Management Discussion and Analysis

EFG Hermes delivered a resilient performance on the back of strong results at the Group’s Investment Bank and NBFI platform to close out an unprecedented year of operations on a positive note.

Despite the impacts of COVID-19 on global capital markets, EFG Hermes was able to witness growth at its Investment Bank and NBFI platforms in 2020. The Group successfully maintained its leading positions in the brokerage space across its footprint and was also able to execute successful exits on the private equity front throughout the year. EFG Hermes’ NBFI platform maintained its double-digit growth trajectory in 2020, a testament to the value it provides to stakeholders through its comprehensive and innovative offering.

EFG Hermes’ Investment Bank platform recorded a revenue increase of 12% Y-o-Y on the back of a solid performance from the Group’s Buy-side and Capital Markets and Treasury revenues. The Group’s successful exit from Vortex Solar, as well as higher incentive fees booked by FIM, supported the Investment Bank’s top line for the year. On the sell-side front, despite recording a decline in revenues due to the impact of the pandemic on capital markets, EFG Hermes’ Brokerage arm successfully led in Egypt, Dubai, Kuwait, and Kenya in terms of market share. The Investment Banking division successfully concluded 24 ECM, M&A and DCM transactions worth an aggregate of USD 1.7 billion — the highest number of transactions the division has recorded in a single year.

The Group’s NBFI platform recorded a top line increase of 13% Y-o-Y and contributed 26% to EFG Hermes’ revenues in FY20. The NBFI platform’s growth came on the back of a stellar performance by consumer financing business valU, which recorded a more than four-fold increase in revenues in FY20. Additionally, valU acquired a consumer financing license from the FRA in the tail-end of the year, marking the complete regulation of all the Group’s NBFI operations. Microfinancing business Tanmeyah continued to contribute the lion’s share of revenues for the NBFI platform in FY20. At the Group’s factoring and leasing operations, 2020 saw the merger of these two divisions under EFG Hermes Corp-Solutions with a goal to capitalize on cross-selling opportunities and grow their contributions to the top line. Both leasing and factoring performed exceptionally well over the past year and recorded improved results on the back of strong bookings at the leasing business and a significant expansion in the factoring portfolio.

EFG Hermes recorded an increase of 12% Y-o-Y in operating revenues to EGP 5.5 billion in FY20. Top line growth for the year was driven by improved performance at the group’s Investment Bank platform, which was primarily supported by solid results at the Group’s buy-side operations and Capital Markets and Treasury revenues in FY20. Additionally, EFG Hermes’ top line results for the period were supported by the continued growth of the NBFI platform, which recorded double-digit growth across the majority of its divisions. Despite an unfavorable operating environment due to the impacts of the pandemic, EFG Hermes’ fees and commissions recorded a small uptick in growth at 2% Y-o-Y to EGP 3.5 billion, contributing 64% of the Group’s revenues in FY20. Moreover, the Group’s Capital Markets and Treasury Operations reaped the rewards of recovering regional capital markets and the subsequent revaluation of seed capital and investments and delivered a top line expansion of 36% Y-o-Y to EGP 1.9 billion in FY20.

Group operating expenses recorded an increase of 17% Y-o-Y to EGP 3.6 billion on the back of an increase in employee expenses as EFG Hermes continued to expand its team, as well as an increase in provisions and impairment charges over the course of the year. The Group’s ratio of employee expenses to operating revenues remained below management’s threshold of 50% and stood at 42% in FY20.

EFG Hermes recorded an increase of 4% Y-o-Y in net operating profit to reach EGP 1.9 billion, yielding a margin of 34% in FY20. Net profit after tax and minority interest came in at EGP 1.3 billion, representing a decline of 5% Y-o-Y on the back of higher tax charges over the course of the year, which included deferred taxes for unrealized gains on investments as well as the reversal of FY19 deferred tax gains at the holding level in FY20.

Group Financial Highlights
In EGP mnFY20FY19Change
Group Operating Revenue4,8595,45912%
Investment Bank3,6204,06212%
Group Operating Expenses3,0803,60417%
Group Net Operating Profit 1,7791,8554%
Group Net Operating Profit Margin37%34% 
Group Net Profit after Tax & Minority Interest1,3781,305-5%
Investment Bank1,0611,1508%

