Efg-hold.gdr S Regulatory News (EFGD)

EFG HERMES REPORTS FIRST QUARTER 2012

GROUP NET INCOME OF EGP35 MILLION; ON TOTAL OPERATING REVENUE OF EGP433 MILLON

Cairo, June 5th, 2012 - EFG Hermes reported today Group net income of EGP35 million for the 1Q2012, compared to a net loss of EGP14 million in 4Q2011. The Group operating revenue reached EGP433 million in 1Q2012, from EGP417 million a quarter earlier. Total assets stood at EGP53.6 billion at the end of 1Q2012.

Key Highlights

·; Group revenue rose 4% Q-o-Q to reached EGP433 million in 1Q2012, while the Group operating expenses declined 17% Q-o-Q to EGP296 million, resulting in a net operating profit of EGP137 million, an increase of 128% Q-o-Q, and a net profit after tax and minority of EGP35 million compared to a loss of EGP14 million in 4Q2011.

·; Investment Bank revenue rose 31% Q-o-Q to EGP166 million in 1Q2012. Fees and commissions increased 20% Q-o-Q to EGP125 million on the back of higher revenue generated from Brokerage, Asset Management and Investment Banking. Revenue generated from capital markets and treasury operations rose 80% Q-o-Q to EGP41 million, largely attributed to gains on investments made during the quarter.

·; Investment Bank operating expenses fell 9% Q-o-Q to EGP163 million in 1Q2012, as the management maintained its cost cutting measures taken last year.

·; Credit Libanais net income improved 34% Q-o-Q to reach USD18.3 million, and resulting in a pre-tax RoAE of 17.2%.

·; Credit Libanais total assets rose 2.3% Q-o-Q to USD7.4 billion, driven principally by corporate loan growth. Loans grew 3.7% Q-o-Q to USD2.05 billion and deposits rose 2.1% Q-o-Q to USD6.4 billion.

·; Brokerage remained #1 on the Egyptian Stock Exchange and maintained a leading position in a number of other regional markets. Over the quarter, Brokerage executions rose 55% to reach USD5.9 billion in line with the average regional volumes which rose 43% Q-o-Q (excluding KSA).

·; Asset Management AuMs stood at USD3.3 billion at the end of 1Q2012, up 1% Q-o-Q. Aggregate funds saw a net outflow of 6% Q-o-Q, mainly driven by the local money market funds (MMFs), which represented 72% of the total outflows. However, improving market performance managed to offset the funds outflow, adding 7% to the funds value.

·; EFG-Hermes Investment Banking closed one transaction during the quarter. The demerger of Orascom Telecom S.A.E. was the first of its kind in Egypt and marks a new line of business for our Investment Banking unit.

·; Private Equity AuMs stood at USD976 million, with no exits taking place during the quarter.

A. GROUP PERFORMANCE

I. Performance Indicators and Financial Highlights

Table 1: Key Operating Indicators

Please refer to attached PDF

Source: EFG Hermes and Crédit Libanais data

Table 2: Investment Bank/Commercial Bank Financial Performance

Please refer to attached PDF

Source: EFG Hermes management accounts and Crédit Libanais data

Table 3: Group Financial Performance

Please refer to attached PDF

Source: EFG Hermes management accounts

II. Group Revenues

Table 4: Group Revenue

Please refer to attached PDF

Source: EFG Hermes management accounts

Group revenue improved 6% Y-o-Y to reach EGP433 million supported by higher revenue generated from the Commercial Bank. The Commercial Bank revenue represented 62% of the Group revenue and the Investment Bank represented the remaining, 38%.

The Commercial Bank revenue rose 10% Y-o-Y to EGP267 million, reflecting higher revenue generated from operating income, including net interest income and non-interest income. The Investment Bank revenue declined 1% Y-o-Y to EGP166 million in 1Q2012, supported by revenue generated from capital markets and treasury operations. Fee and commission revenue declined 24% to EGP125 million, as Brokerage, Asset Management, Investment Banking and Private Equity, all reported lower Y-o-Y revenue.

