Currently EFG Hermes covers 58% of the regional market capitalization.
The research department covers 11 economies from a macro level and 8 countries in terms of regular
strategy notes. In addition, the research team issues regular publications, including daily morning round-
ups, after end of session wrap-ups and a regional monthly product.
19 22 27 23 31 30 25
16 21 20 19 23 25
23 11
16 22
30 38 50
18 13 13
4
6 13
26
22 25 26
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 Jun-12
Egypt UAE KSA Oman Others
39
60
76
90
124 131
137
No. of stocks
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 16
Fee and Commission Revenue – Asset Management
Figure 21: Development of Listed Assets under Management
Source: EFG Hermes
EFG Hermes assets under management stood at USD3.1 billion at the end of 2Q2012, declining 6% Q-o-Q,
where redemptions accounted for 5% of the decline and weak market performance the remaining 1%.
Regional funds/portfolios redemptions represented 65% of total redemptions while local MMF and equity
funds/portfolios represented the remaining 35%. Of the total redemptions, the regional institutional
portfolios net outflow accounted for 40% and local money market funds (MMFs) accounted for another
31%.
Over 1H2012, the improved funds performance (+7%) managed to partially offset the 11% redemptions,
thus resulting in a 5% decline in total asset value. Local MMF and equity funds/portfolios redemptions
represented 61% of total redemptions while regional funds/portfolios represented the remaining 39%. Of
the total redemptions, local money market funds (MMFs) accounted for 54% while regional institutional
funds and regional institutional portfolios each accounted for another 18%.
EFG Hermes Asset Management team remains focused to maintain a diversified client base and attract
more long-term and institutional clients. This is seen evident in the development of AuMs breakdown across
different client segments throughout the quarters. During 2Q2012, institutional clients accounted for 24.0%
of total AuMs compared to 21.9% last quarter; Foundation/Pension/Insurance clients contribution
increased from 38.7% last quarter to 42.1%; while SWF clients represented 19% of total AuMs versus
23.2% a quarter earlier.
Investor mix changed in 2Q2012 in terms of funds origination. MENA-based clients increased from 75.9%
last quarter to 77.6% in 2Q2012; Europe-based clients on the other hand declined to 20.0% from 20.9% a
quarter earlier; and the USA-based clients declined to 1.7% this quarter compared to 2.6% in 1Q2012.
0
1
2
3
4
5
6
7
8
9
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Portfolios Regional Equity Funds
Money Market & Fixed Income Egypt Equity Funds
4.6 4.1
4.4
7.6 7.8
6.3
4.2 3.7 4.0
4.4
USD (bn)
4.5 4.7
3.7 3.7 3.2 3.3 3.3 3.1
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 17
Figure 22: Assets under Management by Geography
Source: EFG Hermes Asset Management
Mena 77.6%
Western 21.7%
Others 0.7%
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 18
Fee and Commission Revenue – Investment Banking
Adverse conditions continued to characterize both regional and international markets during the second
quarter of 2012. Coupled with the unfavourable political environment in the Arab world in general and the
Egyptian market specifically, this has continued to directly impact our investment banking business as
capital markets activities remain shut and appetite for direct investments remains quite weak.
Nevertheless, the Investment Banking division was still able to close a major transaction during the quarter
raising USD462 million in a private placement for Egyptian Refining Company (“ERC”) during the course of
the second of quarter. The placement is the largest in Egypt since the end of 2007 and is one of the largest
to take place in the region this year. Our ability to tap into certain pockets to raise this massive amount of
equity for a Greenfield project in Egypt is another testament to our ability to achieve our clients’ objectives
even in the most adverse conditions.
