2q2012 earnings release - london stock exchange2012/08/15 · investor relations 2q2012 earnings...

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

[email protected]

Tel: +20 2 3535 6120

Hanzada Nessim

Head of Investor Relations

Strategy & Investor Relations

[email protected]

Tel: +20 2 3535 6502

Nada Al-Hamalawy

Associate Vice President

Strategy & Investor Relations

[email protected]

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 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%



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


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.


III. Group Operating Expenses

Table 6: Investment Bank/Commercial Bank Operating Expenses – 2Q2012

EGP (mn) Investment Bank Commercial Bank


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%


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%


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%




Employee Expenses 209 193 194 8% 8%



Other Operating Expenses 122 103 105 18% 15%

Other Operating Expenses/Operating Revenue 25% 24% 23%

Other Operating Expenses/Operating Expenses 37% 35% 35%


Table 8: Group Operating Expenses – 1H2012

EGP (mn) Investment Bank Commercial Bank Group EFG Hermes


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 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%



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.


B. THE INVESTMENT BANK

I. Investment Bank Revenue Table 9: Investment Bank Revenue




Operations 8 4% 41 18% 41 19% -81% -81% 49 14% 46 12% 7%

of which:



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


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.


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%


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)


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%



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%


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)


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


Executed by EFG-Hermes Market Share in DFM Market Share in ADX AED (bn)


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



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



EGP billions

OMR (mn)


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



EGP billions

KWD (mn)


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


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


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


Figure 22: Assets under Management by Geography

Source: EFG Hermes Asset Management

Mena 77.6%

Western 21.7%

Others 0.7%


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.


Capital Markets and Treasury Operations Revenue

Table 23: Capital Markets and Treasury Operations Revenue




Operations 8 4% 41 18% 41 19% -81% -81% 49 14% 46 12% 7%

of which:



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


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.


II. Investment Bank Operating Expenses

Table 24: Investment Bank Operating Expenses – 2Q2012

EGP (mn) Fees & Commissions

Capital Markets & Treasury Operations


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%


166% 32% 29%


68% 72% 68%

Other Operating Expenses 50 52 52 -4% -4% 6 5 6 15% 9%


Revenue 27% 42% 29%

77% 13% 13%


Expenses 33% 36% 34%

32% 28% 32%


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%




Employee Expenses 117 106 115 11% 1%



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%


Table 26: Investment Bank Operating Expenses – 1H2012

Fee & Commission

Income Capital Markets &

Treasury Operations Total Investment

Bank


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 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%



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.


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.


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.


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.


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%.


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%.


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.


________________________________________________________________________________

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

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