The Investment Bank

Securities Brokerage

EFG Hermes Securities Brokerage completed USD 55.1 billion in executions, representing a minor decline of 1% Y-o-Y on the back of lower capital markets activity in Saudi Arabia, Qatar, Egypt, and the Group’s Structured Products due to the pandemic. The Group was able to maintain its leading position as the broker of choice across multiple markets, retaining its position as the leading brokerage house in Egypt with a market share of 36.4% in FY20. The Group successfully retained 49.0% of the 19.8% of foreign participation in the market during the year and 11.1% of the retail business in Egypt. In parallel, EFG Hermes ranked first on the DFM and second on the ADX, hitting market shares of 32.5% and 27.6%, respectively in FY20. In Saudi Arabia, the Group delivered a fourth-place finish among pure brokers (non-commercial banks) at a 2.2% market share in FY20. Moreover, the Firm maintained its position as the largest broker operating on the Kuwait Exchange, closing out the year with a market share of 34.1% in FY20. In Oman, the Group improved its ranking, coming in at third place up from fourth in the previous year, with a market share of 24.5% in FY20. EFG Hermes ranked thirteenth in Jordan with a market share of 6.0% in FY20. in addition to a 3.8% market share in Pakistan.. The Group successfully ranked first in Kenya, recording a market share of 51.6% to come up from second place in the previous year, and ranked second in Nigeria with a market share of 19.8% in FY20.

Securities Brokerage recorded revenues of EGP 1.0 billion, representing a decline of 17% Y-o-Y in FY20 on the back of lower revenues booked across multiple markets as well as the Group’s Structured Products due to the impacts of the pandemic on capital markets.

Egyptian equities continued to represent the highest contribution to the Brokerage commission pool, representing 25.6% of the total, followed by Kuwait at 19.8%, and Frontier Markets, including Nigeria, Kenya, Pakistan and other Frontier executions, which came in third with a 14.8% contribution in FY20.

Group Revenue by LOB (EGP mn)
Investment Banking

EFG Hermes Investment Banking successfully executed 24 ECM, M&A, and DCM worth an aggregate value of USD 1.7 billion in FY20, marking the division’s largest number of transactions in a single year.

On the ECM front, EFG Hermes Investment Banking acted as joint book runner on the USD 700 million IPO of Saudi-based healthcare company Dr. Sulaiman Al Habib Group on the Tadawul exchange. The team also acted as sole bookrunner on the USD 50million accelerated equity offering of a 7% stake on the EGX for Fawry for Banking and Payment Technology. Despite the challenging environment, the transaction witnessed positive aftermarket performance and unlocked increased value for shareholders’ residual stake. Additionally, the team acted as buy-side advisor to Abu Dhabi Developmental Holding Company’s (ADQ) Alpha Oryx on the purchase of a 4.99% stake in courier giant Aramex worth USD 77.4 million, through an accelerated equity offering.

In the M&A space, the team acted as sell-side advisor to Food Company (Americana), the largest integrated food company in the Middle East, on the sale of its stake in the Egyptian Starch and Glucose Company (ESGC), through a mandatory tender offer (MTO) on the EGX for a total value of USD 27 million. Moreover, the team successfully advised Pakistan’s United Bank Limited (UBL) on the sale of the assets and liabilities of its Tanzanian subsidiary, UBL Tanzania (UBLT) to Exim Bank Tanzania Limited. The division also acted as the sell-side advisor to Japan-based Tokio Marine Group on the sale of a 75% stake of its Egyptian life insurance subsidiary Tokio Marine Egypt Family Takaful to EFG Hermes Finance and GB Capital. The acquisition aims to expand the scope of EFG Hermes’ and GB Auto’s NBFI offerings through the introduction of innovative insurance products that will unlock additional value for both companies going forward. Building on its longstanding relationship with Heidelberg Cement, the team successfully advised on its restructuring plans, which included an MTO and the delisting of both Suez Cement and Tourah Portland Cement Company for USD 12.3 million and USD 6.0 million, respectively in FY20. The division also successfully advised EFG Hermes Private Equity on the sale of a 100% stake in leading water desalination group, Ridgewood Group, for a total value of USD 27.0 million in FY20.