Fee and Commission Revenue – Private Equity
Private Equity assets under management stood at USD0.97 billion as of 2Q2012, with no exits made during
the year. The team continues to manage portfolio companies’ performance in a very volatile economic
environment in Egypt.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 19
Capital Markets and Treasury Operations Revenue
Table 23: Capital Markets and Treasury Operations Revenue
EGP (mn) 2Q12 1Q12 2Q11 Q-o-Q Y-o-Y 1H12 1H11 Y-o-Y
Fees & Commissions 187 96% 125 82% 181 81% 49% 3% 312 86% 345 88% -10%
Capital Markets & Treasury
Operations 8 4% 41 18% 41 19% -81% -81% 49 14% 46 12% 7%
of which:
Net Interest Income* 10 5% 13 17% 12 5% -18% -14% 23 6% 27 7% -14%
Returns on Investments** (3) -1% 29 1% 29 13% N/M N/M 26 7% 19 5% 35%
Total Revenue 195 100% 166 100% 223 100% 17% -13% 361 100% 391 100% -8%
* Net of bank interest paid, bank charges, FX differences and intercompany revenue (expenses)
** Represents realized & unrealized gains/losses on trading portfolio and dividend income
Source: EFG Hermes Management Accounts
Capital markets & treasury operations declined 81% Y-o-Y to EGP8 million in 2Q2012, largely due to the Y-
o-Y decline in returns on investments as 2Q2011 was a strong comparable quarter.
Returns on Investments declined to EGP(3) million in 2Q2012 from EGP29 million a year earlier, as 2Q2011
included exceptional strong dividend income of EGP28 million received from SODIC.
Net interest income declined 14% Y-o-Y to EGP10 million on lower net interest earned. Net interest earned
came at EGP5.5 million in 2Q2012 versus EGP10.9 million in 2Q2011 as 2Q2012 saw less money market
funds’ (MMF) redemptions.
On a Q-o-Q basis, revenue generated from capital markets and treasury operations declined 81%, as
1Q2012 was a strong comparable base: (a) Included EGP20 million of unrealized gains on stocks, and (b)
Included a one-off capital gain of EGP8 million realized from the sale of the Kingdom Towers in Saudi
Arabia.
Capital markets & treasury operations rose 7% Y-o-Y to EGP49 million in 1H2012, driven by higher returns
on investments. Returns on Investments rose 35% Y-o-Y to EGP26 million, net unrealized capital gain on
equities reached EGP16.7 million in 1H2012 compared to realized/unrealized losses of EGP12 million on
equities and fixed income investments in 1H2011. Net interest income declined 14% Y-o-Y to EGP23
million, mainly due to lower net interest earned which came at EGP16 million in 1H2012 versus EGP21
million a year earlier.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 20
II. Investment Bank Operating Expenses
Table 24: Investment Bank Operating Expenses – 2Q2012
EGP (mn) Fees & Commissions
Capital Markets & Treasury Operations
2Q12 1Q12 2Q11 Q-o-Q Y-o-Y 2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Total Operating Revenue 187 125 181 49% 3% 8 41 41 -81% -81%
Total Operating Expenses 154 145 156 7% -1% 19 18 17 4% 10%
Net Operating Profit 33 (20) 26 N/M 27% (11) 23 24 N/M N/M
Net Operating Margin 18% -16% 14%
-142% 55% 58%
Employee Expenses 104 92 104 12% 0% 13 13 12 -1% 10%
Employee Expenses/Operating Revenue 56% 74% 57%
166% 32% 29%
Employee Expenses/Operating Expenses 67% 64% 66%
68% 72% 68%
Other Operating Expenses 50 52 52 -4% -4% 6 5 6 15% 9%
Other Operating Expenses/Operating
Revenue 27% 42% 29%
77% 13% 13%
Other Operating Expenses/Operating
Expenses 33% 36% 34%
32% 28% 32%
Source: EFG Hermes Management Accounts
Table 25: Investment Bank Operating Expenses – 2Q2012
EGP (mn) Total Investment Bank
2Q12 1Q12 2Q11 Q-o-Q Y-o-Y
Total Operating Revenue 195 166 223 17% -13%
Total Operating Expenses 173 163 173 6% 0%
Net Operating Profit 21 3 50 553% -57%
Net Operating Margin 11% 2% 22%
Employee Expenses 117 106 115 11% 1%
Employee Expenses/Operating Revenue 60% 64% 52%
Employee Expenses/Operating Expenses 68% 65% 67%
Number of Employees 928 941 1,028 -1% -10%
Other Operating Expenses 56 57 58 -2% -3%
Other Operating Expenses/Operating Revenue 29% 34% 26%
Other Operating Expenses/Operating Expenses 32% 35% 33%
Source: EFG Hermes Management Accounts
Table 26: Investment Bank Operating Expenses – 1H2012
Fee & Commission
Income Capital Markets &
Treasury Operations Total Investment
Bank
1H12 1H11 Y-o-Y 1H12 1H11 Y-o-Y 1H12 1H11 Y-o-Y
Total Operating Revenue 312 345 -10% 49 46 7% 361 391 -8%
Total Operating Expenses 298 301 -1% 38 35 7% 336 336 0%
Net Operating Profit 13 44 -70% 12 11 5% 25 55 -55%
Net Operating Margin 4% 13% 24% 24% 7% 14%
Employee Expenses 196 205 -4% 26 24 8% 223 229 -3%
Employee Expenses/Operating Revenue 63% 59% 53% 53% 62% 59%
Employee Expenses/Operating Expenses 66% 68% 70% 69% 66% 68%
Number of Employees 928 1,028 -10%
Other Operating Expenses 102 96 6% 11 11 5% 113 107 6%
Other Operating Expenses/Operating Revenue 33% 28% 23% 23% 31% 27%
Other Operating Expenses/Operating Expenses 34% 32% 30% 31% 34% 32%
Source: EFG Hermes Management Accounts
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 21
The Investment Bank operating expenses was flat Y-o-Y at EGP173 million in 2Q2012, as the management
remained committed to the cost cutting strategy it started at the beginning of 2011.
