A forward-thinking business is the key to meeting shareholder expectations and achieving long-term success
EFG Holding Group CEO Karim Awad shares insights on how this renowned universal financial institution balances long-term viability and market leadership while meeting shareholder growth expectations doing. Find out his views on digital transformation and how EFG Holding plans to ensure it stays ahead of the curve.
What innovative financial products and services is the company developing to strengthen its leadership in emerging markets, particularly in this region?
EFG Holding excels in innovation and constantly introduces new products to meet the evolving needs of its growing customer base. In 2017, our Private Equity division established Vortex Energy, a renewable energy operating company, becoming the first manager in the region to offer clients exposure to this important sector across the European continent.
Our fintech subsidiary, Valu, has become well-known in Egypt and has revolutionized consumer finance in Egypt, now boasting a customer base of over 500,000 people and offering a wide range of innovative products and services. doing. These are just a few examples of innovative financial products that have been or are being developed to provide cutting-edge financial solutions that meet the diverse requirements of an ever-increasing number of customers.
What are the biggest hurdles facing MENA when it comes to investment? What can be done to further improve the region's investment climate?
I believe there is a wealth of opportunity within the MENA region, but I don't think we can think of it as a whole. It is essential to recognize the diversity and uniqueness of each economy. While economies like the UAE and Saudi Arabia have significantly raised the bar to become global havens for investors of all nationalities, other countries also have unique challenges that they are not actively addressing. I'm here.
But in general, I think the biggest hurdle to investing in the region is the recognition of geopolitical risks, which currently continue to put a cap on the amount of investment we can attract. This perception is not entirely fair, but in my opinion, if completely eliminated through a more stable situation with intensive investor education, it could have a huge positive impact on inflows to the region as a whole. there is.
Can you share some insight into how EFG Holding is navigating digital transformation in investment services? What challenges have you encountered and how have you overcome them?
We have long recognized that digital transformation will play a pivotal role in reshaping the industry in the coming years. As we navigate the rapidly evolving AI landscape, it's clear that both product offerings and customer expectations are about to undergo major changes. Remaining at the forefront requires significant investment in infrastructure and innovative products, even if the benefits are not realized immediately.
For publicly traded companies like ours, it is a challenge to strike a balance between strengthening our business for long-term success and meeting our shareholders' immediate growth expectations. We are fortunate to have a partner that provides unwavering support for our strategic initiatives aimed at future-proofing our business and ensuring sustained growth in an increasingly digital-centric environment. There are stakeholders.
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ESG is receiving increasing attention. How are you responding to the demand for sustainable investing?
In fact, we are very active on the sustainable investing front. As previously mentioned, our private equity platform, Vortex Energy, is a rapidly growing player in the global renewable energy scene and is active in funding the growth of players in solar, wind and the energy transition. contributes to. Additionally, our efforts extend into the education sector, with his $150 million endowment investing in more than 15 K-12 schools in Egypt. The fund's remarkable success and strong operational track record led us to consider bringing its expertise to the region through a new $300 million fund that we are currently raising. The fund will be dedicated entirely to Saudi Arabia's burgeoning education sector.
The banking and financial sector is becoming increasingly competitive. What strategies do you employ to stay ahead of the curve?
In a talent business like ours, I believe that a key strategy is to foster a great working environment to attract top talent from all the sectors in which we operate. This can be difficult given the increasing competition in the financial sector, but EFG Holding's track record over the past 40 years shows that we are fortunate to continue to employ some of the brightest and most dedicated professionals in the field. is showing.
The fact that we have been able to retain the majority of these top talent in the face of intense talent competition in the region is a testament to the value proposition that EFG Holding offers its employees. This success makes us feel optimistic about our ability to maintain a leading position in the industry for years to come.
EFG Hermes, the investment bank of EFG Holding, has been based in the UAE for over 20 years. In your opinion, what are the key financial measures that have enabled the UAE to become a regional financial powerhouse?
