Efg-hold.gdr S Regulatory News (EFGD)

EFG HERMES REPORTS SECOND QUARTER 2012

GROUP NET INCOME OF EGP27 MILLION; ON TOTAL OPERATING REVENUE OF EGP477 MILLON

Cairo, August 15th, 2012 - EFG Hermes reported today Group net income of EGP27 million in 2Q2012, compared to a net income of EGP35 million in 1Q2012. The Group operating revenue reached EGP477 million in 2Q2012, up from EGP433 million a quarter earlier. Total assets stood at EGP54.8 billion at the end of 2Q2012.

Key Highlights

·; Group revenue reached EGP477 million in 2Q2012 and Group operating expenses came at EGP330 million, resulting in a net profit after tax and minority of EGP27 million.

·; Investment Bank revenue declined 13% Y-o-Y to EGP195 million in 2Q2012 on the back of lower revenue generated from capital markets and treasury operations, which fell to EGP8 million in 2Q2012. Fee and commission revenue rose 3% to EGP187 million, boosted by Investment Banking division revenue.

·; The Investment Bank operating expenses was flat Y-o-Y at EGP173 million in 2Q2012, reflecting the management commitment to the cost cutting measures taken last year.

·; Credit Libanais net income for the quarter came at USD17.3 million, up 3% Y-o-Y and resulting in a pre-tax RoAE of 17.0%. The Bank's operating revenue was driven by solid growth in all revenue lines and particularly fees and commissions.

·; Brokerage remained #1 on the Egyptian Stock Exchange (excluding special transactions) and on the Dubai Financial Market, and maintained a leading position in a number of other regional markets. Over the quarter, Brokerage executions declined 20.7% to reach USD4.7 billion in line with the average regional volumes which declined 17% Q-o-Q.

·; Asset Management AuMs stood at USD3.1 billion at the end of 2Q2012, down 6% Q-o-Q, with redemptions accounting for 5% and the market performance accounting for 1%.

·; EFG-Hermes Investment Banking closed a major transaction during the quarter raising USD462 million in a private placement for Egyptian Refining Company ("ERC"). The placement is the largest in Egypt since the end of 2007 and is one of the largest to take place in the region this year. 

·; Private Equity AuMs stood at USD970 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 - 2Q2012

Please refer to attached PDF

Source: EFG Hermes management accounts and Crédit Libanais data

Table 3: Group Financial Performance - 2Q2012

Please refer to attached PDF

Source: EFG Hermes management accounts

Table 4: Financial Performance - 1H2012

Please refer to attached PDF

Source: EFG Hermes management accounts

II. Group Revenues

Table 5: Group Revenue

Please refer to attached PDF

Source: EFG Hermes management accounts

Group revenue rose 2% Y-o-Y to EGP477 million in 2Q2012 on the back of higher revenue generated from the Commercial Banking activities. The Commercial Bank revenue rose 16% Y-o-Y in 2Q2012, offsetting the 13% decline in revenue generated by the Investment Bank. In 2Q2012, the Commercial bank revenue represented 59% of the Group revenue and the Investment Bank represented the remaining 41%.

The Commercial Bank revenue rose 16% Y-o-Y to EGP282 million in 2Q2012, driven by solid growth in all revenue lines and particularly fees and commissions. The Investment Bank revenue fell 13% Y-o-Y to EGP195 million in 2Q2012 on the back of lower capital markets & treasury operations revenue which declined 81% Y-o-Y. The sharp decline in capital markets & treasury operations revenue is attributed to a strong comparable 2Q2011, which included dividend income from SODIC.

On a Q-o-Q basis, the Group revenue rose 10% supported mainly by an improvement in the Investment Bank fee and commission revenue which rose 49% Q-o-Q. The Commercial Bank revenue also rose over the quarter, adding 6% Q-o-Q.

For 1H2012, Group revenue rose 4% Y-o-Y to EGP910 million, driven by 13% Y-o-Y increase in revenue generated by the Commercial Bank. Non-interest income, including fee and commission income and trading income, was the main driver for this increase. The Investment Bank revenue declined 8% Y-o-Y, as fee and commission revenue declined 10% Y-o-Y in 1H2012 on the back of lower 1Q2012 revenue.