Group revenue rose 4% Q-o-Q, supported by revenue generated from the Investment Bank which improved 31% Q-o-Q, on higher fees and commissions (+20%) and capital markets and treasury operations (+80%). This reflects the improvement in markets conditions and volumes on a Q-o-Q basis. The Commercial Bank revenue declined 8% Q-o-Q as operating revenue came lower.

III. Group Operating Expenses

Table 5: Group Operating Expenses

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Table 6: Group Operating Expenses

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Group operating expenses rose slightly, up 4% Y-o-Y to EGP296 million, on the back of higher costs on the Commercial Bank side. The Investment Bank maintained the cost cutting measures taken last year, with operating expenses being flat Y-o-Y at EGP163 million. On the other hand, the Commercial Bank operating expenses rose 9% to EGP133 million, largely driven by higher employee costs. Group operating expenses were split 55/45 between the Investment and the Commercial Bank.

Despite the decline in Investment Bank employee expenses, which fell 7% Y-o-Y, the Group employee expenses rose 2% to EGP193 million, driven by a 15% increase in employee expenses on the Commercial Bank side. Meanwhile, the Group other operating expenses rose 8% to EGP103 million as the Investment Bank reported higher costs.

Group operating expenses fell 17% Q-o-Q as the Investment Bank expenses declined 9% Q-o-Q and the Commercial Bank expenses dropped 25%, on lower employees and other operating expenses.

B. THE INVESTMENT BANK

I. Investment Bank Revenue

Table 7: Investment Bank Revenue

Please refer to attached PDF

Source: EFG Hermes Management Accounts

The Investment Bank total revenue slipped 1% Y-o-Y to EGP166 million. Fee and commission revenue declined 24% Y-o-Y to EGP125 million on the back of lower revenue generated from Brokerage, Asset Management, Investment Banking and Private Equity. Capital markets & treasury operations revenue surged 782% Y-o-Y to EGP41 million, on higher gains on investments.

On a quarterly basis, regional markets' volumes and performance improved considerably compared to 4Q2011 thus supporting revenue generated from the Investment Bank operation which rose 31% over the quarter. The fee and commission revenue increase of 20% Q-o-Q was driven by higher Brokerage, Asset Management and Investment Banking revenues. The capital markets and treasury operation revenue increased 80%, supported by gains on investments.

Fee and Commission Revenue

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

Please refer to attached PDF Please refer to attached PDF

Source: EFG Hermes Source: EFG Hermes 

Table 10: Fee and Commission Revenue

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Fee and commission revenue declined 24% Y-o-Y to EGP125 million, as revenue generated from all business lines declined.

Brokerage revenue declined 9% Y-o-Y to EGP62 million on the back of lower regional volumes (excluding KSA). Asset Management revenue declined 28% Y-o-Y to EGP24 million due to lower management fees. Investment Banking revenue declined 40% Y-o-Y to EGP12 million on lower advisory fees. Private Equity revenue declined 35% Y-o-Y to EGP27 million, as incentive fees disappeared.

With regional markets picking up over the first quarter, fees and commissions rose 20% Q-o-Q. Brokerage revenue rose 43% Q-o-Q on higher volumes, Asset Management revenue improved 43% Q-o-Q driven by higher management fees. Investment Banking revenue rose 15% Q-o-Q as advisory fees improved. Private Equity revenue was the only revenue line to decline, falling 20% Q-o-Q, principally on lower management fees.

Fee and Commission Revenue - Brokerage

Regional markets kicked off the year with strong performance. The MSCI EM Index added 13.6% in 1Q2012 and S&P Pan Arab Comp ML Index rose 14.0% over the same period. Improving volumes accompanied the regional indices upward trend, the average regional volumes rose 43% Q-o-Q (excluding KSA). EFG Hermes Brokerage executions rose 55% to reach USD5.9 billion compared to USD3.8 billion in the previous quarter. Consequently, Brokerage revenue rose 43% Q-o-Q to EGP62 million in 1Q2012.

Revenue generated from the retail business (which includes online, call center, branches, VIP individuals and HNWI), increased significantly to account for 71% of total brokerage revenue versus 59% in 4Q2011. The increase in retail activity came on the account of Western institutional clients, with Western institutional clients accounting for 19% of total Brokerage revenue at the end of 1Q2012 versus 32% in 4Q2011. The change in revenue mix reflects retail clients increasing trading activity to cover for their previous losses and Western institutional investors opting to stay on the sidelines.