In the debt-raising space, EFG Hermes successfully concluded a USD 127 million sukuk issuance for the Arab Company for Urban Development, the real estate development arm of Talaat Mostafa Group (TMG), acting as sole financial advisor, sole lead arranger, sole bookrunner and underwriter. The issuance marked Egypt’s first ever corporate sukuk issuance, as well as the largest EGP-denominated private sector corporate debt issuance in the Egyptian capital market. The team also successfully issued a second securitization bond for Premium International for Credit Services worth USD 11 million, which comes as part of the company’s two-year program to issue EGP 2 billion (USD 125 million) in securitized bonds. In the third quarter of the year, the division successfully completed the third issuance of Premium International for Credit Services securitization program, amounting to USD 10.1 million. Additionally, the division issued the first tranche of Tanmeyah’s EGP 3 billion securitization program, amounting to USD 34.4 million, which marks the largest securitization transaction amongst microfinance companies in Egypt. The team also arranged an international debt facility for private equity firm Actis for a value of USD 14.5 million. In the final quarter of the year, EFG Hermes’ Investment Banking Division completed eight debt transactions. The division successfully concluded a seven-year USD 265 million debt arrangement for Orascom Development Egypt (ODE), to refinance outstanding debts and fund growth plans over a two-year period. The team also advised on the USD 38.1 million sukuk issuance by Cairo for Investment and Real Estate Development (CIRA), one of the largest private educational players in Egypt, marking the first sukuk issuance in the Egyptian education sector and the division’s second sukuk issuance in 2020. Additionally, the division concluded two securitization issuances for Talaat Mostafa Group (TMG) worth an aggregate value of USD 83.5 million. Moreover, the division capitalized on encouraging regulatory developments following the publication by the Financial Regulatory Authority (FRA) of Decision No. 172-2018 regarding the rules and procedures for the issuance of short-term debt instruments and successfully advised on a series of debt arrangements. The team advised ADES Investments for a USD 13.0 million debt facility, a USD 23.2 million facility for New City Housing and Developments (NCHD) and completed the advisory for USD 95.5 million worth of debt financing for Marakez.

The Group’s Investment Banking Division recorded revenues of EGP 237 million, representing a decline of 28% Y-o-Y in FY20.

Asset Management

EFG Hermes Egypt Asset Management recorded a 17.2% increase in AUMs to reach EGP 19.1 billion as of year-end 2020 on the back of strong inflows from money market funds and equity portfolios.

In parallel, EFG Hermes’s regional asset management arm Frontier Investment Management “FIM” saw a strong 40% increase in AUMs and surpassed the two billion mark to reach USD 2.1 billion in FY20. FIM’s strong performance for the year added 10.9% to total AUMs in FY20.

The Group’s Asset Management Division recorded a solid 28% Y-o-Y revenue increase to EGP 413 million in FY20.

Private Equity

EFG Hermes Private Equity Division completed the sale of its managing stake in Vortex Solar, the sole owner of a 365 MW solar PV farm in the UK, at an enterprise value of c. GBP 500 million in FY20. The strategic exit saw EFG Hermes Holding (which has a 5% indirect share in Vortex Solar) received GBP 11 million in cash sales proceeds compared to an initial investment outlay of GBP 7.5 million, which resulted in a capital gain of GBP 1.6 million on the holding level. Additionally, the Private Equity Division recorded a carry of GBP 16.7 million from the exit.

The division’s education platform, the Egypt Education Fund, which is jointly owned with Dubai-based GEMS Education, holds a portfolio of three investments including a portfolio of four operational schools located East Cairo currently serving an excess of 6,000 students. Additionally, the Fund owns a school in Al Rehab that is currently under construction and is anticipated to begin operations in 2022. The division also has a majority stake in a leading transportation provider Option Travel.

On the healthcare front, the division acquired an 80% stake in United Pharma (UP) through EFG Hermes’ healthcare investment management arm, Rx Health Management, at the tail-end of 2019. In 2020, United Pharma witnessed a successful turnaround under the stewardship of the Rx Health Management team and achieved the targets it had set out for UP in 2020. United Pharma successfully aligned with the Ministry of Health’s (MOH) Good Manufacturing Practice (GMP) guidelines and captured a market share of 10% despite the turbulent market conditions in FY20. Additionally, UP has upsized its facilities and overall capacities to support the company’s growth trajectory going forward.

In parallel to the division’s progress at United Pharma, the Rx Healthcare platform has begun eyeing a number of highly promising opportunities across the generic products and injectables segments with an aim to further expand the healthcare platform’s investments in the pharmaceutical space.

The Private Equity Division recorded a revenue increase of 37% Y-o-Y to EGP 468 million in FY20. The division’s growth came on the back of its strategic exit from Vortex Solar in FY20.


