CAIRO: EFG-Hermes, Egypt’s biggest investment bank, said first-quarter net profit slumped 93 percent due to political turmoil and an exceptional capital gain having boosted figures in the same period last year.
This year’s uprisings in Arab countries hit the region’s investment banks by depressing stock markets and suppressing appetite for fresh capital. Analysts say the outlook remains tough.
EFG-Hermes said on Wednesday its investment banking operations were also hurt by the closure of the Egyptian stock exchange for 38 trading days in the quarter, due to unrest.
It said net income dropped to LE 36 million ($6.1 million) from LE 483.6 million, while operating revenue fell 62 percent to LE 410 million.
The bank said quarterly revenue would have risen 17 percent were it not for an extraordinary LE 717 million capital gain in the same period last year from the sale of a stake in Lebanese lender Bank Audi that EFG-Hermes sold for $913 million.
EFG-Hermes’s stock was trading 0.6 percent lower at 1135 GMT on Wednesday, having added more than 3 percent in each of the previous two trading sessions.
Ryan Ayache, an analyst with Deutsche Bank, said the bank’s results beat his forecast for a loss of LE 56 million.
"The brokerage (business) did much better than I thought," he told Reuters. "Plus the cost-cutting was very aggressive."
EFG-Hermes said revenue at its brokerage unit declined 43 percent year on year to LE 68.2 million.
First-quarter operating expenses for investment banking operations fell 21 percent to LE 122 million, though for the whole group they rose 39 percent to LE 285 million.
The Cairo-based investment bank, which also has offices in the UAE, Kuwait, Saudi Arabia, Qatar, Oman and Lebanon, said it had shifted the focus of its investment banking activity toward generating revenue from regional markets.
"Although our efforts are yet to bear results, we have been able to sign two regional mandates and are in the final stages of negotiations for a third," it said.
"This diversified focus should help fuel our business until our traditional revenue-generating markets start picking up." –Additional reporting by Ehab Farouk
