Efg-hold.gdr S Regulatory News (EFGD)

 Cairo, March 30, 2011 - EFG Hermes reported consolidated net income of EGP700.4 million for the year ended 31st December 2010, compared with EGP551.8 million in FY2009. Consolidated total operatingrevenue reached EGP2,463.3 million, from EGP1,430.6 million a year earlier. Total assets stood at EGP46.7 billion at the end of FY2010.

Fourth quarter consolidated total operating revenue rose to EGP553.4 million versus EGP378.5 million Y-o-Y. This filters into a consolidated net income of EGP32.0 million versus EGP84.6 million in 4Q2009.

Key Highlights

·; EFG Hermes Group ended FY2010 with a solid balance sheet. Total assets reached EGP46.7 billion and shareholders' equity stood at EGP9.9 billion, versus EGP11.0 billion and EGP8.9 billion, respectively, in FY2009. The FY2010 figures include the consolidation of the Lebanese commercial bank, Crédit Libanais.

·; Group operating revenue rose 72% Y-o-Y to EGP2,463 million in FY2010, with Commercial Bank contribution accounting to 23% versus 77% for the Investment Bank. With operating expenses of EGP1,133 million, the net operating profit reached EGP1,330 million for FY2010, 90% higher Y-o-Y. Consequently, the net operating profit margin rose to 54%, versus 49% in FY2009.

·; For the Investment Bank activities, total revenue rose 92% Y-o-Y to reach EGP1,907 million in FY2010, including a capital gain of EGP716.6 million from the sale of Bank Audi. Fee and commission revenue was largely driven by stronger revenue generated from the investment banking operations as the team managed to close several transactions during the year. Fee and commission revenue rose 8% Y-o-Y to reach EGP855 million in FY2010. Revenue generated from capital markets and treasury operations reached EGP1,052 million in FY2010, reflecting a capital gain of EGP716.6 million from the sale of Bank Audi, and strong revenue generated from FX gains and net interest income.

·; The Commercial Bank reported a net profit of USD77.7 million in FY2010, representing an increase of 52% over FY2009 and reflecting the strong performance of both the Lebanese banking sector as well as Crédit Libanais itself. The growth in earnings was driven by strong recurring and non-recurring income growth.

·; The Commercial Bank loans grew 28% Y-o-Y, to USD1.7 billion by the end of FY2010. While customer deposits rose 17% Y-o-Y; thus pushing loan-to-deposits ratio up to 29.9% at the end of FY2010, from 27.2% in FY2009.

·; Group net profit before tax and minority interest reached EGP1.15 billion, up 86% Y-o-Y, from EGP617.7 million a year earlier. However, the Group net profit after tax and before minority interest came at EGP815.7 million, representing a 36% Y-o-Y increase.

·; Our brokerage remained #1 in terms of executions in the Egyptian and the UAE markets, and maintained its leading position in a number of other regional markets. The team remains committed to expanding its retail business and penetrating new segments. In FY2010, average daily commissions came in at USD223 thousands versus USD293 thousands in FY2009.

·; Public assets under management rose 11% over the year to reach USD4.7 billion. The team closed several new discretionary portfolios/injections by existing clients during the year.

·; Investment Banking remained very active in FY2010, closing 11 transactions with a value of approximately USD4.6 billion and distributed across the entire investment banking spectrum which includes ECM, DCM and M&A activities. In January 2011, the team closed the advisory to Orascom Telecom on the USD1.2 billion sale of its 50% stake in Tunisia's second mobile operator Tunisiana to Qatar Telecom.

·; Private Equity AuMs stood at USD919 million, with a number of exits taking place during the year.

·; Fourth quarter 2010, saw the first closing of the InfraMed Fund of EUR385 million, of which a newly established wholly owned subsidary share is EUR100 million.

·; Market conditions deteriorated significantly in 2011 as a result of the EGX closing.

A. GROUP PERFORMANCE

I. Group Balance Sheet

Table 1: Key Balance Sheet Indicators 

Please refer to attached PDF

The Group's balance sheet ended the fourth quarter and the year on strong footing, with total assets standing at EGP46.7 billion, versus EGP11.0 billion a year earlier. On a Q-o-Q basis, total assets saw a slight contraction of -0.9%, while the Investment Bank total assets declined post the completion of Crédit Libanais acquisition for a transaction value of USD542 million in November. Meanwhile, the Commercial Bank managed to offset the decline, growing its total assets by 3% Q-o-Q.