Employee expenses were broadly flat, up 1% Y-o-Y to EGP117 million in 2Q2012, as the fixed portion of the
employee expenses, which represents a large part of the employee expenses, came flat Y-o-Y.
Other operating expenses declined 3% Y-o-Y to EGP56 million in 2Q2012. Consultancy and service fees,
which include third party fees, rose 54% Y-o-Y to EGP16.7 million, office expenses rose 9% Y-o-Y to
EGP5.6 million and telephone/fax/mobile expenses increased 27% Y-o-Y to EGP3.0 million.
On the other hand, travel expenses fell 30% Y-o-Y to EGP5.0 million in 2Q2012. Occupancy expenses
declined 9% Y-o-Y to EGP11.3 million. Promotional and advertising expenses slipped 2% Y-o-Y to EGP3.6
million on lower promotional and advertising expenses, general expenses dropped 51% Y-o-Y to EGP3.6
million and data communication expense declined 21% Y-o-Y to EGP6.4 million.
On a Q-o-Q basis, the Investment Bank operating expenses increased 6%, as employee expenses increased
11% Q-o-Q. Meanwhile, other operating expenses declined 2% Q-o-Q. The net operating profit margin rose
to 11% in 2Q2012 versus 2% a quarter earlier.
For 1H2012, total operating expenses was flat Y-o-Y at EGP336 million. The employee expenses slipped 3%
Y-o-Y to EGP223 million, largely due to a decline in the fixed portion of the employee expenses which
declined 7% Y-o-Y on the back of the 10% Y-o-Y decline in the number of employees. The increase in other
operating expenses, up 6% Y-o-Y, was to a large extent attributed to higher consultancy and third party
fees which rose 80% Y-o-Y to EGP34.4 million in 1H2012.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 22
C. THE COMMERCIAL BANK
Table 27: Commercial Bank Key Financial Highlights and Ratios
USD (mn) 2Q12 1Q12 4Q11 3Q11 2Q11 Q-o-Q Y-o-Y 1H12 1H11 Y-o-Y
Balance Sheet:
Total Assets 7,493 7,353 7,188 7,049 6,897 1.9% 8.6%
7,493 6,897 8.6%
Loans 2,130 2,049 1,976 1,930 1,871 3.92% 13.8% 2,130 1,871 13.8%
Deposits 6,536 6,423 6,293 6,205 6,017 1.76% 8.6% 6,536 6,017 8.6%
Shareholders' Equity, of
which: 589 584 569 554 588 0.8% 0.2% 589 588 0.2%
Core Equity 511 508 489 475 510 0.6% 0.4% 511 510 0.4%
Subordinated Debt 77 76 81 80 78 1.7% -1.2% 77 78 -1.2%
P&L:
Net Interest Income 31.9 31.4 31.9 28.3 31.2 1.42% 2.1% 63.3 62.0 2.0%
Net Fee and Commission
Income 9.1 8.0 10.5 9.1 6.2 14.0% 47.5% 17.1 13.3 28.7%
Trading Income 3.8 4.1 4.4 1.7 2.2 -7.1% 76.3% 7.9 4.9 63.3%
Total Operating Income 45.3 44.5 47.5 39.3 40.0 1.8% 13.2% 89.8 81.8 9.8%
Net Provisions 0.9 (0.5) 1.6 2.6 1.2 N/M -27.6% 0.4 0.5 -21.3%
Net Operating Income 46.2 44.0 49.1 41.9 41.2 4.8% 12.0% 90.2 82.3 9.6%
Staff Cost 15.2 14.5 16.4 13.4 13.2 4.5% 15.2% 29.7 25.9 14.9%
General Expenses 10.1 7.5 13.6 7.6 8.0 34.6% 26.8% 17.6 15.7 12.4%
Total Operating Expenses 27.1 23.7 31.8 22.5 22.6 14.2% 19.9% 50.8 44.3 14.7%
Net Income 17.3 18.3 13.7 17.3 16.7 -5.7% 3.1% 35.6* 33.8 5.1%
Ratios:
Net Interest Margin 1.8% 1.8% 1.85% 1.8% 1.9% - (0.1) 1.8% 1.9% (0.1)
