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

A very good afternoon, and warm welcome to GFH Financial Group's Quarter 1 2022 Results Presentation. My name is Surya Hariharan. And today, we have our senior management team joining us on the call. The first quarter of 2022 was dominated by extraordinary geopolitical and macro events, and we are particularly proud to achieve another period of profitability during these turbulent times. We have remained focused on drawing on our core strengths and strategy and executing our strategic plans to benefit the various stakeholders. Each of our businesses have been resilient in this environment, and hence, we are in a position to deliver well for the shareholders. In the first quarter of 2022, we continue to grow according to our business plan moving ahead with executing our robust pipeline of opportunities. At USD 19.12 million, net profit attributable to shareholders for the period, the group reported an 18.6% increase in the first quarter results compared to first quarter of 2021. This quarter's earnings translate into an annualized return on equity of 7.2%. Total expenses for the first 3 months of the year were USD 71.46 million, up by 0.57% from USD 71.05 million compared to the same period in 2021. Earnings per share for the first quarter of 2022 were USD 0.0054 compared to USD 0.0052 for the first quarter of 2021. Total income for the first quarter of 2022 was at USD 90.81 million compared to USD 90.39 million in the first quarter of 2021, resulting in a marginal increase. Consolidated net profit for the first quarter remained stable at USD 19.35 million. Total equity attributable to shareholders grew 8.3% to USD 1.04 billion on 31st March 2022 compared to USD 0.96 billion at year-end 2021. The growth in shareholders' equity was due to the current quarter's profitability and changes to fair value of investments. The group's total assets on 31st March 2022 were USD 8.11 billion compared with USD 8.08 billion on 31 December 2021, a slight increase of 0.7%. One of the significant milestone for the group during this quarter was the launch of Infracorp, which will specialize in investing and managing sustainable infrastructure and real estate assets. The group also successfully erode in strategic bias to Infracorp during the quarter, thereby deconsolidating its exposure. Looking at each of the business groups, some of the highlights for the first quarter of 2022 were as follows: Investment Banking, GFH was successful in placing 2 deals in the private equity and real estate space during the period, generating an income of circa USD 25 million. The bank continues to look forward to keep the pace with the opportunities in this field as well as continuing to invest in key markets in the GCC and U.S. Commercial Banking. During the period, Khaleeji Commercial Bank, our Commercial Banking business has performed better than the previous period and has helped Khaleeji Commercial Bank contribute USD 8.5 million towards GFH profitability. Khaleeji Commercial Bank's gross income contributed 22% of the total income of the group. Proprietary and co-investments. During the initial period of the quarter, significant completion and sale in the Harbor Row development, along with continued sale of the units in the Harbor Heights project ensured stable income for the group, along with dividends from its co-investment portfolio. Treasury. Treasury portfolio contribution dropped marginally compared to the first quarter of 2021 due to the impact of macro factors on the global markets. Income from treasury portfolio would have been higher but was impacted by the mark-to-market losses in the portfolio. Treasury and other income contribution remained stable at around 37% of the total income of the group. During the quarter, based on the group treasury's reorganization and on review of the overall market conditions, the bank has modified its treasury business model and identified a portion of its portfolio for long-term yield, resulting in reclassification of these identified securities from shareholder equity to investments at amortized cost. As we go forward, growth remains a central theme for GFH in all areas of our business, and we have entered 2022 with a sharp focus on investments and relationships that will allow us to accelerate growth in our portfolios in key sectors, including logistics, technology and education, among others. GFH has a strong momentum and a pipeline of opportunities to enable us to achieve further growth and profitability for the remainder of the year and beyond. We look forward to announcing further strategic transactions and new partnerships with a view towards creating even greater value for our investors and shareholders. I would like to thank you for your time this afternoon and open the floor for any questions you may have.

We have one question about the Infracorp transaction, and GFH selling 60% of Infracorp during the first quarter. This has been a profit neutral transaction for GFH. We sold 60% at par to third parties during first quarter, and this has already been captured as part of the Q1 results. The impact of this is the deconsolidation of Infracorp from the books of GFH, thereby the real estate portfolio now is being shown as an associate in GFH exposure rather than a subsidiary. We have another question. What is the expectation for the second quarter? Though we cannot give any guidance currently, as I mentioned earlier, that our deal pipeline looks healthy, and so we should be expecting good results going forward. There's one more question. Is GFH looking to restrategize focus on treasury given the international macro conditions? We are watchful of it. We are currently looking at how we can -- we are taking a very cautious approach in terms of our treasury portfolio and for the deployment of our funds in the treasury portfolio. We have one more question. Is GFH looking to be listed in the KSA in the coming future? As it was announced during our AGM that we have the intention to be listed in ADX and Tadawul, subject to regulatory approvals. In terms of the ADX listing, we are -- we should be looking at a listing happening towards the end of this month. The next question is, is GFH looking at any other markets like Egypt? For us, we are looking at any markets that our investors have an appetite for looking at good opportunities across the globe. So we are not restricted to any markets. Thank you all for your time this afternoon. Thank you very much.