Total shareholders' equity increased 9% Q-o-Q to reach EGP9.9 billion at the end of 4Q2010 versus EGP9.0 billion a quarter earlier. For the Investment Bank, shareholders' equity grew 9% Q-o-Q while the Commercial Bank shareholders' equity rose 8% Q-o-Q. Indeed, the increase in total shareholders' equity reflects the company's strong capitalization, which enables the company to further pursue its growth strategy.

With the consolidation of Crédit Libanais in 3Q2010, the balance sheet expanded on a Y-o-Y basis. Total assets rose 324% Y-o-Y to reach EGP46.7 billion. Meanwhile, total shareholders' equity rose 10% Y-o-Y to close at EGP9.9 billion in FY2010, up from EGP8.9 billion in FY2009.

At the end of FY2010, available-for-sale investments amounted to EGP2.8 billion, of which Crédit Libanais available-for-sale instruments accounted for EGP1.3 billion. Moreover, the held-to-maturity portfolio, which is attributed to the Commercial Bank, stood at EGP12.2 billion at the end of the 4Q2010. Worth nothing, that the majority of the Commercial Bank's available-for-sale and held-to-maturity investments are held in Lebanese government treasury bills and Eurobonds. However, on 1st January 2011, the Commercial Bank re-classified all securities to held-to-maturity investments relevant to instructions from the Central Bank of Lebanon and in compliance with the IFRS-9.

On the liability side, the creditors and other credit balances fell to EGP1.0 billion at the end of 4Q2010, compared to EGP4.2 billion at the end of 3Q2010, after the settlement of EGP3.1 billion for the 65% acquisition of Crédit Libanais which was finalized in November, 2010. II. Performance Indicators and Financial Highlights

Table 2: Key Operational Indicators

Please refer to attached PDF

Table 3: Investment Bank/Commercial Bank Financial Performance - 4Q2010

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Table 4: Investment Bank/Commercial Bank Financial Performance - FY2010

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Table 5: Group Financial Performance

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III. Group Revenues

Table 6: Group Revenue Performance

Please refer to attached PDF

The Group's revenue for 4Q2010 reached EGP553 million, up 46% Y-o-Y from EGP379 million in 4Q2009. The Commercial Bank contributed by 54% while the investment bank contribution came at 46%, versus 51.5% and 48.5% respectively, in 3Q2010. The Investment Bank fee & commission revenue contracted by 9% Y-o-Y, on the back of lower brokerage executions and a decline in revenue generated by Private Equity. Meanwhile, revenue from capital markets and treasury operations rose 72% to EGP55 million supported by an increase in net interest income which reached EGP52 million. Meanwhile, the Commercial Bank contribution to Group revenue amounted to EGP301 million in 4Q2010.

For the full year 2010, the Group revenue reached EGP2,463 million of which the Commercial Bank contribution was restricted to 23% versus 77% for the Investment Bank. Noting that, the Commercial Bank's figures were only consolidated in 3Q2010, thus only 2H2010 commercial bank revenue is included in the Group's FY2010 figures.

The Group's revenue for FY2010 rose 72% Y-o-Y to EGP2,463 million up from EGP1,431 million a year earlier. For the Investment Bank, fee & commission revenue rose 8% Y-o-Y to EGP855 million on the back of improving advisory fees generated from Investment Banking. Capital markets and treasury operations soared 419% to EGP1,052 million underpinned by a capital gain of EGP716.6 million recognized from the sale of Bank Audi. However, excluding Bank Audi's capital gain, revenue from capital markets and treasury operations would rise 66% Y-o-Y to EGP335 million versus EGP202 million in FY2009, with FX gains of EGP157 million being the main driver of revenue growth. Meanwhile, the Commercial Bank contribution to total revenue came at EGP556 million (representing only 2H2010 revenue).

IV. Group Operating Expenses

Employee expenses remain a significant component of total operating expenses, representing 69.6% of the Group expenses in 4Q2010. Meanwhile, the Group non-employee related expenses represented the balance, 30.4% of total expenses. In terms of margins, the Investment Bank 4Q2010 net operating profit margin was -9.6% while the Commercial Bank margin was relatively stable at 53.6%, thus resulting in an operating profit margin for the Group of 24.7% in 4Q2010.