Cost-to-income** 56.1% 53.0% 58.2% 54.8% 53.5% 3.1 2.6 56.1% 53.5% 2.6
Loans-to-deposits 32.6% 31.9% 31.4% 31.1% 31.1% 0.7 1.5 32.6% 31.1% 1.5
NPLs-to-Gross Loans 3.8% 3.7% 3.9% 4.0% 4.1% - (0.4) 3.8% 4.1% (0.4)
Provision Cover 93.9% 97.3% 96.5% 95.8% 98.5% (3.4) (4.6) 93.9% 98.5% (4.6)
ROAE (pre- tax) 17.0% 17.2% 17.5% 18.0% 18.0% (0.2) (1.0) 17.0% 18.0% (1.0)
ROAA (pre-tax) 1.1% 1.1% 1.1% 1.2% 1.2% - (0.1) 1.1% 1.2% (0.1)
Core Tier 1 Capital Ratio 10.9% N/A 11.8% N/A 11.9% N/A (1.0) 10.9% 11.9% (1.0)
Total Capital Adequacy Ratio 13.1% N/A 14.1% N/A 15.7% N/A (1.0) 13.1% 15.7% (1.0)
*Of which USD22.1 million is for EFG Hermes pro-rata share related to its 65% shareholding in Credit Libanais
** Including extraordinary items
Source: Crédit Libanai
I. Overview
Despite the political turmoil in the region, Lebanon and its banks continue to be relatively unaffected. In
this environment, Credit Libanais, having no direct exposure to Syria, continued to grow organic
performance. Net Income for 1H2012 reached USD35.6 million, which if we exclude an extraordinary
USD1million tax charge would represent an 8% Y-o-Y increase in organic performance.
This was a result of growth in all organic revenue lines, especially in fees and commissions, while expenses,
excluding the extraordinary tax charge (see below), where in line with expectations.
An extraordinary tax charge of USD4 million (the result of a customary tax review every three years by the
authorities) is being amortized by Credit Libanais by USD500,000 a month from May to December. As
provided in the SPA for the purchase of 65% of Credit Libanais shares, EFG Holding has already been
compensated for 65% of this tax charge at the Holding company level.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 23
As a result of the 2011 profits, the distribution of a USD11 million dividend and the profitability of 1H2012,
core equity has now reached USD511 million, which together with the sub debt of USD77 million resulted
into a Core Tier 1 Ratio of 10.9% and a Total Capital Ratio of 13.1% i.e. each 3% over the required
regulatory minimum.
As anticipated, Credit Libanais’ green-field subsidiary Credit International in Senegal established in mid-
2010, started having a positive contribution to the group for the first time, based on 1H2012 figures.
2Q2012
Net Income for the quarter came at USD17.3 million, in essence flat compared to 1Q2012, excluding the
extraordinary tax charge of USD1 million, relating to the tax charge allocation for May and June.
The above resulted in an organic ROAE of 17.4% (excluding extraordinary tax expense) at the end of the
last quarter.
NII closed the quarter at USD31.9 million, an increase of 1.4% Q-o-Q and up 2.1% compared to the same
quarter last year. The forces at work regarding NII are: continued pressure on lower lending spreads offset
by a continuous effort by the Bank to lower its deposit cost, and more efficient placement of liquidity.