Figure 11: Brokerage Revenue by Desk

Please refer to attached PDF

Source: EFG Hermes

Egypt

Figure 12: Egypt Executions and Market Share

Please refer to attached PDF

Source: EGX, EFG Hermes

The Egyptian equity rallied in 1Q2012 compared to the sluggish performance seen a quarter earlier. With a relatively stable political situation post the first January 25th revolution anniversary and the sitting of the first parliament on January 23rd combined with depressed stock valuations drove the Hermes Financial Index (HFI) up 30% Q-o-Q and volumes higher 91% Q-o-Q.

The limited foreign institutional activity in 1Q2012 together with two special transactions in 4Q2011 resulted in a 16% Q-o-Q decline in our brokerage executions, thus pushing our market share to 26.8% in 1Q2012. Nevertheless, we maintained our number 1 ranking on the EGX in 1Q2012, comfortably outperforming the following broker by 76%.

Despite the decline in executions, Egypt Brokerage revenue rose 21% Q-o-Q to EGP40 million for the quarter. Indeed, 4Q2011 included special transactions which carried very low or zero commissions. Egypt brokerage contribution to the Group's brokerage reached 65% in 1Q2012 down from 77% a quarter earlier.

UAE

Figure 13: UAE Executions and Market Share

Please refer to attached PDF

Source: DFM, ADX, EFG Hermes

Volumes and performance improved considerably on both the UAE markets in 1Q2012, with volumes rising 356% Q-o-Q on the Dubai Financial Market (DFM) and 77% Q-o-Q on the Abu Dhabi Exchange (ADX). In terms of performance, the Dubai Financial Market General Index (DFMGI) gained 22% Q-o-Q and Abu Dhabi Index (ADI) rose 6% Q-o-Q.

On DFM, the increase in our Brokerage executions lagged the improvement in market volumes. Market activity was triggered by speculative trades on selected stock and high net worth families and individual retail clients dominating the market, while foreign and local institutional clients' participation remained low. All this combined resulted in a market share of 10.4% and a fifth place ranking in 1Q2012.

We managed to maintain our 4th position on the ADX market and increase our market share to 14.1% in 1Q2012, as trading on the ADX was dominated by high net worth and individual retail clients speculating on some selected stocks which EFG-Hermes saw flows on.

Worth noting that EFG Hermes has been granted a margin trading license by the Emirates Securities & Commodities Authority (ESCA) to carry out margin trading in both the UAE markets.

In 1Q2012, revenue from UAE brokerage operations reached EGP7 million; a 266% increase Q-o-Q. This brings UAE's contribution to the Group's total brokerage revenue to 10.7% up from 4.1% in 4Q2011.

Saudi Arabia

Figure 14: KSA Executions and Market Share

Please refer to attached PDF

Source: Tadawul, EFG Hermes

First quarter 2012 was another strong quarter for the Saudi Stock Market (Tadawul), with turnover surging 112% Q-o-Q and Tadawul All Share Index (TASI) rising 22% 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 of 0.3%.

The increase in trading volumes was reflected in EFG Hermes executions and revenue. EFG Hermes KSA brokerage revenue reached EGP3 million in 1Q2012, up 112% Q-o-Q and represented 4.1% of the Group's total brokerage revenue.

Oman

Figure 15: Oman Executions and Market Share

Please refer to attached PDF

Source: Muscat Securities Market, EFG Hermes

Volumes on the Muscat Securities Market (MSM) increased 44% Q-o-Q in 1Q2012; while the Muscat Securities Index (MSM30) was broadly flat, slipping 0.1%.

EFG Hermes executions increased with the rebound in market volumes in 1Q2012 and as a result of our high net worth and individual investors increased activity; this led to an improvement in our market share to reach 16.3%. The firm also maintained its 4th place in terms of ranking in 1Q2012, compared to 4Q2011.

Revenue generated from Oman brokerage stood at EGP1.3 million, up 40% Q-o-Q and bringing its contribution to total brokerage revenue to 2.1%.