It is worth highlighting that, the Investment Bank's depressed margins in 4Q2010 were impacted by a one-off cost item of EGP15 million charged in 4Q2010.

For FY2010, employee expenses as a percentage of total expenses, was slightly lower at 68.0% and the remaining 32.0% was attributed to non-employees expenses. Meanwhile, the Group net operating margin for the year reached 54.0%, with solid contribution from both the Investment Bank (54.2%) and the Commercial Bank (53.4%).

Table 7: Group Operating Expenses - 4Q2010

Please refer to attached PDF

Table 8: Group Operating Expenses - FY2010

Please refer to attached PDF

B. THE INVESTMENT BANK

I. Investment Bank Revenue

Table 9: Investment Bank Revenue

Please refer to attached PDF

Investment Bank total revenue rose 2% Y-o-Y to EGP253 million in 4Q2010, supported by 72% increase in the capital markets & treasury operations revenue, as fee & commission revenue declined 9% Y-o-Y in 4Q2010. For the FY2010, total revenue rose 92% Y-o-Y to EGP1,907 million. However, excluding the capital gain of EGP716.6 million from the sale of Bank Audi in FY2010, revenue would increase 20% Y-o-Y.

Fee and Commission Revenue

Fee and commission revenue declined 9% Y-o-Y to EGP198 million in 4Q2010. Moreover, fee and commissions revenue contribution to the total Investment Bank revenue fell, accounting for 78% in 4Q2010, as capital markets and treasury operations revenue improved. For the full year, fee and commission revenue rose 8% Y-o-Y to EGP855 million in FY2010, largely driven by stronger revenue generated from the investment banking activities, and to a lesser degree, by an improvement in the Asset Management and Private Equity revenues. This all combined, managed to mitigate the decline in Brokerage operations which weakened as regional markets retreated and liquidity dropped.

Figure 10: Brokerage Av. Daily Commission Figure 11: Asset Management AuMs

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Table 12: Fee and Commission Revenue - 4Q2010

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Table 13: Fee and Commission Revenue - FY2010

Please refer to attached PDF

For 4Q2010, fee and commission revenue mix changed. Revenue from Investment Banking and Asset Management rose Y-o-Y, as opposed to a decline from revenue generated from Brokerage and Private Equity. Brokerage which remains distressed by weaker regional execution in 4Q2010, accounted for 43% of total revenue versus 48% in 4Q2009.

On a yearly basis, revenue contribution from Investment Banking, Private Equity and Asset Management rose, offsetting the decline in Brokerage revenue. Worth noting that, Investment Banking revenue, which saw a significant increase of 287% Y-o-Y, accounted for 20% in FY2010 versus 6% in FY2009. On the other hand, Brokerage contribution to total revenue fell to 44%, down from 59% a year earlier. This illustrates the company's ability to diversify and maximize revenue generated to weather challenging markets conditions.

Fee and Commission Revenue - Brokerage

Over 4Q2010, the regional markets performance slightly improved, with MSCI EM rising c5% and the S&P Pan Arab Comp ML Index adding c4%. Furthermore, sentiment improved and liquidity picked up in 4Q, with aggregate liquidity in Egypt and the GCC rising by a weighted average of 25% over 3Q2010 levels.

EFG Hermes Brokerage total value of executions stood at EGP47.7 billion (USD8.4 billion) in 4Q2010, up 23% Q-o-Q. Accordingly, commissions rose to EGP85 million (USD14.6 million), up 19% Q-o-Q. Meanwhile, brokerage revenue declined 18% Y-o-Y, reflecting the decline in the Group's executions across different operations (with the exception of Egypt); especially in the UAE.

In line with Brokerage strategy, the team remains committed to expanding the retail business and penetrating new segments within the constantly growing regional markets. The retail business which includes online, call center, branches and VIP individuals represents 53% of total brokerage revenue by the end of 4Q2010.

With a total of nine branches, the team further cement its retail franchise and expanded its retail network operations. By the end of FY2010, the team completed the installation of six ATM machines, to help facilitate money deposits/withdrawals from retail clients' accounts, with operations expected to start soon. In 2011, the team plans to install two additional ATM machines in two branches together with a plan to expand the ATM distribution network in the commercial malls.

