Efg-hold.gdr S Regulatory News (EFGD)

EFG HERMES REPORTS FIRST QUARTER 2011

CONSOLIDATED NET INCOME OF EGP36 MILLION; EARNING PER SHARE OF EGP0.09, ON TOTAL OPERATING REVENUE OF EGP410 MILLON

Cairo, June 15th, 2011 - EFG Hermes reported today consolidated net income of EGP36.0 million for the first quarter 2011, up 13% from EGP32.0 million in the fourth quarter of 2010. Consolidated total operating revenue reached EGP410.5 million, from EGP553.4 million a quarter earlier. Total assets stood at EGP49.1 billion at the end of first quarter 2011.

Key Highlights

·; EFG Hermes ended 1Q2011 with a strong balance sheet. During the quarter total assets grew 5% to EGP49.1 billion. Group shareholders' equity excluding minority interest stood at EGP8.4 billion at the end of 1Q2011, down 3% over the quarter.

·; The Group's revenue reached EGP410.5 million in 1Q2011, lower 62% Y-o-Y. However, if we exclude the one-off capital gain of EGP716.6 million realized from the sale of Bank Audi in 1Q2010, the Group's revenue would increase 17% Y-o-Y. In 1Q2011, revenue generated from the Commercial Bank represented 59% of the Group's revenue versus 41% for the Investment Bank.

·; Management's strong emphasis on cost cutting across all business operating expense items was reflected in the Investment Bank operating expenses, which fell 21% Y-o-Y and 41% Q-o-Q in 1Q2011. Consequently, this supported the Group's net operating profit margin, which rose to 31% from 25% a quarter earlier.

·; For the Investment Bank, revenue declined 84% Y-o-Y to EGP168.2 million, however excluding the one-off gain from the sale of Bank Audi's stake in 1Q2010, revenue would decline 52% Y-o-Y. This poor performance reflects the weak regional operating environment in light of recent political events and regional uncertainty in addition to the closing of EGX for 38 trading days.

·; The Investment Bank fee and commission revenue declined 39% Y-o-Y to EGP163.6 million in 1Q2011, reflecting lower revenue generated from Brokerage, Investment Bankingand to a lower degree Asset Management. Capital markets and treasury operations reported EGP4.7 million, supported by FX gains and net interest income.

·; Crédit Libanais reported net income of USD17.1 million in 1Q2011, higher 5% Y-o-Y. At the end of 1Q2011, total assets rose 4% Q-o-Q to USD6.8 billion. Deposits grew 4% Q-o-Q to USD5.9 billion, loans grew 6% Q-o-Q to USD1.7 billion, and as a result the loans-to-deposits ratio reached 29.7%.

·; The Group reported net income after tax and minority interest of EGP36.0 million. The Commercial Bank reported EGP61.9 million and the Investment Bank fee and commission business reported EGP1.4 million while capital markets and treasury operations reported a net loss of EGP27.2 million. Worth mentioning that the Investment Bank's cash flow was greater than net income because of the amortization of the Employee Share Scheme, which constitutes a large component of employees expenses.

·; Our brokerage remained #1 on the Egyptian Stock Exchange and on the Dubai Financial Market and maintained its leading position in a number of other regional markets.

·; Public assets under management declined 20% over the quarter to USD3.7 billion. The weak market performance represented 6% of the decline in AuMs while redemptions represented the remaining 14%. Money market funds represented 96% of total redemptions principally as a result of rising liquidity needs in the market in general due to recent events and the shift towards buying dollars to reduce foreign exchange risk, in addition to the appeal of buying treasuries directly given the sharp spike in yields. The team completed a new money market portfolio in 1Q2011. Moreover, the team has three mandates in the pipeline. Worth to mention that AuMs stand at USD3.6 billion as of end of May 2011.

·; Investment Banking managed to finish the quarter with one large advisory, the sale of Orascom Telecom's 50% stake in Orascom Telecom Tunisia to Qatar Telecom in a deal that was worth USD1.2 billion. In 2Q2011, the team finalized the USD7 billion merger of Wind Telecom with VimpelCom to create the world's sixth largest telecom operator.