III. Group Operating Expenses

Table 6: Investment Bank/Commercial Bank Operating Expenses - 2Q2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Table 7: Group Operating Expenses - 2Q2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Table 8: Group Operating Expenses - 1H2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Group operating expenses rose 10% Y-o-Y to EGP330 million in 2Q2012, driven by higher costs on the Commercial Bank side, which rose 25% Y-o-Y to EGP157 million. The Investment Bank operating expenses was flat Y-o-Y at EGP173 million. Group operating expenses were split 52/48 between the Investment and the Commercial Bank.

The increase in the Commercial Bank expenses was driven by higher employee expenses and other operating expenses, rising 17% Y-o-Y and 38% Y-o-Y, respectively. The higher other operating expense is partially attributed to a tax charge of USD1.0 million booked in 2Q2012. On the Investment Bank side, employee expenses were broadly unchanged, up 1% Y-o-Y, and the other operating expenses declined 3% Y-o-Y, reflecting the management continuous efforts to keep all costs down.

For 1H2012, Group operating expenses rose 7% Y-o-Y to EGP626 million due to the increase in the Commercial Bank operating expenses which rose 17% Y-o-Y. The increase in the Commercial Bank operating expenses is attributed to higher employees' costs and higher other operating expenses, rising 16% Y-o-Y and 18% Y-o-Y, respectively. The Investment Bank operating expenses was flat Y-o-Y in 1H2012.

B. THE INVESTMENT BANK

I. Investment Bank Revenue

Table 9: Investment Bank Revenue

Please refer to attached PDF

Source: EFG Hermes Management Accounts

The Investment Bank total revenue declined 13% Y-o-Y to EGP195 million in 2Q2012, mainly attributed to exceptional revenue booked in capital markets and treasury operations in 2Q2011.

Capital markets & treasury operations declined 81% Y-o-Y to EGP8 million, as 2Q2011 was a strong comparable quarter which included exceptional dividend income of EGP28 million received from SODIC.

Fees and commission revenue rose 3% Y-o-Y to EGP187 million in 2Q2012, on the back of strong revenue booked by the Investment Banking division which off-set the decline in revenue generated by other business lines, namely Brokerage, Asset Management and Private Equity.

 On Q-o-Q, the Investment Bank revenue rose 17% Q-o-Q, driven by strong fee and commission revenue which rose 49% Q-o-Q. This is mainly attributed to revenue generated from Investment Banking division.

The Investment Bank revenue declined 8% Y-o-Y to EGP361 million in 1H2012 on lower revenue generated from fees and commissions business, which fell 10% Y-o-Y to EGP312 million in 1H2012. The decline in fee and commission revenue is driven by lower revenue generated from Brokerage, Asset Management and Private Equity.

Fee and Commission Revenue

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

  Please refer to attached PDF Please refer to attached PDF

Source: EFG Hermes Source: EFG Hermes 

Fee and commission revenue rose 3% Y-o-Y and 49% Q-o-Q to EGP187 million in 2Q2012, driven by higher revenue generated from the Investment Banking division.

Brokerage revenue declined 18% Y-o-Y to EGP51 million in 2Q2012, broadly in line with the decline in regional volume and executions. Asset Management revenue declined 19% Y-o-Y to EGP26 million on the back of lower regional funds/portfolios management fees. Private Equity revenue declined 34% Y-o-Y to EGP25 million on lower management fees and the disappearance of incentive fees. Investment Banking revenue rose 75% Y-o-Y to EGP84 million on strong advisory fees booked during the quarter.

Table 12: Fee and Commission Revenue - 2Q2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

For 1H2012, fee and commission revenue declined 10% Y-o-Y to EGP312 million. Brokerage revenue fell 14% Y-o-Y to EGP113 million on lower execution and brokerage fees. Asset Management revenue declined 24% Y-o-Y to EGP51 million on the back of lower management fees. Private Equity revenue declined 35% Y-o-Y to EGP52 million on lower management fees and the disappearance of incentive fees. Investment Banking was the only division to recognize higher revenue Y-o-Y in 1H2012, revenue rose 42% Y-o-Y to EGP96 million on strong advisory fees booked during 2Q2012.