Fee and Commission Income came at USD9.1 million in 2Q2012, an increase of 14.0% Q-o-Q and up
47.5% compared to the same quarter last year, reflecting the success in growing the trade finance
business, (which increased 41.6% Y-o-Y).
Total Assets reached USD7.5 billion, an increase of 1.9% Q-o-Q and 8.6% from the same quarter last year,
mainly driven by loans to the corporate sector and SMEs as no net additional government bonds purchases
has taken place this quarter.
Loans grew to USD2.1 billion by the end of 2Q2012, an increase of 3.9% Q-o-Q and 13.8% from the same
quarter last year. Deposits grew to USD6.5 billion, an increase of 1.8% Q-o-Q and 8.6% from the same
quarter last year. As a result, the loans-to-deposits ratio increased further to 32.6%, closer to the sector
average of 35%.
Excluding the USD1 million extraordinary tax charge, the cost-to-income ratio closed the quarter at 54.9%.
ROAE, ROAA, and NIM did not demonstrate any material change during the quarter.
1H2012
Net Income for 1H2012 came at USD35.6 million, an increase of 8.0% Y-o-Y in organic Net Income
(excluding the extraordinary tax charge).
NII reached USD63.3 million in 1H2012, an increase of 2.0% Y-o-Y. Fee and Commission Income reached
USD17.1 million in 1H2012, an increase of 28.7% Y-o-Y, driven by strong growth of trade finance business
which increased by 29% compared to the same period last year.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 24
II. 2Q2012/1H2012 Results Highlights
Total Loans reached USD2.13 billion at the end of 2Q2012, an increase of 13.8% Y-o-Y and 3.9%
Q-o-Q.
Total Deposits reached USD6.54 billion at the end of 2Q2012, an increase of 8.6% Y-o-Y and
1.8% Q-o-Q.
NII rose to USD31.9 million in 2Q2012, up 2.1% compared to the same quarter last year and 1.4%
Q-o-Q. For 1H2012, NII reached USD63.3 million, an increase of 2.0% Y-o-Y.
Fee & Commission Income for the quarter was USD9.1 million, an increase of 47.5% compared
to the same quarter last year and an increase of 14.0% Q-o-Q. For 1H2012, Fee& Commission
Income reached 17.1 million, representing an increase of 28.7% Y-o-Y.
Trading Income was USD3.8 million in 2Q2012, an increase of 76.3% compared to the same
quarter last year and a decline of 7.1% Q-o-Q. For 1H2012, Trading Income came in at USD7.9
million, an increase of 63.3% Y-o-Y.
Net Provisions in 2Q2012 showed a positive balance of USD0.9 million, compared to a charge of
USD0.5 million last quarter. For 1H2012, net provisions came in at USD0.4 million compared to
USD0.5 million in 1H2011.
Net Operating Income was USD46.2 million for 2Q2012, an increase of 12.0% compared to the
same quarter last year and 4.8% Q-o-Q. For 1H2012, Net Operating Income reached USD90.2
million, a 9.6% Y-o-Y increase.
Total Operating Expenses for the quarter were USD27.1 million, higher 19.9% compared to the
same quarter last year and 14.2% Q-o-Q. For 1H2012, Total Operating Expenses reached USD50.8
million, a 14.7% Y-o-Y increase.
Net Income was USD17.3 million in 2Q2012, an increase of 3.1% from the same quarter last year
and a decline of 5.7% Q-o-Q. For 1H2012, Net Income reached USD35.6 million, representing a
5.1% Y-o-Y increase.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 25
III. Comments
Assets: Total Assets reached USD7.5 billion by the end of the quarter, an increase of 8.6% Y-o-Y and 1.9%
Q-o-Q, driven principally by continued corporate loan growth.
Loan content of total assets increased to 28.4% at the end of 2Q2012 from 27.9% at the end of 2Q2011.
Securities as percentage of total assets continued to decline, down from 44.0% in 2Q2011 to 42.9% this
quarter. Finally, Cash as percentage of total assets remained relatively flat compared to last year.