Figure 14: Brokerage Revenue by Desk

Please refer to attached PDF

Egypt

After taking a breather in 3Q2010, both performance and liquidity improved on EGX in 4Q2010. Over the quarter, the Hermes Financial Index (HFI) rose 7.5% and volumes improved c18% compared to 3Q2010. Additionally, EFG Hermes share of total execution improved 28% over the same period.

In 4Q2010, Egypt brokerage market share rose to 26% versus 18% in 3Q2010. Worth noting, that 4Q2010 market share is calculated using securities executions on the EGX as opposed to using the total market executions which include securities trading and primary bond trading.

EFG Hermes remained the #1 broker in the Egyptian market both in terms of volume of executions and revenues. Over FY2010, our two brokerage companies are ranked #1 and #2, with their total execution 118% higher than the following broker, thus reflecting the dominant position of EFG Hermes in the market.

Figure 15: Egypt Executions and Market Share

Please refer to attached PDF

Revenue contribution from brokerage activity in Egypt rose 23% Q-o-Q to EGP61.4 million in 4Q2010 versus EGP49.8 million in 3Q2010, reflecting higher volumes and executions. However, on a Y-o-Y basis, Egypt brokerage revenue was muted, up 3% from EGP59.8 million in 4Q2009. Furthermore, Egypt continued to be the main contributor to Brokerage revenue, accounting for 72%, slightly higher than 70% in 3Q2010.

For FY2010, Egypt brokerage revenue came in at EGP266 million, lower 11% compared to a year earlier. Nevertheless, Egypt contribution to total brokerage revenue rose to 71% compared to 65% in FY2009, largely attributed to a decline in UAE brokerage revenue, thus driving Egypt's weight higher.

UAE

4Q2010 was marked by improved liquidity on both the UAE markets, with the DFM and the ADX turnover rising 32% and 22%, respectively. Performance was broadly muted over the quarter, the Dubai Financial Market General Index (DFMGI) retreated 3.2%; while Abu Dhabi Index (ADI) inched up 1.8%.

EFG Hermes executions improved 28% Q-o-Q on the ADX, pushing EFG Hermes market share to its highest level at 24.9% from 23.7% in 3Q2010. On the other hand, EFG Hermes market share on the DFM fell to 14.6% from 17.5% in 3Q2010, as the 10% increase in EFG Hermes executions was lower than the 32% increase in the market turnover.

Figure 16: UAE Executions and Market Share

Please refer to attached PDF

Total revenue booked by the brokerage operations in the UAE (ADX and DFM) rose 25% Q-o-Q to EGP8 million in 4Q2010 versus EGP6 million in 3Q2010; however, revenue was significantly lower Y-o-Y, down 61%. Meanwhile, UAE contribution to total brokerage fee and commissions revenue improved slightly to 9.2% versus 8.6% a quarter earlier.

In FY2010, UAE brokerage revenue declined 47%Y-o-Y to EGP36 million. Moreover, UAE contribution to total brokerage revenue fell to 9% from 14% in FY2009.

Saudi Arabia

Trading on the Saudi Stock Market (Tadawul) picked up, rising 28% over 4Q2010, while the Tadawul All Share Index (TASI) increase was restricted to +3.6%. In line with the increase in liquidity, our total executions rose 33%, thus maintaining our market share up of 1.6%.

Figure 17: KSA Executions and Market Share

Please refer to attached PDF

Revenue generated from the Saudi brokerage rose 32% Q-o-Q to EGP3.9 million from EGP2.9 million in 3Q2010. However, on a Y-o-Y basis, revenue declined 29% from EGP5.5 million a year earlier. Meanwhile, contribution to the total brokerage stood at 4.6% at the end of 4Q2010, slightly higher than 4.1% in 3Q2010.

For the full year, revenue from the Saudi brokerage declined 26% to EGP13 million; yet contribution to total brokerage fee and commission was flat at 4%.

Oman

Over 4Q2010, turnover on the Muscat Securities Market rose 38% and the Muscat Securities Index rose 4.4%. At the same time, our executions rose 16% over the quarter and thus pulled our market share to 18.1% versus 23.3% at the end of 3Q2010.