Kuwait

Figure 16: Kuwait Executions and Market Share

Please refer to attached PDF

Source: Kuwait Securities Exchange, EFG Hermes

The 1Q2012 was a strong quarter for the Kuwait Stock Exchange (KSE), with volumes increasing 93% Q-o-Q and the KSE Index gaining 6% over the quarter.

The firm's market share increased in 1َQ2012 to 27.4%, this increase came on the back of increased market trading volumes leading to the firm's client base increasing their trading volumes as trading opportunities emerged. EFG Hermes Kuwait maintained its 2nd ranking in 1Q2012, compared to a quarter earlier.

Higher market volumes combined with our improving market share, drove revenue generated from Kuwait up 100% Q-o-Q to EGP10 million. Kuwait Brokerage contribution to the Group's total brokerage revenue was 16.3% this quarter.

Jordan

It was a quiet quarter for the Amman Stock Exchange (ASE), with the index ending 1Q2011 almost flat, down 0.2% Q-o-Q. Volumes however improved, increasing 13% during the quarter.

EFG Hermes market share declined to 5.6%, mainly due to very low trading volumes by foreign investors in 1Q2012, 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 increased 3% Q-o-Q to EGP0.9 million, and represented 1.5% of total brokerage revenue in 1Q2012.

Research

Figure 17: Research Coverage Universe

Please refer to attached PDF

Source: EFG Hermes

The Research department coverage reached 134 companies at the end of 1Q2012, distributed across the region (Egypt 31, UAE 25, KSA 39, Kuwait 8, Oman 13, Qatar 9, Lebanon 4, Morocco 3 and Jordan 2). Currently EFG Hermes covers 57% 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.

Fee and Commission Revenue - Asset Management

Figure 18: Development of Listed Assets under Management

 Please refer to attached PDF

Source: EFG Hermes

EFG Hermes assets under management stood at USD3.3 billion at the end of 1Q2012, up 1% Q-o-Q. Total funds, both fixed income and equity, saw a net outflow of 6% Q-o-Q, mainly driven by the local money market funds (MMFs), which represented 72% of the total outflows seen in the quarter. On the other hand, the Q-o-Q improving markets performance managed to offset the funds outflow, with aggregate market performance adding 7% to the funds value.

The strategy of targeting long term clients and increasing institutional base while maintaining diversified client base remains one of the Asset Management team main focuses. During the quarter, institutional client content increased to 21.9% from 20.8% and the SWF clients' contribution to the total AuMs, increased to 23.2% from 22.2% a quarter earlier. On the other hand, Foundation/Pension/Insurance clients represented 38.7% of total AuMs versus 41.5% a quarter earlier.

In terms of funds' origination, fund sourcing remained largely skewed towards MENA-based clients. Investor mix changed slightly in 1Q2012: MENA-based clients increased to 75.9% from 74.7% a quarter earlier, while USA clients, with the declined to 2.6% from 3.5% a quarter earlier.

Figure 19: Assets under Management by Geography

 Please refer to attached PDF

Source: EFG Hermes Asset Management

Fee and Commission Revenue - Private Equity

Private Equity assets under management stood at USD976 million at the end of 1Q2012 with no exits made during the quarter. During the first quarter the team entered into negotiations for a potential investment that is expected to close during 2Q2012. The team continues to work actively on building a solid pipeline diversified over different sectors and geographies.

Fee and Commission Revenue - Investment Banking

The Investment Banking Department had a relatively quiet quarter closing only one transaction during the first quarter of 2012. The demerger of Orascom Telecom S.A.E. was the first of its kind in Egypt and set a precedent for other demergers that have followed since opening in the process a new restructuring route for many companies in Egypt and a new line of business for our investment banking unit.

Our pitching efforts have also intensified quite significantly during the past period with our concentration shifting to countries outside Egypt. Markets like Saudi Arabia, Qatar and the Levant have been special areas of focus for us although competition is tough. Our ability to secure those engagements will play an important role in ensuring a continuing flow of business to our department and a diversification of its revenues stream especially as our key home market of Egypt continues to see a major slow down.