·; Private Equity AuMs reached USD1,059 million at the end of 1Q2011, after the first closing of InfraMed Fund at EUR385 million in 4Q2010 which included commitment of EUR100 million to Egypt. All of EFG Hermes Private Equity new initiatives will be conducted through a wholly owned subsidiary. The Syria Private Equity Fund was expected to close in 1Q2011; however closing was postponed in light of current events.

A. GROUP PERFORMANCE

I. Group Balance Sheet

Table 1: Key Balance Sheet Indicators 

Please refer to attached PDF

During the quarter, the Group continued to grow its balance sheet. Total assets stood at EGP49.1 billion at the end of 1Q2011, higher 5% Q-o-Q. Total assets growth was driven by the Commercial Bank growing its balance sheets to reach EGP40.3 billion at the end of the quarter. Meanwhile, the Investment Bank's balance sheet contracted 1% to EGP10.3 billion, partially attributed to a decline in the value of the some of the quoted available-for-sale investments, namely SODIC.

Trading investments declined 19% over the quarter to EGP876.5 million, mainly due to a decline in mutual funds certificates held by the Investment Bank. Meanwhile, available-for-sale investments declined 44% to EGP1.6 billion. This is largely driven by Credit Libanais's reclassification of available-for-sale investment to held-to-maturity investments in compliance with the Central Bank of Lebanon regulations.

Total shareholders' equity excluding minority interest declined 3% Q-o-Q to EGP8.4 billion at the end of 1Q2011 versus EGP8.7 billion at the end of 4Q2010. However, the Commercial Bank total shareholders' equity excluding minority interest rose 5% to EGP2.9 billion. For the Investment Bank, shareholders' equity excluding minority interest declined 4% Q-o-Q to EGP8.2 billion, impacted in part by the mark-to-market of the quoted available-for-sale investments.

II. Performance Indicators and Financial Highlights

Table 2: Key Operational Indicators

Please refer to attached PDF

Table 3: The Investment and the Commercial Bank Financial Performance

Please refer to attached PDF

Table 4: Group Financial Performance

Please refer to attached PDF

III. Group Revenues

Table 5: Group Revenue

Please refer to attached PDF

The Group's revenue for 1Q2011 came in at EGP410.5 million, lower 62% Y-o-Y. However, if we exclude the one-off capital gain of EGP716.6 million from the sale of Bank Audi booked in 1Q2010, the Group's revenue would increase 17% Y-o-Y.

The Group revenue was supported by Commercial Bank revenue, which reached EGP242.2 million in 1Q2011 and represented 59% of total revenue, meanwhile revenue generated from the Investment Bank came at EGP168.2 million, with the fee and commission business and the capital market and treasury operations revenues weakening, dropping 39% Y-o-Y and 99% Y-o-Y, respectively.

Fee and commission revenue declined 39% Y-o-Y to EGP163.6 million, mainly attributed to the decline in Brokerage commissions and Investment Banking fees. Capital markets and treasury operations revenue was limited to EGP4.7 million as losses on trading investments weighed down on revenue. That said, reported capital losses amounting to EGP10.1 million during the quarter (realized losses on stock of EGP1.3 million, unrealized losses on stocks of EGP5.5 and unrealized losses on fixed income of EGP4.3 million) were off-set by net interest earned and FX gains of EGP10.2 million and of EGP4.6 million, respectively.

IV. Group Operating Expenses

With the Investment Bank management applying cost cutting measures across all operating expense items, the Group's total operating expenses fell 32% Q-o-Q to EGP284.8 million in 1Q2011, versus EGP416.6 million in 4Q2010.

Investment Bank operating expenses, which represents the bulk of the Group operating expenses, contracted 41% Q-o-Q to EGP162.7 million in 1Q2011, on the back of lower employees' expenses and other operating expenses with the former falling 46% and the latter declining 26% over the quarter. Moreover, the Commercial Bank operating expenses also declined 13% Q-o-Q to EGP122.0 million, mainly due to a decline in non-employees related expenses.

The Group's employee expenses to total operating expenses came at 66.5%, versus 69.6% in 4Q2010, as the employee expenses, which represent the bulk of total expenses, fell to EGP189.4 million compared to EGP289.8 a quarter earlier, reflecting the decline in number of employees, the reduction of packages for certain employees, and the cost cutting measures in other items.