EFG Hermes Research continued to expand its coverage in 2020, and successfully added another 20 stocks across its coverage universe over the course of the year. The expansion included the initiation of coverage on the world’s largest company, Aramco, as well as widening the team’s coverage of banks in Vietnam. Additionally, the team started the initiation of coverage on several stocks in fast-growing sectors, including healthcare and electronic payments. Active coverage increased from 287 stocks in 2019 to 299 by year-end 2020. EFG Hermes initiated coverage of new equities in Nigeria (2), Vietnam (7), Pakistan (1), Saudi Arabia (1), and Kuwait (1). This expansion leaves EFG Hermes Research with enhanced in-depth coverage of a variety of dynamic markets and growth sectors. As of year-end 2020, the department’s coverage universe encompassed Egypt (45), UAE (24), Kuwait (16), Qatar (11), Saudi Arabia (66), Oman (14), Pakistan (31), Vietnam (17), Kenya (10), Nigeria (14), Bangladesh (11), Jordan (6), Morocco (6), Tanzania (6), United Kingdom (5), for Ghana (4), Uganda (3), Sri Lanka (4), Georgia (2), Mauritius (2), Rwanda (1), and The Netherlands (1). Despite the impacts of the pandemic and with it the flurry of social distancing measures seen across the globe, the team was able to perservere and adapt to the situation. The team managed to host three online conferences as well as a number of virtual roadshows to continue delivering the exceptional services that the division’s clients have come to expect of them. The Research team reaped the rewards of its efforts and ranked in first place for Frontier markets and second in the MENA in the 2020 Institutional Investor Poll for MENA and Frontier Research.

Non-Bank Financial Institutions

  • EGP 1.4 BN: NBFI Platform Revenues in 2020
EFG Hermes Leasing

EFG Hermes’ leasing line of business significantly grew its market share to 9%, up from 4.5% in FY19, leaving the Group among the top five leasing companies in Egypt in FY20. The division’s aggressive cross-selling strategy saw the team execute larger ticket sizes compared to the previous year. The team’s efforts drove a 38% Y-o-Y increase in division’s total outstanding portfolio to EGP 4.7 billion in FY20.

Leasing revenues increased by 17% Y-o-Y to reach EGP 184 million in FY20.


EFG Hermes’ factoring portfolio more than doubled in FY20, driven by division capitalizing on the cross-selling opportunities through its merger with the Group’s leasing operations under EFG Hermes Corp-Solutions in 2020. The Group’s factoring portfolio grew to EGP 819 million in FY20, recording a strong increase from EGP 369 million in the previous year. The division recorded a revenue increase of 178% Y-o-Y to EGP 25 million in FY20.


EFG Hermes’ microfinance subsidiary Tanmeyah saw a 6% Y-o-Y decline in its outstanding portfolio to EGP 3.0 billion. The contraction came on the back of an externally challenging environment due to the pandemic, which saw lower traffic at Tanmeyah’s branches. The number of active borrowers declined by 7% Y-o-Y to 335,000 and the number of loans declined by 11% Y-o-Y to 312,000 in FY20.

However, despite the impact of the pandemic, Tanmeyah was able to continue growing its branch network and inaugurate five new branches and closed out the year with a total of 285 branches. Additionally, Tanmeyah officially piloted its new e-payment channel via Damen across 26 of its branches towards the tail-end of the year and has witnessed positive results in its early-stage trials. Tanmeyah also partnered with a local micro insurance provider and sold over 103,000 issuance certificates in FY20 and is looking to expand on this offering going forward.

Tanmeyah recorded a 3% Y-o-Y increase in revenues to EGP 1.1 billion in FY20.


valU is a state-of-the art fintech solution offering Egyptian consumers payment-on-installment-programs. The Group’s consumer financing service witnessed an exceptional performance despite the harsh market conditions over the course of the year. Early on in the year, valU successfully partnered with, an Amazon subsidiary and the leading e-commerce platform in the Middle East, to strengthen valU’s online merchant network and drive the growth of online sales. Additionally, valU added Carrefour, the largest mega store in Egypt, to its network of partners. With Carrefour now in valU’s network, the Group’s consumer financing platform has successfully partnered with Egypt’s four largest megastores, including Hyper One, Spinney’s, Carrefour, and El Morshedy.

In 2020, valU introduced an innovative solution called “WAQTY”, the first online instant transaction approval product for non-valU customers who hold valid credit cards issued from Egyptian banks. The platform supported the growth of valU’s transactional base by providing clients with an automated approval process. Additionally, valU collaborated with Raseedi, the first airtime optimization solution in Egypt, to launch an alternative lending initiative based on customers’ telecommunication behavior.

valU closed out the year with 91,000 customers, reflecting an increase of 56% Y-o-Y in FY20. The company also reaped the rewards of its merchant expansion strategy and recorded a strong increase to 898 merchants in FY20, up from 485 in the previous year. Additionally, over 196,000 transactions were completed using the valU platform in FY20, representing an increase of 255% Y-o-Y in FY20. valU’s total outstanding portfolio grew by a stellar 130% Y-o-Y to reach EGP 832 million in FY20.

The Group’s consumer financing platform recorded revenues of EGP 111 million in FY20, up from EGP 25 million in the previous year. It is worthy to note that valU successfully acquired its consumer finance license from the FRA in 2020, signaling the complete regulation of EFG Hermes’ NBFIs operations.