We take great pride in being one of the pioneering investment banks that established our presence in the UAE in 2002. While our initial foray was driven by optimism about the country's potential, the impressive progress of the past two decades has far exceeded our expectations. What sets the UAE apart is its commitment to providing equal opportunities to all participants, regardless of their nationality.
The regulatory framework, known for its transparency, has evolved significantly over the years to become more investor-friendly, resulting in an increasing share of foreign direct investment in the region. Additionally, the establishment of DIFC (Dubai International Financial Center) and ADGM (Abu Dhabi Global Market) as globally competitive jurisdictions within the UAE will help foster a more conducive environment for businesses to operate. It's helpful.
What impact do you think Egypt's EGP free float decision will have on the results for the first quarter of this year?
Over the past decade, we have built a resilient business model specifically designed to cope with the region's continued fluctuations. With an increasing proportion of our revenues now denominated in US dollars, we are well positioned to benefit from recent currency movements and grow in EGP. Additionally, we have diligently managed our balance sheet and have implemented hedging strategies to mitigate the risks associated with a potential devaluation of EGP. As a result, we expect to deliver exceptional performance in the first quarter of 2024, taking advantage of recent monetary regime changes.
EFG Holding's commercial bank, aiBANK, saw a 61% increase in revenue due to higher net interest income due to a significant increase in loan balances. In this economic environment, which companies and projects are borrowing and where are investments being made?
In late 2021, we acquired aiBANK as a pure restructuring plan, and since then, over the past two years, we have properly capitalized the bank and equipped it with the necessary human and non-human resources for strong future growth. We have worked hard to prepare. . The bank will continue to serve large corporate clients in Egypt, but its main focus will be on expanding its lending portfolio for individuals, medium-sized businesses, and small and medium-sized enterprises.
These segments not only enhance risk diversification across the bank, but also offer more favorable margins. However, effectively targeting these segments requires significant investment in upgrading our technology infrastructure and branch network, and we are currently directing a significant portion of our capital into this area.
We have heard that EFG Holding may hold an IPO in Egypt within the next 12 months and sell 25 percent of Valu's shares. With several companies considering postponing their listings due to the worsening environment, is now the right time for an IPO?
Our board of directors has not yet reached a final decision on this matter. Nevertheless, we are actively seeking avenues to maximize shareholder value, including evaluating the possibility of listing some of the excellent businesses we have developed in recent years. It will be. The best example is Valu.
Although market conditions will ultimately influence the decision to proceed with the listing, we believe the company will significantly increase its market share, which will also improve its profitability. Coupled with widespread brand recognition in Egypt, Valu presents an attractive opportunity to successfully launch his IPO at the right time and the Board of Directors has decided to move forward.
About Karim Awad
Karim Awad is Group Chief Executive Officer, Chairman of the Executive Board and member of the Board of Directors of EFG Hermès Holding. Since taking over as the company's leader in 2013, Awad has led EFG Hermès to profitability by cutting unreasonable expenses, selling non-core assets and distributing surplus cash to shareholders. Since 2014, Mr. Awad has worked with leading experts across the firm's various divisions to build a comprehensive regional advisory pipeline. Expanding our leadership as the Arab world's largest securities company. We will continue to lead our peers in the same ranking as an asset management company. Successfully refocused on private equity business. And we will continue to provide the highest quality research services in the region.
Mr. Awad also announced that by the beginning of 2016, the company would undergo a new strategic shift based on expanding its geographical footprint, with the aim of transforming EFG Hermès from a MENA company into a financial company operating across frontier markets. We promoted it. He also leveraged the company's traditional business areas through the creation of a parallel non-bank financial platform, EFG Hermes Finance, which was founded in 2015 and currently covers leasing, microfinance and consumer financial services. began to place greater emphasis on product diversification. Finance and factoring business.
Prior to his current role, Mr. Awad was Chief Executive Officer of the Investment Banking Platform, where he was responsible for overall management of the firm's investment banking, securities brokerage, research, asset management, and private equity divisions. . He joined his investment banking division in 1998 and previously served as head of investment banking.
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