The 1Q2011 was marked by improved in operating margins; the Group's net operating profit margin reached 30.6% up from 24.7% a quarter earlier. The Group's higher margin reflects better cost containment on the Investment Bank side. While the Commercial Bank net operating profit margin declined to 49.6% from 53.6% in 4Q2010, the Investment Bank margins improved to 3.3% in 1Q2011, up from - 9.6% in 4Q2010.

Table 6: Group Operating Expenses

Please refer to attached PDF

B. THE INVESTMENT BANK

I. Investment Bank Revenue

Table 7: Investment Bank Revenue

Please refer to attached PDF

In 1Q2011, the Investment Bank revenue declined 84% Y-o-Y to EGP168.2 million. Excluding the capital gain of EGP716.6 million from the sale of Bank Audi in 1Q2010, the decline in revenue would be lower at 52% Y-o-Y.

Recent regional events and weaker operating environment in those markets impacted the Investment Bank activities and performance, driving both the fee & commission business and the capital markets and treasury operation revenues lower.

Fee and commission revenue declined 39% Y-o-Y to EGP163.6 million, largely due to lower Brokerage executions and Investment Banking fees. Capital markets and treasury operations reported revenues of EGP4.7 million on the back of net interest income and FX-gains, and despite losses on trading investments, both realized and unrealized.

Worth noting that, net interest income decline to EGP14.7 million in 1Q2011 from EGP51.6 million in 1Q2010, reflecting the disappearance of interest earned on sales proceeds of Bank Audi in 1Q2010.

Fee and Commission Revenue

Fee and commission revenue came at EGP163.6 million in 1Q2011, down from EGP266.6 million a year earlier, with lower revenue generated mainly from Brokerage and Investment Banking.

Brokerage revenue, which currently represents 41.7% of total fee and commission revenue, declined 43% Y-o-Y to EGP68.2 million, largely due to a decline in revenue generated from Egypt Brokerage as the EGX remained closed for almost two months (38 trading days) in 1Q2011. Moreover, Investment Banking revenue weakened 72% Y-o-Y to EGP20.0 million on the back of lower advisory fees as local events influenced our ability to complete some transactions in 1Q, meanwhile Asset Management revenue decline 8% Y-o-Y to EGP34.0 million as incentive fees disappeared. On the other hand, Private Equity revenue improved 8% Y-o-Y to EGP41.4 million, mainly driven by stronger management fees.

Figure 8: Brokerage Av. Daily Commission Figure 9: Asset Management AuMs

Please refer to attached PDF Please refer to attached PDF

  Table 10: Fee and Commission Revenue

Please refer to attached PDF

Fee and Commission Revenue - Brokerage

In 1Q2011, regional financial markets took a hit after recent events swept the whole Arab region. Amid such uncertainty investors opted to stay on the sidelines as most markets retreated and trading volumes dried up, especially with the closure of the Egyptian Stock Exchange. The MSCI EM Index was relatively flat, up 1.7% over the quarter, while S&P Pan Arab Comp ML Index lost 5.3% over the same period. Over the quarter, aggregate liquidity in regional markets (Egypt and the GCC) rose by a weighted average of 15%, however excluding Saudi Arabia regional turnover would decline 14%.

The decline in EFG Hermes Brokerage executions in 1Q2011 was restricted to 12% Q-o-Q; executions came at USD7.4 billion (EGP43.7 billion) versus USD8.4 billion (EGP48.6 billion) in 4Q2010. That said, commissions contracted 20% Q-o-Q to EGP68 million. The larger decline in commission compared to executions, is attributed to a decline in margin interest income and reflects the firm's executions in lower commission markets.

In line with Brokerage strategy, the team remains committed to expanding the retail business and penetrating new segments. However, due to the regional events the retail clients' activity subsided, with the majority of the retail investors preferring to stay on the sidelines. The retail business which includes online, call center, branches and VIP individuals represents 29% of total brokerage revenue by the end of 1Q2011.