Figure 18: Oman Executions and Market Share

Please refer to attached PDF

Over 2010, revenue generated from Oman brokerage dropped 33% to EGP9 million; consequently, Oman contribution to total brokerage revenue fell to 2.4% compared to 2.9% in FY2009.

Kuwait

In 4Q2010, liquidity on the KSE increased slightly, up 8%, while the KSE index was relatively flat, down 0.4%. EFG Hermes share of total executions rose 15%, thus driving our market share up to 29.7% in 4Q2010, compared to 27.7% in 3Q2010. For the quarter and for the FY2010, EFG Hermes IFA Brokerage maintained its second ranking on KSE.

Figure 19: Kuwait Executions and Market Share

Please refer to attached PDF

Similarly on a yearly basis, revenue from Kuwait brokerage fell 22% to EGP51 million compared to EGP66 million in FY2009. However, Kuwait's contribution to total brokerage revenue represents 13.6% versus 14.1% in FY2009.

Jordan

Revenuebooked from Jordan operations (EFG Hermes Jordan), which was consolidated for the first time in 3Q2010, amounted to EGP1.0 million in 4Q2010 versus EGP0.4 million in 3Q2010. Meanwhile, market share reached 2.8% in 4Q2010 versus 2.0% in 3Q2010.

Research

Figure 20: Research Coverage Universe

Please refer to attached PDF

At the end of 4Q2010 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 56% 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, end of session wrap-ups and a regional monthly product. New products introduced in 2010 include the MENA dashboard and monthly funds flow publications. This, in addition to regular MENA Report and an annual MENA Investment Perspective.

The team is aiming to extend coverage to the Levant markets as local presence in the Syrian, Jordanian and Lebanese markets has been established.

Fee and Commission Revenue - Asset Management

Figure 21: Development of Listed Assets under Management

Please refer to attached PDF

In line with Asset Management strategy of targeting long term perspective clients and increasing institutional base, the team managed to maintain its diversified client base including institutions, Sovereign Wealth funds and foundations/ endowment/ insurance companies and add new long term clients. At the end of the quarter, the client base was skewed towards long term investors, with Foundation/Pension/Insurance funds representing 26.7% of the client base, followed by Sovereign Wealth funds which accounted for 23.6%.

In terms of funds' origination, the team continues to work aggressively on exploring different funds sourcing options. The investor mix changed slightly in 4Q2010, with the US and the MENA-based investors reducing their contribution to account for 10.5% and 67.3%, respectively, at the end of 4Q2010, down from 12.0% and 68.2%, respectively, at the end of 3Q2010. On the other hand, Europe-based clients increased their contribution to account for 18.7% in 4Q2010, up from 16.3% in 3Q2010.

Figure 22: Assets under Management by Geography

Please refer to attached PDF

The team has been actively working on increasing the size of existing mutual funds including money markets, fixed income and equity funds. This is implemented by conducting training sessions for sales staff, as well as preparing marketing materials which is used in marketing campaigns.

EFG Hermes Asset Management has three mandates in the pipeline; a capital protected and a money market fund, where both are sponsored by the same entity, and 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. Moreover, the team has completed a distribution agreement with a foreign bank. The bank will begin sales of the Egypt and MEDA Funds before moving on to other products.

Fee and Commission Revenue - Private Equity

Total funds under management by the Private Equity stood at USD919 million in 4Q2010, as no exits or investments were made during the quarter. The fourth quarter 2010 saw the first closing of the InfraMed Fund of EUR385 million of which a newly established wholly owned subsidary share is EUR100 million.

Fee and Commission Revenue - Investment Banking

Investment banking wrapped up a very strong 2010 with a solid fourth quarter performance that saw the division close two important transactions. The first was the sale of the online brokerage company Arabiya Online to Bank Audi of Lebanon for USD42 million, where EFG Hermes acted as sole advisor to the selling shareholders. Although EFG Hermes has successfully executed multiple transactions in the financial services sector, the sale of Arabiya Online marks the first transaction executed in Egypt's growing online brokerage sector. The transaction drew the attention of a number of regional and local financial institutions and was closed at highly attractive multiples further solidifying our position as Egypt's premier Sell Side advisor.

In addition to Arabiya Online, EFG Hermes acted as Sole Financial Advisor to the Sixth of October Development and Investment Company ("SODIC") on the arrangement of USD76 million of debt that was extended through a competitive process by Alexbank.