Corporate Banking as a percentage of total assets rose to 13.5% in 2Q2012 from 12.6% at the end of
1Q2012, mainly on the account of Treasury & Capital Markets, which represented 66.1% at the end of
1Q2012 and declined to 65.3% this quarter. Investment Banking and Retail Banking were virtually flat,
representing 1.1% and 20.0%, respectively.
Loans: Total Loans increased to USD2.13 billion by the end of the quarter, an increase of 13.8% Y-o-Y and
3.9% Q-o-Q, driven by the corporate loan book growth. On a Q-o-Q basis, corporate loans grew 5.6%, SME
loans 4.6% and retail loans 1.9%.
At the end of 2Q2012, corporate loans represented 43.8% of the total loan book versus 43.1% a quarter
earlier. Meanwhile, retail loans as a percentage of total loans declined to 41.2% versus 42.0%, and SME
loans virtually flat at 15.0%.
Changes in loan portfolio content in 2Q2012: Personal and consumer loans declined to 47.9% from 49.4%,
a quarter earlier. Loans to the trading sector, increased to 27.4% at the end of this quarter from 26.7% a
quarter earlier. Loans to the industrial sector declined to 13.3% from 14.3% a quarter earlier. Loans to the
construction sector increased to 7.7% from 5.9% All other sectors remained unchanged.
Loan quality: The NPL ratio was relatively flat at 3.8% in 2Q2012, as the Bank saw another quarter of
strong performance in bad debt collection resulting in a positive balance in net provisions for this quarter.
Of total loans, 81.0% is covered by mortgage, cash and bank guarantees, as collateral, on top of the
relevant reserves cover, where applicable.
At the end of 2Q2012, the loan book was split 38/62 between local and foreign currency, respectively.
Based on the Bank’s local currency deposits and relevant local currency reserve requirement with the
Central Bank of Lebanon, Credit Libanais has exhausted its lending limit in LBP. As a result loan growth is
driven mainly by loans in foreign currency.
The Blended yield on loans declined over the quarter to 7.35% from 7.41% at the end of last quarter and
from 7.62% a year earlier.
Deposits: Total deposits stood at USD6.5 billion at the end of 2Q2012, up 8.6% Y-o-Y and 1.8% Q-o-Q,
mildly reflecting management’s attempt to relax the earlier defensive deposit collection strategy.
Savings accounts continued to be the main contributor to total deposits, representing 61.4% of deposits at
the end of 2Q2012. Term deposits represented 27.9% compared to 26.9% a quarter earlier, while sight
deposits remained relatively flat representing 10.7%.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 26
By the end of 2Q2012, deposits were split 96%/4% between retail and corporate, respectively.
The split between foreign and local currency deposits came at 52%-48% respectively.
Blended cost of deposits came at 4.21% in 2Q2012 from 4.24% at the end of 1Q2012.
Loans/Deposits ratio: The loans/deposits ratio reached 32.6%, up from 31.9% a quarter earlier,
reflecting our continuous strategy to grow the loan book and, this quarter, loosening the conservative
deposit collection strategy.
NII: Net Interest Income for the quarter was USD31.9 million, up 2.1% compared to the same quarter last
year and 1.4% Q-o-Q, evidencing loan growth and lower than expected net interest expense. For 1H2012,
NII saw an increase of 2.0% Y-o-Y, reaching USD63.3 million.
Fee & Commission Income: Fee & Commission Income came at USD9.1 million for 2Q2012, an increase
of 47.5% compared to the same quarter last year and 14.0% Q-o-Q. This improvement reflects the Bank’s
strategy to grow trade finance (+42% Y-o-Y). Fee & Commission Income accounts for 20.1% of total
operating income in 2Q2012. For 1H2012, Fee and Commission Income reached USD17.1 million,
representing an increase of 28.7% Y-o-Y.
Trading Income: Trading Income was USD3.8 million for 2Q2012, up 76.3% compared to the same
quarter last year and a decline of 7.1% Q-o-Q. The mark-to-market gains in our securities trading portfolio
together with trading gains on investment securities, were the main drivers for the Y-o-Y increase. Also for
1H2012, Trading Income saw a substantial improvement (+63.3% Y-o-Y) to reach USD7.9 million.