Figure 11: Brokerage Revenue by Desk

Please refer to attached PDF

Egypt

Figure 12: Egypt Executions and Market Share

Please refer to attached PDF

The turbulence caused by events in Egypt and resulted in the closure of the EGX had a significant impact on both the market performance and liquidity. Over the quarter, the Hermes Financial Index (HFI) declined 20% and volumes dropped 47% compared to 4Q2010.

EFG Hermes cemented its position as the #1 broker on the Egyptian market both in terms of executions and revenues. The total of our two brokerage companies' executions was 211% higher than the following broker, thus reflecting the dominant position of EFG Hermes in the market.

With stronger western activity after the re-open of the EGX, EFG Hermes executions decline was limited to 23% in 1Q2011 (versus 47% drop in market liquidity), thus pushing Egypt Brokerage market share to its highest level in more than a year, up to 43% versus 26% in 4Q2010. However, the decline in volumes was reflected in revenues. Revenue reported by Egypt brokerage fell 48% Y-o-Y to EGP42 million. Moreover, Egypt's Brokerage contribution to total brokerage fell to 62% versus 68% a year earlier.

UAE

Figure 13: UAE Executions and Market Share

Please refer to attached PDF

In the UAE Markets, 1Q2011 was marked by weaker performance and a decline in liquidity. Over the quarter, the Dubai Financial Market General Index (DFMGI) lost 5% and turnover declined 9%. Meanwhile, Abu Dhabi Index (ADI) lost 4% and saw a sharper decline in liquidity of 19% compared to a quarter earlier.

EFG Hermes market share in the Dubai market rose slightly to 16% in 1Q2011 from 15% a quarter earlier, as executions improved slightly, up 2%. Conversely, EFG Hermes executions on ADX declined 54% Q-o-Q, larger than the 20% decline in the market turnover thus pulling our market share in the Abu Dhabi market to 14%. The contraction in our market share is largely attributed to the shrinkage of the Western institutions activity on the ADX. EFG Hermes maintained its #1 ranking on DFM and retreated to third place on ADX.

Total revenue booked by the brokerage operations in the UAE (ADX and DFM) fell 24% to EGP9 million in 1Q2011 versus EGP11 million in 1Q2010. Nevertheless, UAE contribution to total brokerage revenue improved slightly to 12.7% up from 9.5% a year earlier.

Saudi Arabia

Figure 14: KSA Executions and Market Share

Please refer to attached PDF

Performance was broadly muted on the Saudi Stock Market (Tadawul), with the Tadawul All Share Index (TASI) inching down 0.9%. However, turnover rose sharply, up 53% over the quarter, while the increase in EFG Hermes executions came lower at 31%, thus resulting in a decline in the firm's market share from 1.6% in 4Q2010 to 1.4% in 1Q2011.

Revenue generated during the quarter rose to EGP5 million, up 74% from EGP3 million in 1Q2010. Saudi operations contribution to total brokerage revenue rose to 7.3% from 2.4% a year earlier.

Oman

Figure 15: Oman Executions and Market Share

Please refer to attached PDF

During 1Q2011, liquidity on the Muscat Securities Market rose 33%, while the Muscat Securities Index lost 9%. EFG Hermes execution rose sharply, up 45%, thus driving our market share to 22% versus 18% in 4Q2010. In 1Q2011, Oman brokerage maintained its third ranking on MSM.

Despite the relatively small revenue contribution from Oman brokerage, revenue generated rose by 22% to EGP3.3 million from EGP2.7 million a year earlier. Consequently, Oman's contribution to total brokerage revenue increased to 4.8% from 2.2% in 1Q2010.

Kuwait

Figure 16: Kuwait Executions and Market Share

Please refer to attached PDF

Activity on the Kuwait Stock Exchange was subdued, with the KSE Index losing 9% and market turnover declining 24% in 1Q2011. Given the decline in trading opportunities for our HNWI/ VIP and local institutions, EFG Hermes share of total executions fell 26%, thus driving our market share slightly down to 28% in 1Q2011, compared to 30% in 4Q2010. However, despite tough market conditions, EFG Hermes IFA Brokerage maintained its second ranking on KSE.

