x Abu Dhabi, UAEWednesday 17 January 2018

EFG-Hermes gets a timely boost from sale

Bank triples profit after disposing of Lebanese stake

DUBAI // If it wasn't for a one-off gain, EFG-Hermes's first-quarter profits would not have been all that impressive. In fact, the company could well have incurred a net loss. One of the largest investment banks in the region, EFG-Hermes on Monday said its net profit for the quarter more than tripled to 483.6 million Egyptian pounds (Dh317m), from 140.1m pounds in the same period last year. However, the net earnings were boosted by a gain of 505m pounds on the sale of the bank's 29.16 per cent stake in Banque Audi of Lebanon.

Without the sale, EFG-Hermes could have reported a 21m pound loss, which is 38 per cent more than Shuaa Capital's forecast loss of 15m pounds for the first three months of this year. EFG sold its entire stake in the Lebanese lender for US$913m (Dh3.35 billion) in January and has realised the gains from the sale. The bank said it would seek new investment opportunities. Ghida Obeid, a banking analyst at Shuaa Capital, said there were signs of "marked improvement" at the operating level and there was less risk now compared with a difficult situation last year. But the outlook remains bearish for overall activity in regional equity markets this year.

"Hence, we only see minor operating improvement in the second part of 2010 for EFG-Hermes," she wrote in a note to investors on Monday. The silver lining for existing investors is the fact that fee and commission revenue, a key source of income for the bank, climbed 57 per cent to 267m pounds. The bank said it had observed increased market activity for investment banking deals as well as brokerage activity.

Like their international peers, regional investment banks have struggled to maintain profitability and have exited most of their boom-era financial investments in order to improve their balance sheets and raise liquidity. EFG shares are down 15.4 per cent since their 12-month peak last month. They gained 0.8 per cent to 31.25 pounds in trading in Cairo yesterday. skhan@thenational.ae