Capital Markets and Treasury Operations Revenue

Table 20: Capital Markets and Treasury Operations Revenue

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Capital markets & treasury operations revenue rose 782% Y-o-Y to EGP41 million in 1Q2012, supported by higher returns on investments.

Returns on Investments rose to EGP29 million in 1Q2012, as the quarter included EGP20 million of unrealized gains on stocks, mainly attributed to investments made into new equity funds. This, compared to losses on stocks and fixed income instruments reported a year earlier amounting to EGP10 million.

Net interest income declined 13% Y-o-Y to EGP13 million on lower fx-gains. Net interest earned was unchanged Y-o-Y at EGP10 million in 1Q2012. Meanwhile, fx-gains came lower at EGP2.3 million versus EGP4.6 million in 1Q2011.

On a Q-o-Q basis, revenue generated from capital markets and treasury operations rose 80% on the back of higher returns on investments as market conditions improved and new investments made.

II. Investment Bank Operating Expenses

Table 21: Investment Bank Operating Expenses

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Table 22: Investment Bank Operating Expenses

Please refer to attached PDF

Source: EFG Hermes Management Accounts

The Investment Bank strict cost cutting initiatives remained in place in 1Q2012, with operating expenses flat Y-o-Y at EGP163 million. Employee expenses fell 7% Y-o-Y to EGP106 million, largely due to a contraction in the fixed portion of employee expenses which fell 13% Y-o-Y on the back of 11% Y-o-Y headcount reduction. Other operating expenses rose 17% Y-o-Y to EGP57 million in 1Q2012, mainly on the back of third party fees which rose to EGP12.1 million versus EGP4.0 million a year earlier.

Travel expenses fell 21% Y-o-Y to EGP4.3 million in 1Q2012. Promotional and advertising expenses declined 23% Y-o-Y to EGP3.2 million on lower promotional and advertising expenses, occupancy expenses slipped 7% Y-o-Y to EGP11.5 million, general expenses dropped 39% to EGP3.4 million and data communication expense declined 6% Y-o-Y to EGP6.4 million.

On the other hand, consultancy and service fees, which include third party fees, rose 112% to EGP17.7 million, office expenses rose 69% Y-o-Y to EGP7.1 million and telephone/fax/mobile expense increased 32% Y-o-Y to EGP2.8 million.

On a Q-o-Q, the Investment Bank operating expenses fell 9% as employee expenses and other expenses declined. Employee expenses fell 11%, mainly attributed to a decline in bonuses. Salaries declined 3% in line with the 3% Q-o-Q headcount reduction. Other operating expenses decline 7%, as most expense items declined Q-o-Q.

C. THE COMMERCIAL BANK

Table 23: Commercial Bank Key Financial Highlights and Ratios

Please refer to attached PDF

Source: Crédit Libanais

Table 24: Selective results attributable to the majority shareholder*

Please refer to attached PDF

Source: Crédit Libanais

I. Overview

Credit Libanais continued to demonstrate sustained organic performance and profitability in 1Q2012, especially on a Y-o-Y basis.

Net income for the quarter came at USD18.3 million (a record quarter for the last 12 months), an increase of 7% Y-o-Y and 33.5% Q-o-Q. Net of 4Q2011 extraordinary charges, Q-o-Q result was flat. The above resulted in a pre-tax RoAE of 17.2%.

NII closed the quarter at USD31.4 million, an increase of 1.8% Y-o-Y and flat Q-o-Q due to competitive spread compression. The Y-o-Y increase indicates the successful offsetting of the high loss of interest income from the heavy government securities maturity schedule in 2011. In the last month of the quarter, management started to ease their defensive deposit strategy and lowered deposit pricing which, in turn, reduced the rate of growth in deposits and net interest expense. As a result we expect higher NII growth rates in the coming months, if conditions continue to permit.

Net fee and commission income reached USD8 million, a solid 12.3% increase Y-o-Y and a decline of 23.7% Q-o-Q (as deposit account fee collection in the last quarter of each year is at its peak). The major contributor to the increase in F&C's is the successful implementation of our trade finance growth initiative which has resulted in the relevant commissions growing by 25% Y-o-Y.