Revenue generated from Kuwait brokerage slipped to EGP7 million, down 64% Y-o-Y, from EGP21 million in 1Q2010. Accordingly, Kuwait brokerage revenue contribution to total brokerage revenue declined to 10.9% versus 17.4% a year earlier.

Jordan

Revenue booked from the Jordanian operation (EFG Hermes Jordan) amounted to EGP1.5 million in 1Q2011 versus EGP1.0 million in 4Q2010. Meanwhile, market share almost doubled to reach 5.0% in 1Q2011 versus 2.8% in 4Q2010. EFG Hermes Jordan ranking improved to #8 in 1Q2011 after being ranked 42nd in FY2010.

Research

Figure 17: Research Coverage Universe

Please refer to attached PDF

The Research department maintained its coverage, with no additions/drops of coverage made during the quarter. At the end of 1Q2011 the Research department had 124 companies under coverage, spread across the region (Egypt 31, UAE 23, KSA 30, Kuwait 7, Oman 18, Qatar 8, Lebanon 4, and Morocco 3); currently EFG Hermes covers 55% of the regions market capitalization.

Moreover, 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.

The team is aiming to extend coverage on the Levant markets in general as presence in these markets has been established.

Fee and Commission Revenue - Asset Management

Figure 18: Development of Listed Assets under Management

Please refer to attached PDF

EFG Hermes Asset Management AuMs ended 1Q2011 at USD3.7 billion, down 20% from USD4.7 billion at the end of 4Q2010. The decline in AuMs is attributed in part to weak market performance which represented 6% of the decline in AuMs while redemptions represented the remaining 14%. Egypt fixed income funds/portfolios redemptions represented 96% of total redemptions given the increasing liquidity needs in the market as well as the inclination to reduce foreign exchange risk through dollarization. That, in addition to the shift towards buying treasuries after the sharp spike in yields. Worth mentioning that AuMs stood at USD3.6 billion as at end of May 2011.

Asset management continued to pursue its strategy of targeting long term clients and increasing its institutional base while maintaining its diversified client base. During the quarter, the team succeeded in expanding its clients base towards long term clients, with Foundation/Pension/Insurance funds' allocation to total AuMs reaching 33.8% at the end of 1Q from 26.7% a quarter earlier together with an increase in both Institutional and SWF clients as compared to last quarter.

In terms of funds' origination, the team maintained its diversified fund sourcing options. However, the investors' mix change was minimal in 1Q2011, MENA-based clients increased slightly to 68.3% from 67.3% a quarter earlier on the account of Western investors who retreated to 28.2% versus 29.2% in 4Q2010.

Figure 19: Assets under Management by Geography

Please refer to attached PDF

For the discretionary portfolios, there were no portfolio inflows. Assets in managed equity and fixed income portfolios (both Egypt and regional) stood at USD1.0 billion at the end of 1Q2011 down 12% from 4Q2010. The client base is split between insurance companies, banks, regional HNWI/Family Office and SWF. The team completed the addition of a new money market portfolio; which is an addition to a series of 11 existing portfolios and with injections expected in 2Q2011. The team will continue to pursue potential mandates with Saudi family groups and institutions, as well as other areas in the GCC including Kuwait, Oman, UAE & Qatar. The team will also continue to target fixed income prospects in the coming quarter.

EFG Hermes Asset Management has three mandates in the pipeline; a capital protected fund and a money market fund where both are sponsored by the same entity in addition to an Islamic money market fund. During 4Q2010, the team received the Central Bank of Egypt's (CBE) approval for the capital protected fund and the money market fund, however, pending EFSA approval. Appetite for the products is strong, and we expect the funds to launch towards year end.

Fee and Commission Revenue - Private Equity

Private Equity AuMs reached USD1,059 million at the end of 1Q2011, after the first closing of InfraMed Fund of EUR385 million in 4Q2010, which included EUR100 million in commitments to Egypt pocket. All of EFG Hermes Private Equity initiatives will be conducted through a newly established wholly owned subsidiary.

The Syria Private Equity Fund was expected to close in 1Q2011, however was postponed due to current events.