Table 13: Fee and Commission Revenue - 1H2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Fee and Commission Revenue - Brokerage

Most regional markets ended 2Q2012 in the red, losing the steam they gained earlier in 1Q2012. The MSCI EM Index lost 10.0% Q-o-Q in 2Q2012 and S&P Pan Arab Comp ML Index slipped 10.9% Q-o-Q over the same period. Volumes declined, falling an average of 17% Q-o-Q (11% Q-o-Q excluding KSA) over the quarter. EFG Hermes Brokerage executions were in line with the decline in volumes, falling 20.3% Q-o-Q to USD4.7 billion compared to USD5.9 billion a quarter earlier. Consequently, Brokerage revenue declined 17% Q-o-Q to EGP51 million in 2Q2012.

Brokerage revenue breakdown across different customer segments was broadly unchanged over the quarter. Revenue generated from the retail business (which includes online, call center, branches, VIP individuals and HNWI), accounted for 70% of total brokerage revenue in 2Q2012 versus 71% in 1Q2012. Western institutional client accounted for 20% of total Brokerage revenue at the end of 2Q2012 versus 19% in 1Q2012. Regional institutional clients accounted for the remaining 10%.

Figure 14: Brokerage Revenue by Desk

Please refer to attached PDF

Source: EFG Hermes

Egypt

Figure 15: Egypt Executions and Market Share

Please refer to attached PDF

Source: EGX, EFG Hermes

Egypt's Hermes Financial Index (HFI) lost 3.2% Q-o-Q, while volumes rose 31.2% Q-o-Q amid choppy trading. The two rounds of the presidential elections together with a number of political events impacted the political scene during the quarter and weighted down on the market performance, while the improvement in the market volumes was mainly attributed to the sale of Mobinil shares to France Telecom in May, which accounted for almost half of the total market turnover during the quarter, and which if we exclude, volumes would decline 33% Q-o-Q.

Second quarter saw increased foreign institutional activity contributing positively to our market share and supporting our ranking. If we exclude the Mobinil shares sale to France Telecom transaction, our market share would reach 30.4% with a number one ranking place (based on total market volumes our market share declined to 21.3% with a second place ranking).

Egypt Brokerage revenue declined 11% Q-o-Q to EGP36 million in 2Q2012. Egypt brokerage contribution to the Group's brokerage revenue came at 70% in 2Q2012 from 65% a quarter earlier.

UAE

Figure 16: UAE Executions and Market Share

Please refer to attached PDF

Source: DFM, ADX, EFG Hermes

The UAE markets saw thin trading during 2Q, with volumes falling 42.2% Q-o-Q on the Dubai Financial Market (DFM) and 32.2% Q-o-Q on the Abu Dhabi Exchange (ADX). Performance followed suit, with the Dubai Financial Market General Index (DFMGI) declining 11.9% Q-o-Q and the ADI slipping 4.1% over the quarter.

On the DFM, EFG Hermes Brokerage managed to execute some special transactions for foreign institutional clients and saw higher retail and GCC institutional clients' activity, despite the declining volumes in 2Q. This resulted in higher market share and ranking, reaching 14.1% and 1st place ranking on DFM compared to 10.4% and 5th place a quarter earlier.

Trading on the ADX was dominated by HNW individuals speculating on selected stocks which affected EFG Hermes market share in 2Q2012. The decline in EFG Hermes execution came higher than the decline in the total market volume, pushing our market share to 11.3% in 2Q2012 compared to 14.1% in 1Q2012. However, our ranking improved to 3rd place versus 4th place a quarter earlier.

In May, EFG Hermes started testing the margin trading by offering the service to existing clients. We believe that its impact should be more obvious when the markets volumes pick up.

In 2Q2012, revenue from UAE brokerage operations reached EGP4 million; a 46% Q-o-Q decline. This drags UAE's contribution to the Group's total brokerage revenue to 7% from 11% in 1Q2012.

Saudi Arabia

Figure 17: KSA Executions and Market Share

Please refer to attached PDF

Source: Tadawul, EFG Hermes

The Saudi Stock Market (Tadawul) took a breath in 2Q2012, with turnover declining 17.9% Q-o-Q and Tadawul All Share Index (TASI) dropping 14.4% 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 at 0.3%.

EFG Hermes KSA brokerage revenue reached EGP2 million in 2Q2012, lower 15% Q-o-Q and represented 4.2% of the Group's total brokerage revenue.