The two transactions capped a very solid year for EFG Hermes Investment banking that saw the division close two rights issues (Orascom Telecom's USD800 million rights issue and SODIC's USD100 million rights issue), an initial public offering (Juhayna's USD176 million IPO), two bond offerings (USD276 million Mobinil fixed rate notes and USD290 million OCI fixed rate notes), one debt arrangement (SODIC's USD76 million debt arrangement) and five M&A transactions (Sale of Arabiya Online for USD42 million, the sale of LinkdotNet for USD130 million, SODIC's USD40 million acquisition of 50% of Palymera in addition to the sale of the EFG Hermes stake in Bank Audi and its subsequent acquisition of a controlling stake in Crédit Libanais). In a year where investment banking activity was largely subdued, our ability to close 11 transactions worth almost USD4.6 billion across the entire investment banking spectrum of equity, M&A and debt shows the team's ongoing ability to grow the investment banking franchise even in less than favorable market conditions.

In January 2011, the team closed the advisory to Orascom Telecom on the USD1.2 billion sale of its 50% stake in Tunisia's second mobile operator Tunisiana to Qatar Telecom. Moreover, the investment banking pipeline was the healthiest it has been in years with several equity, debt and M&A mandates including the already announced sale of Olympic Group to Electrolux and our continued advisory work to Wind Group on its merger with Vimpelcom. However, the recent political events that have taken place in the Arab world have cast a lot of doubt on our ability to execute some of those transactions especially in our key market Egypt. While this is bound to affect our revenue generating capability in 2011, we continue to focus our attention on generating mandates across the Arab world with several advanced discussions for transactions in Syria, Lebanon, Sudan, Kuwait and UAE among others. Our ability to successfully land and close those transactions will help expand our regional reach and further strengthen our franchise in the rest of the Arab world.

Capital Markets and Treasury Operations Revenue

Table 23: Capital Markets and Treasury Operations Revenue

Please refer to attached PDF

Net interest income was the largest contributor to revenue generated by capital markets and treasury operations, with revenue from net interest income rising to EGP52 million in 4Q2010, up from EGP25 million in 4Q2009, a significant portion of which is attributed to FX gains from the USD appreciation against the EGP. Meanwhile, revenue generated from the treasury department investing in fixed income and stocks was limited over 4Q2010. Revenue booked from gain on investments was EGP3 million, lower than EGP7 million in 4Q2009.

For the full year, revenue generated from capital markets and treasury operations reached EGP1,052 million, however, excluding the EGP716.6 million realized capital gain from the sale of Bank Audi, revenue would amount to EGP335 million, higher 66% Y-o-Y compared to EGP202 million in FY2009. Moreover, the largest portion of the revenue generated from the treasury department is attributed to net interest income, which reached EGP307 million in FY2010, higher 164% Y-o-Y. Of the EGP307 million booked, EGP157 million relates to FX gains and EGP142 million relates to net interest earned. On a similar note, capital gains on investments of EGP28 million (excluding Bank Audi capital gain) relates to EGP13 million of realized and unrealized gain on stocks, while gains from fixed income (realized and unrealized) amounted to EGP9 million.

Table 24: Investment Bank Operating Expenses - 4Q2010

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Table 25: Investment Bank Operating Expenses - FY2010

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The bulk of the total operating expense is attributed to employees' expenses, which represents 76% of the total operating expenses. Over the quarter employees expenses rose 14% Y-o-Y to EGP211 million, reflecting the increase in the number of staff hired (increase of 9% Y-o-Y) to support the Group's operational expansion in different countries and the management ongoing search to hire the best caliber and retain its high-quality human capital. Additionally, the management took a one-off cost charge of EGP15 million in 4Q2010.

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 have declined 16% Y-o-Y to EGP66 million in 4Q2010.

Travel expenses were largely stale, flat Y-o-Y at EGP9 million in 4Q2010. Meanwhile, promotional and advertising declined 56% Y-o-Y to EGP4 million, down from EGP9 million in 4Q2009.

Occupancy expenses rose slightly, up 3% Y-o-Y to EGP13 million in 4Q2010, and lower than the EGP13.7 million booked in 3Q2010 as the majority of costs related to the move to the new headquarters disappeared.

