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

A very good afternoon and warm welcome to GFH Financial Group's results presentation for the first quarter of 2023. My name is Surya Hariharan. And today, I'm joined by my colleagues from the senior management team on the call. We are pleased to announce another quarter of enhanced performance and results, including continued growth in the group's income and profitability. Against a less certain market and ongoing volatility across global markets, the diversity of our business lines and the expertise of our team ensure that we are working well in such economic cycles. Let me first provide you with the key milestones achieved by the group for the first quarter of 2023. Net profit attributable to shareholders of USD 24 million, up by 25.6%. Consolidated net profit for the period of USD 24.4 million, an increase of 26.4%. Rise in total income for the period by 31.7% to USD 86.9 million. Growth in total assets by 6.5% (sic) [ 6.6% ] to USD 10.4 billion. A slight increase in operating expenses during the period to USD 41.1 million. Increase in finance expenses in line with the rising rate environment to USD 20.8 million during Q1 of 2023 from USD 11 million in Q1 of 2022. Capital adequacy ratio of 14.39%. Total assets and assets under management increased to USD 18 billion. Our strength was reflected across verticals, including our Investment Banking, Commercial Banking and Treasury and proprietary business lines. Highlights of the contribution by each of the business lines were as follows. Investment Banking. Investment Banking, which remains our core business line, contributed roughly about half of the total income of the group for the period. GFH was successful in placing a private equity deal during this period. Investment Banking income grew by more than 80% during the first quarter of 2023. Our diverse investment portfolio, which spans the GCC, U.K., Europe and the U.S. continue to perform robustly with our strategy of targeting defensive, recession-proof sectors, once again proving its effectiveness in creating value for investors and shareholders in the face of significant headwinds. We have also built a strong pipeline of exciting deals for the rest of the year. Commercial Banking. We realized growth in contribution from our commercial banking subsidiary, Khaleeji Commercial Bank, which recorded a net profit of BHD 3.75 million for the quarter. Our stake in Khaleeji Commercial Bank has enhanced our diversity of results. Khaleeji Commercial Bank's gross income contributed 29% of the total income of the group. The income from Khaleeji Commercial Bank witnessed a 28% growth during the current period compared to similar period of 2022. Proprietary and Treasury investments. Contribution from treasury and proprietary investments dropped during the first quarter of 2023 compared to first quarter of 2022 by 24%. This business line contributed 20% of the total income of the group. All our investments within this portfolio continue to perform in line with our strategy. However, the rising finance cost in line with the growing rate environment has impacted the net spread of the Treasury performance. We continue to monitor the markets closely and accordingly evaluate our strategy related to this business line. The group's total assets at end of first quarter of 2023 stood at USD 10.4 billion compared with USD 9.8 billion on 31st December 2022, an increase of 6%. The primary increase is due to the increase in the Treasury portfolio of the group, which has grown in line with the placements raised by the group. The group's liabilities grew from USD 7.5 billion as of 2022 year-end to USD 7.7 billion at 31st March 2023. The liabilities raised through money market funds have been actively deployed in the liquid asset portfolio of the bank. Total equity attributable to shareholders dropped from USD 997 million at 31 December 2022 to USD 982.7 million at the end of first quarter of 2023. The primary movement in shareholders' equity was the current -- previous profitability, dividends approved by the shareholders for 2022 and change in treasury shares. Our performance translates into an annualized return on equity of 9.8% and return on assets of 1%. Turning to regulatory ratios. Our capital adequacy ratio was at 14.39%, liquidity coverage ratio at 179%, and net stable funding ratio at 101%. All our regulatory ratios are above the prescribed thresholds. We have also included a couple of slides on the ESG initiatives that the bank is currently looking at. We entered 2023 from a position of strength and we continue to show our strategy performs well across the cycle. We have been able to undertake key investments during 2023 and successfully placed funds of our regional health care platform, Healian, with investors during this period. Our Commercial Banking subsidiary was able to successfully adapt to high interest rates during the period and achieved sound growth. Similarly, our Treasury business rebalanced its portfolio and achieved good performance during the first quarter. We aim to further build our portfolio of income-generating assets in the GCC where economic growth is expected to continue in the coming periods. Having entered the year with good momentum, we look forward to building on these results and generating even greater value for our investors and shareholders in the forthcoming periods. I would like to thank you for your time this afternoon and open the floor for any questions you may have.

I'll take the first question, which is, if we can achieve triple-digit result this year depending on this growth. While we are not supposed to be giving out any forward-looking statements, hopefully, we continue to deliver solid results for our investors and stakeholders in the future [Foreign Language]. There's another question about clues for future acquisitions for this year. As you would see from GFH performance for the past couple of years, we are actively looking at acquisitions. This is one way of growth for GFH balance sheet, and the contribution from these acquisitions go significantly into the income statement of GFH. We are looking at acquisitions. However, nothing is finalized as of now. We will keep the markets informed as and when we have some headways on these. Thank you. There's another question about total equity attributable to the owners of the parent company dropped. The primary reason for this is the dividend that was declared during first quarter of 2023, the dividends that were approved by the AGM during first quarter of 2023. That amounted to roughly about $56 million, which is a deduction from the retained earnings for 2023 Q1. Thank you very much all of you for your attendance. I hope to see you in the next quarter after the results are published. Thank you very much for your time this afternoon.