Net Provisions: Net Provisions were positive for 2Q2012 coming in at USD0.9 million versus a charge of
USD0.5 million in 1Q2012. The positive balance this quarter illustrates the Bank’s successful collection of
bad debts. For 1H2012, despite net provisions showing a positive balance of USD0.4 million, it represented
a 21.3% decrease compared to 1H2011, as 2011 witnessed even higher bad debt collections.
Expenses: Total Operating Expenses for the quarter was USD27.1 million, up 19.9% compared to the
same quarter last year and 14.2% Q-o-Q, negatively affected by the USD1 million tax charge. Excluding the
tax charge, Total Operating Expenses increased 15.5% from the same quarter last year and 10.0% Q-o-Q.
For 1H2012, Total Operating Expenses reached USD50.8 million, a 14.7% Y-o-Y increase.
Net Income: Net Income for 2Q2012 was USD17.3 million, showing a 3.1% increase compared to the
same quarter last year, yet representing a 5.7% Q-o-Q decline. Excluding the tax charge, Net Income
would be broadly unchanged Q-o-Q. For 1H2012, Net Income reached USD35.6 million, representing a
5.1% Y-o-Y increase. If we exclude the one-off expense of tax adjustment in 2Q2012, Net Income Y-o-Y
growth would further improve to be 8.0%.
Cost/Income Ratio: Cost-to-Income came at 56.1% in 2Q2012 compared to 53.0% a quarter earlier.
Excluding the tax adjustment expense, cost-to-income by the end of 2Q2012 would be 54.9%.
Net Interest Margin: NIM remained relatively flat in at the end of the quarter, coming at 1.8%.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 27
IV. International Operations
SENEGAL
In 2010, Credit Libanais invested USD20 million in a full banking license in Senegal and opened one branch
in Dakar in August of the year. Total assets came in at USD50.1 million by the end of June 2012,
representing a YTD growth rate of 13.7%. Loans reached USD29.5 million, an increase of 35.3% from
December 2011; while deposits stood at USD28.3 million, 50.9% increase YTD; resulting in a
loans/deposits ratio of 104.1%. The subsidiary incurred a loss of USD1.6 million in 2010 (for the first four
months of operation) but managed to narrow its losses to USD0.5 million in 2011. For 1H2012, Senegal
subsidiary broke even and started generating a positive bottom line in July 2012.
IRAQ
We now have two branches of Credit Libanais in Iraq; one in Baghdad and one in Arbil at the cost of USD7
million per branch. Iraq started operations in January 2012 and will focus almost exclusively on cross-
border trade finance.
EFG HERMES INVERSTOR RELATIONS 2Q2012 Earnings Release - 15 August 2012 28
________________________________________________________________________________
In this earnings release EFG Hermes may make forward looking statements, including, for example, statements about
management’s expectations, strategic objectives, growth opportunities and business prospects. Such forward looking statements
by their nature may involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ
materially from those expressed or implied by these statements. Examples may include financial market volatility; actions and
initiatives taken by current and potential competitors; general economic conditions; and the effect of current, pending and future
legislation, regulations and regulatory actions. Furthermore, forward looking statements contained in this document that
reference past trends or activities should not be taken as a representation that such trends or activities will continue. EFG
Hermes does not undertake any obligation to update or revise any forward looking statements.
Accordingly, readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date on
which they are made.
This document is provided for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to
buy any securities or interests described within it in any jurisdiction. We strongly advise potential investors to seek financial
guidance when determining whether an investment is appropriate to their needs.
EFG Hermes Holding SAE has its address at Building No. B129, Phase 3, Smart Village – km 28 Cairo Alexandria Desert Road, 6
October and has an issued capital of EGP 2,391,473,750
جم 2,391,473,750: رأس المال المصدر السادس من أكتوبرالمرحلة الثالثة، ، ب921القرية الذكية مبنى المجموعة المالية هيرميس القابضة شركة مساهمة
________________________________________________________________________________
Stock Exchange & Symbol:
Cairo: HRHO.CA
London: HRHOq.L
Bloomberg: EFGH
Reuters pages: . EFGS .HRMS .EFGI .HFISMCAP .HFIDOM
________________________________________________________________________________
EFG Hermes (Holding Main Office)
Building No. B129, Phase 3, Smart Village – km 28 Cairo Alexandria Desert Road, 6 October Egypt 12577
Tel +20 2 353 56 499
Fax +20 2 353 70 942
efghermes.com