Oman

Figure 18: Oman Executions and Market Share

Please refer to attached PDF

Source: Muscat Securities Market, EFG Hermes

Volumes on the Muscat Securities Market (MSM) declined 16% Q-o-Q in 1Q2012 and the Muscat Securities Index (MSM30) was flat in 2Q2012.

The decreased in foreign and GCC institutional activity in the Omani market was reflected in our market share. EFG Hermes market share declined from 16.3% in 1Q2012 to 14.2% in 2Q2012 and fifth place ranking versus fourth place a quarter earlier.

Revenue generated from Oman brokerage stood at EGP1.4 million, up 3% Q-o-Q and bringing its contribution to total brokerage revenue to 2.7%.

Kuwait

Figure 19: Kuwait Executions and Market Share

Please refer to attached PDF

Source: Kuwait Securities Exchange, EFG Hermes

After the rally seen in 1Q2012, the Kuwait Stock Exchange (KSE) took a breath. Volumes fell 25.7% Q-o-Q and the KSE Index lost 6.1% over the quarter.

The firm's market share was slightly higher at 27.8% versus 27.4% in 1Q2012; and maintained our 2nd place ranking in 2Q2012.

Kuwait Brokerage revenue declined 26% Q-o-Q to EGP7 million. Kuwait Brokerage contribution to the Group's total brokerage revenue was 14.5% this quarter.

Jordan

It was another weak quarter for the Amman Stock Exchange (ASE) with the index declining 5.4% Q-o-Q and volumes falling 12.2% during the quarter.

EFG Hermes market share declined to 4.7%, mainly due to very low trading volumes by foreign investors in 2Q2012, 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 slipped 4% Q-o-Q to EGP0.9 million, and represented 1.7% of total brokerage revenue in 2Q2012.

Research

Figure 20: Research Coverage Universe

Please refer to attached PDF

Source: EFG Hermes

The Research department coverage reached 137 companies at the end of 2Q2012, distributed across the region (Egypt 25, UAE 23, KSA 49, Kuwait 9, Oman 13, Qatar 9, Lebanon 4, Morocco 3 and Jordan 2). Currently EFG Hermes covers 58% 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 21: Development of Listed Assets under Management

 Please refer to attached PDF

Source: EFG Hermes

EFG Hermes assets under management stood at USD3.1 billion at the end of 2Q2012, declining 6% Q-o-Q, where redemptions accounted for 5% of the decline and weak market performance the remaining 1%. Regional funds/portfolios redemptions represented 65% of total redemptions while local MMF and equity funds/portfolios represented the remaining 35%. Of the total redemptions, the regional institutional portfolios net outflow accounted for 40% and local money market funds (MMFs) accounted for another 31%.

Over 1H2012, the improved funds performance (+7%) managed to partially offset the 11% redemptions, thus resulting in a 5% decline in total asset value. Local MMF and equity funds/portfolios redemptions represented 61% of total redemptions while regional funds/portfolios represented the remaining 39%. Of the total redemptions, local money market funds (MMFs) accounted for 54% while regional institutional funds and regional institutional portfolios each accounted for another 18%.

EFG Hermes Asset Management team remains focused to maintain a diversified client base and attract more long-term and institutional clients. This is seen evident in the development of AuMs breakdown across different client segments throughout the quarters. During 2Q2012, institutional clients accounted for 24.0% of total AuMs compared to 21.9% last quarter; Foundation/Pension/Insurance clients contribution increased from 38.7% last quarter to 42.1%; while SWF clients represented 19% of total AuMs versus 23.2% a quarter earlier.

Investor mix changed in 2Q2012 in terms of funds origination. MENA-based clients increased from 75.9% last quarter to 77.6% in 2Q2012; Europe-based clients on the other hand declined to 20.0% from 20.9% a quarter earlier; and the USA-based clients declined to 1.7% this quarter compared to 2.6% in 1Q2012.

Figure 22: Assets under Management by Geography

Please refer to attached PDF

Source: EFG Hermes Asset Management

Fee and Commission Revenue - Investment Banking

Adverse conditions continued to characterize both regional and international markets during the second quarter of 2012. Coupled with the unfavourable political environment in the Arab world in general and the Egyptian market specifically, this has continued to directly impact our investment banking business as capital markets activities remain shut and appetite for direct investments remains quite weak.

