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

A very good afternoon, and a warm welcome to GFH Financial Group's 12 months and fourth quarter of 2024 results presentation. My name is Surya Hariharan, and I will present you with the highlights of our financial performance during this period. 2024 has been another remarkable year of growth and profitability for the group. Our robust strategy has provided us with the stability needed to continue expanding our global footprint in support of top and bottom line growth whilst also remaining resilient. This slide highlights the group's performance in a glance for 2024. Robust financial performance. The group achieved net profit attributable to shareholders of USD 118.5 million, up by 15% compared to 12 months of 2023. We delivered double-digit growth in income for the 12 months period by 40% to USD 677 million, driven by the continued strong performance of all our business verticals. The group's assets and AUMs has further grown to USD 21.5 billion with 48% of the group's assets in cash and treasury portfolio. Our capital adequacy ratio stands at 16.67%, liquidity coverage ratio at 195% and net stable funding ratio at 137%. All these ratios are well above the regulatory minimum threshold. Unwavering strategic focus. This year underscored our commitment to diversify our investment portfolio and reinforce our position as a leading financial group in the region and beyond. All the business lines played a pivotal role in the group's 2024 profitability. We further capitalized on opportunities for growth in our core regional markets with an emphasis on Saudi Arabia and the U.A.E. This is in addition to strengthening our existing access to the U.S. as a mature market, allowing us to continue to offer compelling asset management and investment products. Strong business growth. Momentum in investment banking and proprietary investments, including 13 investment banking business deals, successfully closed in 2024. Additionally, and in line with our commitment to deliver strong and timely returns to our investors, our private equity team achieved notable exits in 2024, including the sale of GFH's leading GCC-based K-12 education platform, Britus Education, as well as an early exit from GFH's joint investment in Citrix, which was exited 18 months ahead of its projected 3-year horizon. In line with its Board-approved strategy, the proprietary investments business line has been successful in exiting real estate assets from the portfolio, contributing to gain from sale of assets. Continued confidence in the group. Further positive reflections of our performance were provided by credit rating agencies. Fitch Ratings affirmed our long- and short-term issuer default ratings, IDR, at B, and confirmed the outlook on long-term IDR as stable. Capital Intelligence rating also affirmed GFH's long- and short-term foreign currency ratings at BB- and B, respectively, with stable outlook. Moving on to the details of the financials of the group. We are pleased to report another year of positive performance with net profit attributable to shareholders of USD 118.5 million, up by 15% compared to 12 months of 2023. Some of the key numbers for 2024 are as follows: Consolidated net profit for the 12 months was USD 128.3 million, an increase of 22%. We delivered double-digit growth in income for the 12 months period by 40% growth to USD 677.3 million. In line with the growth, rise in total expenses by 21% to USD 346.8 million. Earnings per share for the period grew by 13% to USD 0.0333 per share. The group's assets and assets under management is circa USD 22 billion. Stable liquid assets with 48% of the assets in cash and treasury portfolio of circa USD 5.3 billion. Total equity attributable to shareholders of USD 990 million, broadly in line with 2023 balance. Our performance translates into a higher return on equity as of December 2024, which stands at 12% compared to 9.8% as of December 2023. We will now move on to the main highlights for each of the business lines, along with their contribution to quarter 4 revenues. Investment Banking. Our core business line, investment banking, contributed circa 27% of the total income of 2024. A key milestone in 2024 was the continued success of GFH Partners, a dedicated global Dubai-based investment arm. With deals spaced across the GCC, U.S. and the U.K. markets, GFH Partners exemplifies our vision of delivering impactful investments in life critical sectors. Its portfolio spans logistic hubs, affordable student and multifamily housing and medical facilities across the GCC, U.S., Europe and U.K., areas that are vital to both economic resilience and societal well-being. These investments reflect our belief in combining financial performance with meaningful contributions to essential services, ensuring long-term stability and value creation. Furthermore, the group's private equity investments in 2024 contributed to the expansion of GFH's regional and international footprint. These include investments in regional health care, the maritime industry as well as increased investments in sustainable infrastructure and renewable energy. Additionally, and in line with our commitment to deliver strong and timely returns to our investors, our private equity team achieved notable exits in 2024. This included an early exit from GFH's joint investment in Citrix, which was exited 18 months ahead of its projected 3-year horizon. The investment's strong performance exceeded expectations, leading to an early refinancing and a full exit, which resulted in an IRR of approximately 7.3% to