EFG Hermes, a leading financial services corporation, reported earnings of EGP41 million ($2.56 million) on revenues of EGP294 million during third quarter (Q3) of 2016, up a solid 28 per cent year-on-year.

 Earnings from continued and discontinued operations reported EGP151 million in 3Q16, up 25 per cent year-on-year, reflecting the adjustment of impairment charges booked in 1Q16 associated with the sale of Crédit Libanais.

In addition to revenues of EGP145million from the Group’s core investment bank platform, this quarter’s revenue mix includes an EGP70 million contribution from the company’s greenfield leasing business and from microfinance player Tanmeyah, consolidated in the second quarter of this year.

EFG Hermes’ growth came despite unfavourable market conditions during 3Q16 driven by the downtime associated with summer breaks and a month of September that was cut short by long holidays in most of the firm’s markets.

“Our stated strategy to build Egypt’s premier non-bank financial institution (NBFI) is bearing fruit as contributions from both EFG Hermes Leasing and Tanmeyah underpin growth to our top line,” said EFG Hermes Group chief executive officer Karim Awad. “Meanwhile, our traditional investment bank activities continue to post solid results with our brokerage operations witnessing healthy growth levels over the previous year, maintaining our position as the Arab world’s largest securities brokerage operation.”

For the third quarter of 2016, additional costs associated with the new businesses, Leasing and Tanmeyah, coupled with a prevailing inflationary environment and the devaluation of the Egyptian pound in the first quarter increased the firm’s operating expenses 37 per cent year-on-year to EGP219 million. Nevertheless, careful attention to cost discipline kept employee expenses — which constitute the bulk of operating expenses —at 47 per cent as a percent of revenue in 3Q16. As a result, net operating profit for the period stood at EGP76 million, up 7 per cent over the comparable period last year.

“The final months of 2016 will see us make important headway on our previously stated strategic goal of expanding our product base, with two major product launches scheduled before year’s end that will enhance our revenue and improve profitability metrics,” said Awad.

“In the days ahead, EFG Hermes will announce a strategic alliance with a global player which will both push new revenue lines and serve to expand our access to new markets. Our strategy for geographical diversification will also gain further traction as our acquisition of Pakistan’s IFSL finalizes and as we seek licensing in another frontier market. Similarly, we are pushing forward with opening our office in New York to better serve our institutional clients in the United States.

“EFG Hermes meanwhile will continue to enhance its positioning in existing markets, pushing new products, adopting a prudent merchant banking model, and maintaining strong cost controls as we create value for all our stakeholders,” Awad concluded.

The company also continues to divest its remaining stake in Crédit Libanais following the sale of its 44.3 per cent holding in the bank and the subsequent deconsolidation in 2Q16. During the third quarter, EFG Hermes offloaded an additional 3.3 per cent of the bank’s shares, thus leaving the firm with a 16.1 per cent stake of Crédit Libanais shares at the end of the period. – TradeArabia News Service