Fee and Commission Revenue - Investment Banking

After a very strong showing in FY2010, the Investment Banking Department (IBD) entered FY2011 with one of its strongest transaction pipelines in recent years. Featuring a multitude of mandated transactions, our pipeline included a number of M&A, Equity and debt transactions that were highly executable and gave us a strong indication for a year that could potentially surpass 2010 in terms of revenues. However, the recent events that have taken place across a number of markets in the Middle East have cast a lot of doubt on our ability to execute those transactions especially in some of our key markets like Egypt and potential markets like Syria.

However, we still managed to finish the quarter with one very large advisory, which was the sale of Orascom Telecom's 50% stake in Orascom Telecom Tunisia to Qatar Telecom in a deal that was worth USD1.2 billion, one of the largest regional M&A transactions to take place this year. The beginning of the second quarter saw us continuing to close very large transactions in the telecom industry with the finalization of the USD7 billion combination of Wind Telecom with VimpelCom to create the world's sixth largest telecom operator. Our largest M&A transaction to date, this deal has further cemented our position as the region's premier advisory firm and established a track record for the firm on the global scale.

We have shifted a lot more of our focus and attention towards generating business from regional markets. Although our efforts are yet to bear results, we have been able to sign two regional mandates and are in final stages of negotiations for a third. This diversified focus should help fuel our business going forward until other traditionally revenue generating markets for us start picking up again.

Capital Markets and Treasury Operations Revenue

Table 20: Capital Markets and Treasury Operations Revenue

Please refer to attached PDF

Revenue generated from capital markets and treasury operations came at EGP4.7 million in 1Q2011 versus EGP83.0 million in 1Q2010 (if we exclude Bank Audi capital gain of EGP716.6 million in 1Q2010). The drop in revenue generated from capital markets and treasury operations is attributed to the decline in net interest earned and the capital losses, both realized and unrealized.

Net interest income declined to EGP14.7 million in 1Q2011 from EGP51.6 million in 1Q2010 reflecting the disappearance of interest earned on sales proceeds of Bank Audi in 1Q2010. Net interest income was driven by EGP4.5 million of FX gains and net interest earned amounting to EGP10.2 million. Meanwhile Capital losses weighted down on revenue, losses on investments, both realized and unrealized, reached EGP10.1 million in 1Q2011 versus last year's gain of EGP39.4 million.

II. Investment Bank Operating Expenses

Table 21: Investment Bank Operating Expenses

Please refer to attached PDF

In line with the stringent cost saving strategy outlined last quarter, the management managed to reduce operating expenses in 1Q by 21% Y-o-Y and 41% Q-o-Q.

On a Y-o-Y basis, employees' expenses declined 17% to EGP113.6 million despite the increase in employees' headcount from 1,025 at the end of 1Q2010 to 1,055 at the end of 1Q2011 on the back of the reduction of packages for certain employees and the cost cutting measures in other items, this also contributed to the employees' expenses Q-o-Q decline, dropping 46%, together with the employees' headcount reduction from 1,080 at the end of 4Q2010 to 1,055 at the end of 1Q2011.

Other operating expenses which includes occupancy expenses, office expenses, communication expenses (data and telecommunication), travel and marketing expenses, promotion and advertising expenses and consultant and service fees declined 28% Y-o-Y and 26% Q-o-Q as a result of the aforementioned cost saving strategy which was executed across all operating expenses.

Travel and marketing expenses were well contained during 1Q2011, declining 40% Q-o-Q to EGP5.4 million. Meanwhile, promotional and advertising expenses rose slightly, rising 4% Q-o-Q to EGP4.1 million on the back of higher promotional and advertising expenses.

Occupancy expenses were down 5% Q-o-Q to EGP12.3 million, office expenses were down 25% Q-o-Q to EGP4.2 million, telephone/fax/mobile expense declined 34% Q-o-Q to EGP2.1 million and data communication were down by 14% Q-o-Q to EGP6.9 million.

C. THE COMMERCIAL BANK

Table 22: Commercial Bank Key Financial Highlights and Ratios

Please refer to attached PDF

Crédit Libanais reported net income of USD17.1 million in 1Q2011, higher 5% Y-o-Y and driven by higher net interest income in 1Q2011. Sequentially, net income declined 14% Q-o-Q, as 4Q2010 included extraordinary items. Total assets rose 4% Q-o-Q to USD6.8 billion, compared to USD6.5 billion at the end of FY2010.

