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

A very good afternoon and a warm welcome to the GFH Financial Group's First Quarter of 2025 Results Presentation. My name is Bhaskar Mehta, I'm currently the acting Chief Financial Officer for GFH Group. I'll be presenting you with the highlights of our financial performance during this period. Quarter 1 2025 has been an excellent start to the year, continuing the momentum on our financial performance from 2024. Our dedication, focus and robust business strategies sustained our financial performance for quarter 1 2025. We reported increased shareholders' profits and enhanced income with strong balance sheet. Our quarter 1 2025 shareholders' profits have increased by 11% year-on-year growth to reach USD 30 million. This translates to an annualized ROE of 12.6%, which is up by 1.3% year-on-year. Underpinning this, our emphasis on a strong balance sheet is maintained. All capital and liquidity metrics are at robust levels, supporting our sustained growth trajectory. Let me begin by giving you a summary of our key financial highlights. We are pleased to report another year of positive performance with net profit attributable to shareholders of USD 30 million, representing year-on-year growth of 11%.Consolidated net profit for the 3 months was USD 31 million with an increase of 1.2%, rise in total income for the period by 5% to $171 million. All the core business lines of the group continued their contribution to the revenue. We were also very disciplined on our total expenses. They were in line with our previous year of $89 million. It demonstrates our effective cost discipline measures. Earnings per share for the period grew by almost 10% to USD 0.85 per share. The group's assets and funds under management is close to $22.6 billion, which grew by 4% from the last year. Stable liquid assets with almost 47% of the assets and cash and treasury portfolio standing at USD 5.5 billion, makes the balance sheet very resilient. Total equity attributable to shareholders dropped from USD 981 million at 31 December 2024 to $937 million at the end of quarter 1 2025. The primary movement in the shareholders' equity was the dividends approved by the shareholders for the year 2024. Our performance translated into a higher return on equity as of March 2025, which stands at 12.6%, which is an increase of 1.3% year-on-year. I'll now talk more about robust capitalization equity and funding levels of GFH. We remain well capitalized with our capital adequacy ratio at 16.27%, liquidity coverage ratio at 210% and net stable funding ratio of 133%, which are better than December 2024 numbers. All our regulatory ratios are well above the minimum regulatory thresholds. We'll now move on to the main highlights for each of the business lines along with their contribution to quarter 1 revenues. Starting with investment banking, our core business line, investment banking contributed close to 39% of the total income of the group for the period. During the quarter, we successfully made and placed new investments in defensive sectors and high-growth regional and global markets, and we work to maximize the value of our existing portfolios. The group's investment banking income generation is supported by its tie-ups with platforms of the acquired leading asset managers in the U.S. and U.K., which offer access to highly promising investment opportunities as well as the strong income generated from placements and asset management fees from the group's investment portfolios. GFH Partners, the asset management arm of the group based out of UAE was successful in placing an opportunity in the industrial and transportation logistics space. GFH private equity vertical was also successful in launching an investment in a leading pan-European renewable energy platform through a partnership with one of the largest U.S.-based asset managers targeting attractive returns backed by long-term contracted assets and strong market positioning. Investments in well-performing defensive sectors and high-growth markets in the region and internationally remain rooted in the success of this business line of GFH. Talking about commercial banking. The income from our commercial banking arm, Khaleeji Bank improved compared to the previous period and contributed close to 25% to the total income of the group. Khaleeji Bank achieved a net profit of $8.58 million attributable to the bank's shareholders for the period ended 31st March 2025, compared to a net profit of $7.96 million in 2024, marking an increase of 7.8%. Talking about treasury and portfolio -- proprietary investments, the contribution of income was 37% for the group, '21-'25 total income. It is the second largest business line contributed to the total income of quarter 1 2025. The performance of the treasury portfolio has improved compared to same period last year. The treasury team is currently capitalizing on market volatility and dislocations to further returns over the coming period. Furthermore, proprietary investments continue to generate income from monetizing its assets in the existing portfolio. We would like to give some insights into the group's year-to-date share price performance. After GFH dividends payout during the first quarter, the U.S. announced a sweeping global tariff policy, which caused a triggering and rise in global stock market volatility. GFH stock price went ex-dividends with GFH distributed AED 0.0602 per share. As of 13th March, GFH stock price closed at AED 1.10. Talking about some of the announcement on our digital banking and the app performance. We have made tangible efforts in this area by launching the latest version of the GFH Investment App powered by AI, which was exceptionally well received during the first 3 months of the year. The GFH Investments App has enhanced customer experience and digital offering. This resulted in a growth in customer onboarding in quarter 1. Looking ahead, we remain fully committed to driving operational excellence and digital transformation across the group, leveraging technology to enhance efficiency and support scalable growth. We also started the year with a couple of global and regional awards. Our commitment to excellence across financial services, digital innovation and sustainability has been validated by MEA Finance. The group was awarded Islamic Digital Banking Provider for the Year in Bahrain. In addition, GFH has also been presented with multiple regional achievements and awards during this quarter, namely Middle East's Best for Alternative Investments from Euromoney, World's Best Islamic Investment Bank from Global Finance, Best Islamic Fintech Solution Implementations both on MEA Finance and many more. Finally, having entered the year with a positive moment, we look forward to continue accelerating our growth, further expanding the group's investment across core business lines and geographies and generating even greater value for shareholders and investors in the forthcoming periods. Considering the recent developments in the global markets, we remain committed to put the interest of our investors and shareholders at the heart of our investment decision-making process and remain committed to sustainable progress across our business, including investment banking, commercial banking, proprietary investments and treasury businesses in order to deliver additional revenue to all our stakeholders. I would like to thank you all for your time this afternoon and open the floor for any questions you may have.

Thank you for the questions. I will start answering one by one. I think the first question is over on the liquid assets, how is the balance sheet and everything? I think we are quite resilient on that, almost 47% of the assets are in cash and overall treasury portfolio, which is close to $5.5 billion. So we are very mindful of the liquidity of the balance sheet and overall the bank. So we are quite healthy on that. Also our LCR and NSFR, which are the liquidity ratios are well above the regulatory requirements and from the last year numbers 233% and 134% of NSFR is there. The second question is what is driving the investment banking income? So I think from last year, when we see, it's more on the asset management side and deal side. We had a healthy pipeline of deals in the region and outside the region also. And based on that, the asset management fees and overall deal pipeline helped us to generate a very high investment banking income for quarter 1 2025. The third question is on the drop in the shareholder's equity. Yes, this minor drop of 3% is primarily driven by the dividends that were distributed for the year 2024, which caused a drop in this equity. Thank you for your time this evening, and looking forward to meet and see all of you for next quarter. Thank you very much.