our investors. Further, GFH signed to sell its leading GCC-based K-12 education platform, Britus Education, to the Saudi Education Fund managed by the private equity arm of EFG Hermes. At the heart of our accomplishments remains our strategic focus on diversification and sustainable growth, marked by significant investments in sectors demonstrating robust fundamentals. This strategic alignment has driven our continued success, underpinning our commitment to delivering value to our investors and shareholders while maintaining focus on impactful investment. Commercial Banking. Income from our commercial banking arm, Khaleeji Bank, improved compared to the previous year and contributed circa 22% to the total income of the group. Khaleeji Bank achieved a net profit of USD 27.86 million, attributed to bank shareholders for the fiscal year ended 31st December 2024, compared to net profit of USD 23.88 million in 2023, an increase of 16.67%. Khaleeji's Board of Directors have recommended distributing dividends to shareholders after the results for the fiscal year 31st December 2024 on all ordinary shares, excluding treasury shares at a rate of 5% of the nominal value of the share. Treasury and proprietary investments. Contribution from treasury and proprietary investments, including strategic transactions and monetizing of proprietary assets, increased from USD 146 million to USD 347 million for the period ended 31st December 2024. This business line contributed circa 50% of the total income of the group. Performance on the treasury portfolio is in line with the previous year, except for the negative fair value movement, which was a positive number in the previous year. In line with its Board-approved strategy, the proprietary investments' business line has been successful in exiting real estate assets from the portfolio, contributing to gain from sale of assets. This includes a sale stake in Raffles Bahrain and in Amwaj project. The group as well in partnership with Infracorp, signed with Kempinski to launch Harbour Heights Kempinski Hotel, an exclusive branded residences. The project will deliver the next level of luxury waterfront living in the heart of Manama's exclusive Bahrain Harbour. During 2024, the group also launched OUTLIVE, an innovative real estate venture rooted in health and well-being in MENA and Europe, to create master-planned communities and environments where personal health and social connections flourish, blending individual well-being with shared community life. Now we would like to give some insights into the group's share price performance during 2024. A 34% increase in GFH share price during 2024 reflecting the momentum in the group's performance and outperforming DFM General Index by circa 8%, showcasing a strong share price appreciation. In line with the group's results, the Board of Directors have recommended a total cash dividend of 6.2% on par value, subject to approval by the general assembly and regulators. The Board of Directors have also recommended implementing the interim dividend distribution policy on a semiannual basis starting this year, subject to regulatory approvals. The group continued to effectively execute on its ESG strategy, undertaking key initiatives in the fourth quarter, including student internship program with Britus International School, the commitment to cultural preservation and environmentally sustainable projects and an MOU with Safa, Bahrain's voluntary carbon offsetting platform. As we reflect on a year of substantial achievements and set our sights on the future, GFH is well positioned for continued success. Our investments focus on sustainable growth and unwavering commitment to our stakeholders form the cornerstone of our strategy. The resilience, innovation and foresight that have guided us through 2024 will continue to guide our success. With a well-diversified business, clear direction and a dedicated team, we are well positioned to tackle the challenges and opportunities that lie ahead. 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 from one of the participants in terms of the Britus transaction. We have signed with EFG Hermes for the sale of the Britus transaction. However, the same was not concluded by Q4 of 2024 and hence, has not been reflected in the financials for 2024. The same would be reflected in 2025. We had one more question in terms of the other operating expenses being on the higher side. We have a lot of initiatives that we have taken in terms of cost reduction. However, we also have to bear in mind that GFH is constantly growing. We have had offices and licenses being set up in DIFC at the same time in Saudi Arabia and in Kuwait currently. So each of these jurisdictions need their own set of employees to be part of it, own set of directors to be part of it. So this, for 2024, has been one of the primary factors for the increase in operating expenses. However, going forward, we have, as a plan, a Board-approved strategy to control our operating expenses in the near future. We have one question on the fair value of investment property arrived by independent valuers experienced a positive uptick in 2024. Compared to previous year, how did that reflect on reserves in the equity section. It has been a positive reflection on the reserves in the equity section. You can see the same thing in the fair reserves in the components of equity. There are no more questions. So thank you very much for your time this afternoon, and hope to share with you the results of Q1 2025 in the next couple of months' time. Thank you very much for your time today. Thank you.