EFG Hermes is set to add new, complimentary business lines to its non-bank financial institution (NBFI) sector segment to create a complete platform in this field.
The move comes as part of the company’s prudent NBFI strategy that puts a primary focus on asset quality, alongside continued growth and investments in the coming period.
The company’s management intends to take 2020 as a breather in terms of geographical expansion, and to evaluate the next move. It has, particularly over the past three to four years, seen continuous geographical expansion and product diversification, including the addition of fixed income, debt capital markets and structured products.
EFG Hermes has also been an early adopter of the International Financial Reporting Standard 16 (IFRS 16), in the first quarter (1Q) of 2020, and which hit that quarter’s income statement due to declining markets. No further significant one-off impacts from IFRS 16 is expected.
Brokerage volumes have perked up in the UAE, Saudi Arabia, and Egypt, and stable in frontier markets. EFG Hermes’ management does not expect to see losses similar to those in 1Q 2020 coming from the fixed income desk.
The company has shifted focus to quality rather than growth this year for leasing and microfinance. It will continue to take regular provisions, but not as big as those in 1Q 2020, due to a large part of it being precautionary rather than against actual deterioration of asset quality.
Leasing started the year with strong growth in lease bookings until the escalation of the novel coronavirus (COVID-19) pandemic in March. The global health crisis has caused a short-term slow down for several months, with business now starting to pick up healthily.
A total of 40% of EFG Hermes clients have not utilised the six-month moratorium granted by the regulator.
The company’s management believes that the moratorium may help alleviate the pressure on clients and help them regain their feet following the six-month grace period. On the back of this, long term deterioration in asset quality is highly unlikely. However, EFG Hermes will continue to take precautionary provisions over the next period.
