GFH Bank B.S.C. (GFH) Earnings Call Transcript & Summary

Hello, and welcome to GFH's Q2 2021 Earnings Webcast. My name is Melissa, and I'll be coordinating this for you today. I will now hand over to Janany Vamadeva of Arqaam Capital to begin. Janany, please go ahead.

Thank you, Melissa. Good afternoon, everyone, and thank you for joining us today. This is Janany Vamadeva, and on behalf of Arqaam Capital, I'm pleased to welcome you to Gulf Finance Group's Q2 2021 Earnings Conference Call. I have with me here today from GFS management, Hisham Al Rayes, the Group Chief Executive Officer; and Suryanarayanan Hariharan, the Chief Financial Officer. Without any further delay, I'll now turn the call over to the CFO, Suryanarayanan Hariharan, who will take you through the presentation. Over to you.

Thank you, Janany. Good afternoon, all. I, Suryanarayanan Hariharan, CFO, on behalf of the GFH management team welcome you to GFH Financial Group's financial results presentation for the first half of 2021. Along with me today on the call is Mr. Hisham Al Rayes, our Chief Executive Officer, and other senior members of the management team. GFH continued to deliver another period of profitability as the world is truly returning to normalcy from the pandemic. We are extremely pleased with the contribution from each of our business lines and the resilience they have shown to achieve progress in light of the current global condition. Let me take you through the key highlights of our performance for the first half of the year. Increase in our net profit attributable to shareholders by 146% to USD 37.04 million compared with USD 15.05 million in the first 6 months of 2020. Total income for the first half of 2021 was USD 181 million versus USD 146.5 million for the 2020 period, an increase of 23.5% Consolidated net profit for first half of this year increased by 116% to $44.15 million compared with $20.39 million in the first 6 months of 2020. Total expenses for the period were up 8.5% to USD 137 million from USD 126 million for the first 6 months of 2020. Earnings per share for the period was USD 0.0121 compared to USD 0.0045 for the first 6 months of 2020. The increase during the first half comes in line with solid performance and contributions across each of the group's core business activities. Specifically, supporting growth for the first half of this year the placement of a number of significant national deals, increased treasury activities and stronger performance by the Commercial Banking subsidiary of the group. The group continued its growth in second quarter of 2021 with significant contributions from Treasury portfolio as well as higher contribution from an increased stake acquired during the quarter in Khaleeji Commercial Bank, the group's Commercial Banking subsidiary. Our performance highlights for the second quarter of 2021 were as follows. Increase in net profit attributable to shareholders by 110% to USD 21 million for the second quarter of this year compared with USD 10 million for the second quarter of 2020. Total income for the second quarter of 2021 was $90.6 million compared to $77 million, a rise of 17.6%. Consolidated net profit for the second quarter was $24.8 million compared with $13.6 million in the second quarter of 2020, an increase of 82.3%. Total expenses for the second quarter were $65.8 million compared to $63.5 million, an increase of 3.7%. Earnings per share for second quarter was USD 0.0068 compared to USD 0.0030 for the comparative quarter of 2020. On the balance sheet, total assets of the group grew by 7.1% to $7.06 billion at 30 June 2021 compared with USD 6.59 billion at 31st December 2020. The group's total liabilities grew by 10% to USD 4.66 billion compared with USD 4.24 billion at 2020 year-end. The increase reflects the additional funds raised during the period, which were deployed in Treasury business of the group. Total equity attributable to shareholders were USD 0.94 billion at 30th June, up 2.4% from $0.91 billion at year-end 2020. During the second quarter of this year, the group distributed cash dividends of USD 17 million and bonus shares of USD 25 million as supported by the shareholders in the last annual general meet. GFH results for the first half of 2021 translate into an annualized return on equity of 8%. Our liquidity coverage ratio at 30 June 2021 was at 215%, net stable funding ratio at 98% and capital adequacy ratio at 13.4%. The group's business model remains very diversified with healthy contribution from each of the business lines into the profitability of the group. Contribution by each of the business lines during the first half of 2021 were as follows: Investment Banking contributed 19% of the total income of the group, mainly from product placement activities to investors and structuring fees. The group strategy for strategic business line has shown significant improvement with Treasury contributing 43% of the total income. Higher stake in Khaleeji Commercial Bank in second quarter of 2021, along with better performance from the bank, has helped in Commercial Banking contributing 27% of the total income. Proprietary investments held by the bank continued to contribute around 6% and real estate contributed 5% of the total income. The Real Estate income is primarily from sale of development units in Bahrain. Our performance in the first half of 2021 reiterates our focus on sourcing unique deals through our investment banking business in the U.S. and Europe and successfully placing them with investors eager for diversification and opportunities for sound income generation. We look forward to building on our momentum in the forthcoming periods and maximizing the strong pipeline of opportunities we have in place. With our performance going from strength to strength, we are focused on delivering further growth and value creation for our stakeholders during the remainder of 2021. I would like to thank you for your time this afternoon and open the floor for any questions you may have. Thank you very much.

[Operator Instructions]

Thank you, Suryanarayanan. So we have the first question. What are the expectations for the second half of the year?

We typically do not give guidance or the forecast for the remainder of the year. But going with the momentum, we have a lot of deals in pipeline and that should contribute to the investment banking income for the remainder of the year. As mentioned in the presentation, our Treasury activities look stable. The contribution from the Commercial Banking income is now more stabilized. So we expect the remainder of the year to be delivering good results for the group.

And the next question is, is Commercial Banking performance stable?