Trading income was virtually flat Q-o-Q and 51.1% higher Y-o-Y. Net provisions continued to be insignificant and general expenses have remained virtually flat for a whole year, excluding the 4Q2011 extraordinary costs.

Total assets reached USD7.4 billion, a 8.7% increase Y-o-Y and 2.3% Q-o-Q, the main contributor being the growth in loans, which reached USD2.05 billion, a 17.2% increase Y-o-Y and a 3.7% increase Q-o-Q. Deposits reached USD6.4 million, an increase of 9.1% Y-o-Y and 2.1% Q-o-Q.

As a result of the solid growth in volumes and organic revenue, strict cost containment and the absence of extraordinary costs, the cost-to-income ratio declined to 52.96%. The 'Bank only' cost to income ratio stood at 51.9%.

The loans-to-deposits ratio resumed its increasing trend reaching 31.9%, a 2.2 percentage point increase Y-o-Y.

ROAE, ROAA and NIM did not show any material change. NIM posted a marginal decline on a Q-o-Q basis due to the continuous narrowing of the loans and deposits spread due to intense competition. However NIM started to recover within the quarter, posting an increase from February to March.

Despite the continued political and economic turmoil in the region, the banking market in Lebanon remains relatively unaffected. This will probably allow us to ease further our defensive deposit collection strategy and hence boost further our profitability in the coming quarters.

The Board of Credit Libanais decided in its April meeting to distribute dividends of USD11.0 million for FY2011. This and its impact on retained earnings and resulting Equity will be reflected in the 2Q2012 numbers.

II. 1Q2012 Results Highlights

·; Total Loans reached USD2.05 billion at the end of 1Q2012, an increase of 17.2% Y-o-Y and 3.7% Q-o-Q.

·; Total Depositsreached USD6.42 billion at the end of 1Q2012, an increase of 9.1% Y-o-Y and 2.1% Q-o-Q.

·; NII rose to USD31.4 million up 1.8% Y-o-Y in 1Q2012 and declined 1.5% Q-o-Q.

·; Fee & Commission Income for the quarter was USD8.0 million, an increase of 12.3% Y-o-Y and a decline of 23.7% Q-o-Q.

·; Trading Incomereached USD4.1 million, an increase of 51.1% Y-o-Y and a decline of 6.3% Q-o-Q.

·; Net Provisions in 1Q2012 were USD0.5 million versus USD0.7 million a year earlier and a positive charge of USD1.6 million in 4Q2011.

·; Net Operating Income came at USD44.0 million for 1Q2012, an increase of 7.2% Y-o-Y and a decline of 10.3% Q-o-Q.

·; Total Operating Expenses for the quarter were USD23.7 million, higher 9.3% Y-o-Y, yet lower 25.6% Q-o-Q.

·; Net Income reached USD18.3 million, an increase of 7% Y-o-Y and 33.5% Q-o-Q.

III. Comments

Assets: Total Assets reached USD7.35 billion, an increase of 8.7% Y-o-Y and 2.3% Q-o-Q, driven principally by corporate loan growth.

The Securities and Cash contents of total assets declined from 2011 to the end of 1Q2012; with the former declining from 44.2% to 44.0% and the latter from 25.2% to 24.9%. These declines came in favor of loans, which increased as a percentage of total assets from 27.5% to 27.9% at the end of 1Q2012.

Corporate Banking as a percentage of total assets rose to 12.6% in 1Q2012 from 11.7% at the end of 2011, mainly on the account of Treasury & Capital Markets, which represented 66.1% at the end of 1Q2012 from 67.0%, a quarter earlier. Investment Banking and Retail Banking were virtually flat, representing 1.2% and 20.1%, respectively.

Loans: Total Loans increased to USD2.05 billion, an increase of 17.2% Y-o-Y and 3.7% Q-o-Q, driven by the corporate loan book growth. On a Q-o-Q basis, corporate loans grew 6.4%, SME loans 0.3% and retail loans 2.2%.

At the end of 1Q2012, corporate loans represented 43.1% of the total loan book versus 42.0% a quarter earlier. Meanwhile, both retail and SME loans as a percentage of total loans declined, with the former declining to 42.0% versus 42.6% and the latter declining to 14.9% versus 15.4%.

