​EFG Hermes, the leading financial services corporation in the Middle East and North Africa (MENA), reported today its financial results for FY2016, delivering an almost eight-fold increase in net profits to EGP 1.6 billion on revenues of EGP 4 billion, up 279% Y-o-Y. 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 realize an EGP 2.7 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% Y-o-Y to EGP 1.9 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% in FY2016, well below the firm’s 50% target, once again illustrating management’s commitment to maintain cost discipline. Fee and commission income grew 50% Y-o-Y, reaching EGP 1.2 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 cognizant 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 EGP 2.1 billion, up 568% Y-o-Y in FY2016, 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 2Q2016. In the fourth quarter, EFG Hermes divested an additional 1.0% of the Bank’s shares, leaving the Firm with a 15.1% 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. Key Operational Highlights of 4Q/FY2016 • The Securities Brokerage division ranked first in four markets in 4Q2016 including Egypt (39.6% market share), Nasdaq Dubai (54.4%), Abu Dhabi (27.0%), and Kuwait  (25.7%) – in addition to ranking second in Jordan (21.4%), third in Oman (27.4%) and fourth in Dubai (14.0%). Brokerage recorded total executions of USD 9.0 billion in 4Q2016, up from USD 6.7 billion in 3Q2016, representing an increase of 11% Y-o-Y and 34% Q-o-Q as liquidity on all regional markets improved significantly during the final quarter of the year. Along with our Research Division, Brokerage hosted the 6th annual London MENA and Frontier Conference, the largest MENA-focused investor event in the United Kingdom, which broadened its customary focus to include listed companies from frontier markets for the first time. • Investment Banking successfully concluded more than 10 equity, M&A and debt capital markets transactions in FY2016. In 4Q2016, EFG Hermes acted as the lead arranger, underwriter and buy-side advisor to Advanced Energy Systems (ADES) in its acquisition and financing of three operational rigs from Hercules Offshore in the Kingdom of Saudi Arabia for a total value of USD 65 million through a debt syndication of USD 55 million. The division also served as sole sell-side financial advisor and transaction broker to Litat Group in its sale of a majority stake in Solb Misr. The USD 1.4 billion M&A transaction is the largest in Egypt in recent years and one of the largest in the Middle East in 2016. The division was also financial advisor to Hassan Allam Holding on its agreement with the International Finance Corporation for an equity injection of USD 20 million as the company continues its journey toward a potential IPO. EFG Hermes’ Investment Banking department has continued to develop a robust regional pipeline of both M&A and equity deals expected to be executed throughout 2017. • EFG Hermes Asset Management’s assets under management (AUM) stood at USD 1.5 billion at the end of FY2016. Beginning this quarter, the division is reporting Egypt mandates separately from the Regional mandates to eliminate the impact of the Egyptian currency devaluation during 4Q2016, as c.37% of the total asset base is denominated in Egyptian pounds. EFG Hermes’ Egypt-based AUM grew 18% Q-o-Q to reach EGP 10.5 billion at the end of 4Q2016, underpinned by the outperformance of the equity market. During 4Q2016, market appreciation added 22% to AUM, while the redemptions withdrew 4% of the AUM base. Regional AUM inched up 1.2% Q-o-Q to USD 955 million at the end of 4Q2016, supported by the outperformance of equity markets. Market improvements added 5% to the AUM base against redemptions equivalent to 4% of the AUM. • Private Equity assets under management at the end of FY2016 stood at USD 1.0 billion, up 62% year-on-year. The Vortex infrastructure platform had AUM of EUR 730 million and a managed capacity of 457 MW after the completion of the acquisition of 49% of EDPR’s Pan European Portfolio via its vehicle “Vortex II” and building on the acquisition of a 49% stake in EDPR France via its vehicle “Vortex I” (the latter having been completed in December 2014). Both vehicles are jointly owned by EFG Hermes Holding and a GCC SWF, with economic ownership at 5% and 95%, respectively. In early 2017, the Vortex team signed a share purchase agreement, joining Tanega Nasional Berhad to acquire a 365MW solar PV farm in the UK for an enterprise value of GBP 470 million. Financial close is expected to take place during 2Q2017. The UK portfolio will grow the Vortex platform’s AUM to USD 1.4 billion and give it 822 MW of managed capacity. • The Research department’s coverage universe reached 154 companies across the region at the end of FY2016. The division ended the year with its highest-ever ranking on the Thomson Reuters Extel research survey, ranking with a second-place finish among research houses in MENA. Currently, the EFG Hermes Research division covers 63% of the regional market capitalization. Moreover, the research department covers nine economies from a macro level and nine countries in terms of regular strategy notes, in addition to regular publications. • EFG Hermes Leasing stood as the fourth largest market player with a 9% market share at the close of the full year. The company worked in the fourth quarter to roll-out a new vendor finance program targeting small and medium-sized enterprises. The company also entered into a partnership with leading industry player Karm Solar to provide financing for the purchase of solar pumps and solar panels while also arranging three club deals valued at EGP 530 million in total. • Tanmeyah Micro Enterprise Services reported solid growth in active borrowers (+5% Q-o-Q), application processed (+9% Q-o-Q) and loans issued (+11% Q-o-Q) on the back of higher sales backed by secure funding and the completion of the integration process with EFG Hermes Holding. Activity was down on a year-on-year basis on the back of the closing of the old portfolio and slower sales in the first four months of the year as funding was delayed during 1Q2016. Eight new branches opened during 4Q2016. EFG Hermes’ 4Q2016 financial results and management’s commentary on them are now available fordownload here.