Data communication expenses were slightly reduced to EGP8 million in 4Q2010, down 4% Y-o-Y. For the consultation fees, expenses rose significantly 79% Y-o-Y to EGP25 million in 4Q2010, mainly due to an increase in third party fees.

For FY2010, while other operating expenses declined 6% Y-o-Y to EGP255 million, employees' expenses rose 35% Y-o-Y to EGP619 million, resulting in an overall increase in total operating expenses which rose 20% to EGP874 million compared to EGP730 million in FY2009. For the year, employees' expenses accounted for 71% while other operating expenses accounted for the balance, 29%.

C. THE COMMERCIAL BANK

Table 26: Commercial Bank Key Indicators

Please refer to attached PDF

Crédit Libanais reported 4Q2010 net profit of USD20 million, up 83% Y-o-Y, thus taking FY2010 net profit to USD78 million, up 52% Y-o-Y over FY2009 figures. It is worth noting that FY2010 included two extraordinary items, a capital gain of USD12.0 million from the disposal of a real estate unit and a gain from the sale of investment securities of USD10.7 million.

Figure 27: Total Assets Figure 28: Total Equity

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The balance sheet grew by 3% over the fourth quarter to reach USD6.5 billion. The loan book grew by 5% Q-o-Q, mainly driven by a pickup in SME loans which rose 17% over the quarter and an improvement in corporate loans, which rose 7% Q-o-Q. However, Crédit Libanais remains retail focused, with retail customers accounting for 52% of total loan portfolio versus 48% for corporate and SME customers. Meanwhile, deposits grew at a lower rate, rising 2% Q-o-Q reflecting the increase in term deposits which rose 15% Q-o-Q.

Over FY2010, the bank managed to increase its market share both for the deposits and the loans. Loans market share rose to 4.69% at the end of FY2010 from 4.51% in FY2009. For the deposits, market share rose to 5.04% from 4.86% in FY2009.

Crédit Libanais is well capitalized, with USD380 million of Core Tier 1 capital and USD140 million of subordinated (Tier 2) capital. A total Risk Weighted Assets (RWA) of USD3,072 million, translates into a Core Tier 1 capital ratio of 12.37% and a total Capital Adequacy Ratio (CAR) of 16.95%.

Figure 29: Loans and Deposits Market Share Figure 30: Loans-to-Deposits Ratio

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On a Y-o-Y basis, total assets grew 18% Y-o-Y, underpinned by a loan book growth of 28%. Meanwhile, deposits rose 17% Y-o-Y, thus pushing loans to deposits ratio to 29.9% from 27.2% at the end of FY2009.

Figure 31: Loan Book Breakdown by Type

Please refer to attached PDF

On the income statement front, total banking income rose to USD55 million in 4Q2010, up 10% Q-o-Q, driven by an expansion in the non-interest income which rose 81% Q-o-Q to USD22 million, on the back the aforementioned profit realized from the sale of investment securities for a value of USD11 million. Meanwhile net interest income remained broadly flat over the quarter up 1% Q-o-Q to USD33 million. By the end of 4Q2010, net interest income accounted for 60% of the total banking income while non-interest income accounted for the remaining 40% versus 66% and 34%, respectively, a quarter earlier. Net profit margin for the quarter stood at 37% at the end of the quarter. Moreover, cost-to-income came in at 47% at the end of 4Q2010 and for FY2010, as compared to 52% in FY2009.

For the year, total banking income rose 32% Y-o-Y to USD187 million, driven by strong net interest income and non-interest income. Net interest income rose 18% to reach USD127 million in FY2010, the increase in net interest income is attributed to the strong loan growth as the improvement in net interest spreads was limited to 3bps, the net spreads rose to 2.23% from 2.20% in FY2009. Meanwhile, non-interest income rose 74% to USD60 million, boosted by the capital gain from the sale of securities investment.

As part of the Bank's conservative strategy, Crédit Libanais booked net provisions of USD2.9 million in 4Q2010; pushing total provisions to USD8.7 million in FY2010 compared to USD5.7 million in FY2009.

Figure 32: ROAE Figure 33: ROAA

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As a result, the Bank continues to record very decent returns on its equity and asset bases. Crédit Libanais reported a return on average equity of 24.5% and a return on assets of 1.52% in 4Q2010, up from 23.9% and 1.49%, respectively at the end of 3Q2010.

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