Nevertheless, the Investment Banking division was still able to close a major transaction during the quarter raising USD462 million in a private placement for Egyptian Refining Company ("ERC") during the course of the second of quarter. The placement is the largest in Egypt since the end of 2007 and is one of the largest to take place in the region this year. Our ability to tap into certain pockets to raise this massive amount of equity for a Greenfield project in Egypt is another testament to our ability to achieve our clients' objectives even in the most adverse conditions.

Fee and Commission Revenue - Private Equity

Private Equity assets under management stood at USD0.97 billion as of 2Q2012, with no exits made during the year. The team continues to manage portfolio companies' performance in a very volatile economic environment in Egypt.

Capital Markets and Treasury Operations Revenue

Table 23: Capital Markets and Treasury Operations Revenue

Capital markets & treasury operations declined 81% Y-o-Y to EGP8 million in 2Q2012, largely due to the Y-o-Y decline in returns on investments as 2Q2011 was a strong comparable quarter.

Returns on Investments declined to EGP(3) million in 2Q2012 from EGP29 million a year earlier, as 2Q2011 included exceptional strong dividend income of EGP28 million received from SODIC.

Net interest income declined 14% Y-o-Y to EGP10 million on lower net interest earned. Net interest earned came at EGP5.5 million in 2Q2012 versus EGP10.9 million in 2Q2011 as 2Q2012 saw less money market funds' (MMF) redemptions.

On a Q-o-Q basis, revenue generated from capital markets and treasury operations declined 81%, as 1Q2012 was a strong comparable base: (a) Included EGP20 million of unrealized gains on stocks, and (b) Included a one-off capital gain of EGP8 million realized from the sale of the Kingdom Towers in Saudi Arabia.

Capital markets & treasury operations rose 7% Y-o-Y to EGP49 million in 1H2012, driven by higher returns on investments. Returns on Investments rose 35% Y-o-Y to EGP26 million, net unrealized capital gain on equities reached EGP16.7 million in 1H2012 compared to realized/unrealized losses of EGP12 million on equities and fixed income investments in 1H2011. Net interest income declined 14% Y-o-Y to EGP23 million, mainly due to lower net interest earned which came at EGP16 million in 1H2012 versus EGP21 million a year earlier.

 II. Investment Bank Operating Expenses

Table 24: Investment Bank Operating Expenses - 2Q2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Table 25: Investment Bank Operating Expenses - 2Q2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

Table 26: Investment Bank Operating Expenses - 1H2012

Please refer to attached PDF

Source: EFG Hermes Management Accounts

The Investment Bank operating expenses was flat Y-o-Y at EGP173 million in 2Q2012, as the management remained committed to the cost cutting strategy it started at the beginning of 2011.

Employee expenses were broadly flat, up 1% Y-o-Y to EGP117 million in 2Q2012, as the fixed portion of the employee expenses, which represents a large part of the employee expenses, came flat Y-o-Y.

Other operating expenses declined 3% Y-o-Y to EGP56 million in 2Q2012. Consultancy and service fees, which include third party fees, rose 54% Y-o-Y to EGP16.7 million, office expenses rose 9% Y-o-Y to EGP5.6 million and telephone/fax/mobile expenses increased 27% Y-o-Y to EGP3.0 million.

On the other hand, travel expenses fell 30% Y-o-Y to EGP5.0 million in 2Q2012. Occupancy expenses declined 9% Y-o-Y to EGP11.3 million. Promotional and advertising expenses slipped 2% Y-o-Y to EGP3.6 million on lower promotional and advertising expenses, general expenses dropped 51% Y-o-Y to EGP3.6 million and data communication expense declined 21% Y-o-Y to EGP6.4 million.

On a Q-o-Q basis, the Investment Bank operating expenses increased 6%, as employee expenses increased 11% Q-o-Q. Meanwhile, other operating expenses declined 2% Q-o-Q. The net operating profit margin rose to 11% in 2Q2012 versus 2% a quarter earlier.