The relatively major shift in loan portfolio concentration came from the personal and consumer loans which represented 49.4% at the end of 1Q2012 versus 51.3%, a quarter earlier. This came in favor of Industry loans, which represented 14.3% in 1Q2012 versus 12.7% at the end of the year. Trade loans represented 26.7% from 27.1% a quarter earlier. Construction loans represented 5.9% up from 5.4%, while agriculture and other loans were broadly stable, representing each 1.9%.

NPLs continued their downward trend, declining to 3.7% in 1Q2012 from 3.9% at the end of the 2011, reflecting the strong performance in bad debt collection and the high quality of CL's portfolio. Of total loans, 82.9% is covered by mortgage, cash and bank guarantees, as collateral, on top of the relevant reserves cover, where applicable.

The total loan book is split 39/61 between local and foreign currency, respectively.

Blended yield on loans declined over the quarter to 7.41% from 7.46% at the end of last year and from 7.68% a year earlier.

Deposits: Total deposits stood at USD6.4 billion at the end of 1Q2012, up 2.1% Q-o-Q and 9.1% Y-o-Y, thus reflecting the management attempt to relax the defensive deposit collection strategy.

Savings accounts continued to grow in 1Q2012, representing 62.2% of total deposits compared to 61.8% at the end of FY2011. Term deposits retracted, representing 26.9% compared to 27.7% a quarter earlier, while sight deposits represented 10.8% compared to 10.5% a quarter earlier. 

Deposits are split 95%/5% between retail and corporate, respectively.

The split between foreign and local currencies in deposits came at 52%-48% respectively.

Blended cost of deposits came at 4.24% in 1Q2012 from 4.28% at the end of FY2011 and 4.12% a year earlier.

Loans/Deposits ratio: The loans/deposits ratio reached 31.9%, up from 31.4% a quarter earlier, reflecting our continuous strategy to grow the loan book and, this quarter, the loosening of the conservative deposit collection strategy.

 NII: Net interest income reached USD31.4 million, down 1.5% Q-o-Q and higher 1.8% Y-o-Y in 1Q2012, suggesting that the strong loan growth and the efficient allocation of excess cash has now permanently offset the large loss of interest income from matured high coupon securities during 2011.

Fee & Commission Income: Fee & Commission Income came at USD8.0 million, a decline of 23.7% Q-o-Q and an increase of 12.3% Y-o-Y. The Y-o-Y improvement reflects higher trade finance (+25% Y-o-Y) and higher account charges. Fee & commission income accounts for 18% of total operating income in 1Q2012.

Trading Income: Trading income reached USD4.1 million, an increase of 51.1% Y-o-Y and a decline of 6.3% 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.

Net Provisions: The Bank booked net provisions of USD0.5 million versus USD0.7 million a year earlier and a positive charge of USD1.6 million in 4Q2011. The relatively low provisions illustrate the Bank's successful collection of bad debts.

Expenses: Total Operating Expenses for the quarter was USD23.7 million, up 9.3% Y-o-Y and lower 25.6% Q-o-Q, due to the absence of the 4Q2011 extraordinary costs and strict control of non-payroll (other operating) expenses, which declined sharply Q-o-Q.

Net Income: Net income increased 7% Y-o-Y and 33.5% Q-o-Q to USD18.3 million in 1Q2012. Excluding the extraordinary costs in 4Q2011, net income would be broadly unchanged Q-o-Q.

Cost/Income Ratio: With growth seen across all revenue lines, strong cost containment and with the absence of extraordinary costs, cost to income came at 52.96% in 1Q2012 versus 58.17% a quarter earlier.

Net Interest Margin: NIM reached 1.80% in 1Q2012 versus 1.85% a quarter earlier, as deposits and loans spreads continued to narrow due to increased competition.

_______________________________________________________________________________

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

المجموعة المالية هيرميس القابضة شركة مساهمة القرية الذكية مبنى 129ب، المرحلة الثالثة، السادس من أكتوبررأس المال المصدر: 2,391,473,750 جم

_______________________________________________________________________________

Stock Exchange & Symbol:

Cairo: HRHO.CALondon: HRHOq.LBloomberg: EFGHReuters 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