Figure 23: Total Assets Figure 24: Total Equity

Please refer to attached PDF Please refer to attached PDF

Deposits grew 4% Q-o-Q to USD5.9 billion while loans grew 6% Q-o-Q to USD1.7 billion, as a result the loans-to-deposits ratio reached 29.7%. This comes in line with the strategy of increasing the bank's leverage.

The Bank succeeded in accelerating the growth of its corporate loan book 31% Q-o-Q. As a result, corporate loans now represent 39% of total loan portfolio versus 32% at the end of 4Q2010. Retail loans represent 46% compared to 52% at the end of last year.

Total shareholder's equity increased 20% Q-o-Q to USD521 million, due to the reclassification of subordinated bonds of USD77 million issued last year into equity, according to the new Central bank regulations. If we exclude the subordinated bonds, shareholder's equity would show an increase by 2% to reach USD444 million.

The bank continues to grow its market share both in terms of deposits and loans. The Bank's deposits market share rose 4% to 5.26% and the loans market share grew 3% to 4.84%.

Crédit Libanais is well capitalized, with a Core Tier 1 capital ratio of 12.40% and a total Capital Adequacy Ratio (CAR) of 16.95%. These calculations are made twice a year and represent December 31st, 2010 figures.

Figure 25: Loans/ Deposits Market Share Figure 26: Loans-to-Deposits Ratio

Please refer to attached PDF Please refer to attached PDF

Moreover, other incremental adjustments relating to the bank's AFS and HTM securities portfolio include securities with total unrealized capital gains of USD161.9 million, as at 31st March, 2010. As of 1st January, 2011 and in compliance to IFRS-9 and relevant instructions of the Central Bank of Lebanon, the bank has classified all securities in the HTM portfolio. As such, these securities will be held to maturity and the above capital gain will be realized throughout the life of the securities in the form of incremental net interest income. In addition, the bank owns and uses for its operations real estate, the market value of which is higher than the recorded book value. It is foreseen that upon transfer of most central administration functions to the presently under construction, new main administration building in Beirut, these properties will be available for sale and a capital gain of approximate USD30 million will be realized.

Figure 27: Loan Book Breakdown by Type

Please refer to attached PDF

Total banking income fell 24% Q-o-Q to USD41.8 million, reflecting the lack of extraordinary items booked in 4Q2010. Net interest income declined 7% to USD30.8 million over the quarter. Non-interest income dropped 50% to USD10.9 million as a result of the sale of government securities that created one of the two extraordinary income results in 2010. Consequently, net interest income accounted for 74% of the total banking income, while non-interest income accounted for the remaining 26%, this compares to 60% and 40% respectively in 4Q2010.

Figure 28: ROAE Figure 29: ROAA

 Please refer to attached PDF Please refer to attached PDF

In 1Q2011 return on average equity after tax declined to 16.3% from 21.1% for FY2010, return on average assets declined to 1.0% in 1Q2011 compared to 1.3% in FY2010, and cost-to-income increased to 52% in 1Q2011 from 46% in 4Q2010; all of which reflect the disappearance of the extraordinary items booked in FY2010.

Going forward, we will continue to increase the loan-to-deposit ratio steadily towards our end-of-year target of 34% and continue our initiative for reducing cost. This will allow us to reduce the cost-to-income ratio further closer to our target of 50% or even below.

http://www.rns-pdf.londonstockexchange.com/rns/4686I_-2011-6-15.pdf 

http://www.rns-pdf.londonstockexchange.com/rns/4686I_1-2011-6-15.pdf 

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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 1,939,320,000.

المجموعة المالية هيرميس القابضة شركة مساهمة القرية الذكية مبنى 129ب، المرحلة الثالثة، السادس من أكتوبررأس المال المصدر: 1,939,320,000 جم

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Stock Exchange & Symbol:

Cairo: HRHO.CALondon: HRHOq.LBloomberg: EFGHReuters pages: . EFGS .HRMS .EFGI .HFISMCAP .HFIDOM

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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