For 1H2012, total operating expenses was flat Y-o-Y at EGP336 million. The employee expenses slipped 3% Y-o-Y to EGP223 million, largely due to a decline in the fixed portion of the employee expenses which declined 7% Y-o-Y on the back of the 10% Y-o-Y decline in the number of employees. The increase in other operating expenses, up 6% Y-o-Y, was to a large extent attributed to higher consultancy and third party fees which rose 80% Y-o-Y to EGP34.4 million in 1H2012.

C. THE COMMERCIAL BANK

Table 27: Commercial Bank Key Financial Highlights and Ratios

Please refer to attached PDF

Source: Crédit Libanai

I. Overview

Despite the political turmoil in the region, Lebanon and its banks continue to be relatively unaffected. In this environment, Credit Libanais, having no direct exposure to Syria, continued to grow organic performance. Net Income for 1H2012 reached USD35.6 million, which if we exclude an extraordinary USD1million tax charge would represent an 8% Y-o-Y increase in organic performance.

This was a result of growth in all organic revenue lines, especially in fees and commissions, while expenses, excluding the extraordinary tax charge (see below), where in line with expectations.

An extraordinary tax charge of USD4 million (the result of a customary tax review every three years by the authorities) is being amortized by Credit Libanais by USD500,000 a month from May to December. As provided in the SPA for the purchase of 65% of Credit Libanais shares, EFG Holding has already been compensated for 65% of this tax charge at the Holding company level.

As a result of the 2011 profits, the distribution of a USD11 million dividend and the profitability of 1H2012, core equity has now reached USD511 million, which together with the sub debt of USD77 million resulted into a Core Tier 1 Ratio of 10.9% and a Total Capital Ratio of 13.1% i.e. each 3% over the required regulatory minimum.

As anticipated, Credit Libanais' green-field subsidiary Credit International in Senegal established in mid-2010, started having a positive contribution to the group for the first time, based on 1H2012 figures.

2Q2012

Net Income for the quarter came at USD17.3 million, in essence flat compared to 1Q2012, excluding the extraordinary tax charge of USD1 million, relating to the tax charge allocation for May and June.

The above resulted in an organic ROAE of 17.4% (excluding extraordinary tax expense) at the end of the last quarter.

NII closed the quarter at USD31.9 million, an increase of 1.4% Q-o-Q and up 2.1% compared to the same quarter last year. The forces at work regarding NII are: continued pressure on lower lending spreads offset by a continuous effort by the Bank to lower its deposit cost, and more efficient placement of liquidity.

Fee and Commission Income came at USD9.1 million in 2Q2012, an increase of 14.0% Q-o-Q and up 47.5% compared to the same quarter last year, reflecting the success in growing the trade finance business, (which increased 41.6% Y-o-Y).

Total Assets reached USD7.5 billion, an increase of 1.9% Q-o-Q and 8.6% from the same quarter last year, mainly driven by loans to the corporate sector and SMEs as no net additional government bonds purchases has taken place this quarter.

Loans grew to USD2.1 billion by the end of 2Q2012, an increase of 3.9% Q-o-Q and 13.8% from the same quarter last year. Deposits grew to USD6.5 billion, an increase of 1.8% Q-o-Q and 8.6% from the same quarter last year. As a result, the loans-to-deposits ratio increased further to 32.6%, closer to the sector average of 35%.

Excluding the USD1 million extraordinary tax charge, the cost-to-income ratio closed the quarter at 54.9%.

ROAE, ROAA, and NIM did not demonstrate any material change during the quarter.

1H2012

Net Income for 1H2012 came at USD35.6 million, an increase of 8.0% Y-o-Y in organic Net Income (excluding the extraordinary tax charge).

NII reached USD63.3 million in 1H2012, an increase of 2.0% Y-o-Y. Fee and Commission Income reached USD17.1 million in 1H2012, an increase of 28.7% Y-o-Y, driven by strong growth of trade finance business which increased by 29% compared to the same period last year.

II. 2Q2012/1H2012 Results Highlights

·; Total Loans reached USD2.13 billion at the end of 2Q2012, an increase of 13.8% Y-o-Y and 3.9% Q-o-Q.

·; Total Depositsreached USD6.54 billion at the end of 2Q2012, an increase of 8.6% Y-o-Y and 1.8% Q-o-Q.

·; NIIrose to USD31.9 million in 2Q2012, up 2.1% compared to the same quarter last year and 1.4% Q-o-Q. For 1H2012, NII reached USD63.3 million, an increase of 2.0% Y-o-Y.

·; Fee & Commission Incomefor the quarter was USD9.1 million, an increase of 47.5% compared to the same quarter last year and an increase of 14.0% Q-o-Q. For 1H2012, Fee& Commission Income reached 17.1 million, representing an increase of 28.7% Y-o-Y.

·; Trading Incomewas USD3.8 million in 2Q2012, an increase of 76.3% compared to the same quarter last year and a decline of 7.1% Q-o-Q. For 1H2012, Trading Income came in at USD7.9 million, an increase of 63.3% Y-o-Y.

·; Net Provisionsin 2Q2012 showed a positive balance of USD0.9 million, compared to a charge of USD0.5 million last quarter. For 1H2012, net provisions came in at USD0.4 million compared to USD0.5 million in 1H2011.

·; Net Operating Incomewas USD46.2 million for 2Q2012, an increase of 12.0% compared to the same quarter last year and 4.8% Q-o-Q. For 1H2012, Net Operating Income reached USD90.2 million, a 9.6% Y-o-Y increase.

·; Total Operating Expensesfor the quarter were USD27.1 million, higher 19.9% compared to the same quarter last year and 14.2% Q-o-Q. For 1H2012, Total Operating Expenses reached USD50.8 million, a 14.7% Y-o-Y increase.

·; Net Income was USD17.3 million in 2Q2012, an increase of 3.1% from the same quarter last year and a decline of 5.7% Q-o-Q. For 1H2012, Net Income reached USD35.6 million, representing a 5.1% Y-o-Y increase.

III. Comments

Assets: Total Assets reached USD7.5 billion by the end of the quarter, an increase of 8.6% Y-o-Y and 1.9% Q-o-Q, driven principally by continued corporate loan growth.

Loan content of total assets increased to 28.4% at the end of 2Q2012 from 27.9% at the end of 2Q2011. Securities as percentage of total assets continued to decline, down from 44.0% in 2Q2011 to 42.9% this quarter. Finally, Cash as percentage of total assets remained relatively flat compared to last year.

Corporate Banking as a percentage of total assets rose to 13.5% in 2Q2012 from 12.6% at the end of 1Q2012, mainly on the account of Treasury & Capital Markets, which represented 66.1% at the end of 1Q2012 and declined to 65.3% this quarter. Investment Banking and Retail Banking were virtually flat, representing 1.1% and 20.0%, respectively.

Loans: Total Loans increased to USD2.13 billion by the end of the quarter, an increase of 13.8% Y-o-Y and 3.9% Q-o-Q, driven by the corporate loan book growth. On a Q-o-Q basis, corporate loans grew 5.6%, SME loans 4.6% and retail loans 1.9%.

At the end of 2Q2012, corporate loans represented 43.8% of the total loan book versus 43.1% a quarter earlier. Meanwhile, retail loans as a percentage of total loans declined to 41.2% versus 42.0%, and SME loans virtually flat at 15.0%.

Changes in loan portfolio content in 2Q2012: Personal and consumer loans declined to 47.9% from 49.4%, a quarter earlier. Loans to the trading sector, increased to 27.4% at the end of this quarter from 26.7% a quarter earlier. Loans to the industrial sector declined to 13.3% from 14.3% a quarter earlier. Loans to the construction sector increased to 7.7% from 5.9% All other sectors remained unchanged.

Loan quality: The NPL ratio was relatively flat at 3.8% in 2Q2012, as the Bank saw another quarter of strong performance in bad debt collection resulting in a positive balance in net provisions for this quarter. Of total loans, 81.0% is covered by mortgage, cash and bank guarantees, as collateral, on top of the relevant reserves cover, where applicable.

At the end of 2Q2012, the loan book was split 38/62 between local and foreign currency, respectively. Based on the Bank's local currency deposits and relevant local currency reserve requirement with the Central Bank of Lebanon, Credit Libanais has exhausted its lending limit in LBP. As a result loan growth is driven mainly by loans in foreign currency.

The Blended yield on loans declined over the quarter to 7.35% from 7.41% at the end of last quarter and from 7.62% a year earlier.

Deposits: Total deposits stood at USD6.5 billion at the end of 2Q2012, up 8.6% Y-o-Y and 1.8% Q-o-Q, mildly reflecting management's attempt to relax the earlier defensive deposit collection strategy.

Savings accounts continued to be the main contributor to total deposits, representing 61.4% of deposits at the end of 2Q2012. Term deposits represented 27.9% compared to 26.9% a quarter earlier, while sight deposits remained relatively flat representing 10.7%.

By the end of 2Q2012, deposits were split 96%/4% between retail and corporate, respectively.

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

Blended cost of deposits came at 4.21% in 2Q2012 from 4.24% at the end of 1Q2012.

Loans/Deposits ratio: The loans/deposits ratio reached 32.6%, up from 31.9% a quarter earlier, reflecting our continuous strategy to grow the loan book and, this quarter, loosening the conservative deposit collection strategy.

NII: Net Interest Income for the quarter was USD31.9 million, up 2.1% compared to the same quarter last year and 1.4% Q-o-Q, evidencing loan growth and lower than expected net interest expense. For 1H2012, NII saw an increase of 2.0% Y-o-Y, reaching USD63.3 million.

Fee & Commission Income: Fee & Commission Income came at USD9.1 million for 2Q2012, an increase of 47.5% compared to the same quarter last year and 14.0% Q-o-Q. This improvement reflects the Bank's strategy to grow trade finance (+42% Y-o-Y). Fee & Commission Income accounts for 20.1% of total operating income in 2Q2012. For 1H2012, Fee and Commission Income reached USD17.1 million, representing an increase of 28.7% Y-o-Y.

Trading Income: Trading Income was USD3.8 million for 2Q2012, up 76.3% compared to the same quarter last year and a decline of 7.1% 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. Also for 1H2012, Trading Income saw a substantial improvement (+63.3% Y-o-Y) to reach USD7.9 million.

Net Provisions: Net Provisions were positive for 2Q2012 coming in at USD0.9 million versus a charge of USD0.5 million in 1Q2012. The positive balance this quarter illustrates the Bank's successful collection of bad debts. For 1H2012, despite net provisions showing a positive balance of USD0.4 million, it represented a 21.3% decrease compared to 1H2011, as 2011 witnessed even higher bad debt collections.

Expenses: Total Operating Expenses for the quarter was USD27.1 million, up 19.9% compared to the same quarter last year and 14.2% Q-o-Q, negatively affected by the USD1 million tax charge. Excluding the tax charge, Total Operating Expenses increased 15.5% from the same quarter last year and 10.0% Q-o-Q. For 1H2012, Total Operating Expenses reached USD50.8 million, a 14.7% Y-o-Y increase.

Net Income: Net Income for 2Q2012 was USD17.3 million, showing a 3.1% increase compared to the same quarter last year, yet representing a 5.7% Q-o-Q decline. Excluding the tax charge, Net Income would be broadly unchanged Q-o-Q. For 1H2012, Net Income reached USD35.6 million, representing a 5.1% Y-o-Y increase. If we exclude the one-off expense of tax adjustment in 2Q2012, Net Income Y-o-Y growth would further improve to be 8.0%.

Cost/Income Ratio: Cost-to-Income came at 56.1% in 2Q2012 compared to 53.0% a quarter earlier. Excluding the tax adjustment expense, cost-to-income by the end of 2Q2012 would be 54.9%.

Net Interest Margin: NIM remained relatively flat in at the end of the quarter, coming at 1.8%.

IV. International Operations

SENEGAL

In 2010, Credit Libanais invested USD20 million in a full banking license in Senegal and opened one branch in Dakar in August of the year. Total assets came in at USD50.1 million by the end of June 2012, representing a YTD growth rate of 13.7%. Loans reached USD29.5 million, an increase of 35.3% from December 2011; while deposits stood at USD28.3 million, 50.9% increase YTD; resulting in a loans/deposits ratio of 104.1%. The subsidiary incurred a loss of USD1.6 million in 2010 (for the first four months of operation) but managed to narrow its losses to USD0.5 million in 2011. For 1H2012, Senegal subsidiary broke even and started generating a positive bottom line in July 2012.

IRAQ

We now have two branches of Credit Libanais in Iraq; one in Baghdad and one in Arbil at the cost of USD7 million per branch. Iraq started operations in January 2012 and will focus almost exclusively on cross-border trade finance.

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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 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

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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