GFH Financial Group BSC (GFH) Q4 FY2025 Earnings Call Transcript & Summary

A very good afternoon and a warm welcome to GFH Financial Group's year-end 2025 Results Presentation. My name is Bhaskar Mehta, and I will walk you through the key highlights of our financial performance for the year. We are pleased to report that GFH has strong financial performance. Our core revenues and profitability continued to grow supported by further diversification of income streams and ongoing investment in technology to enhance operational efficiencies. At the same time, we remain disciplined and selective in our investment approach, preserve balance sheet strength and liquidity and stayed well positioned to capture opportunities aligned with sustainable growth drivers. This performance was further demonstrated by the continued improvement in our return on equity, reflecting disciplined execution and our ability to translate strategic priorities include measurable results. In 2025, shareholders' profit increased by 18.2% to $140 million, highlighting the resilience and agility of our strategy and our ability to navigate economic challenges while delivering competitive and sustainable return to our shareholders. Let me begin with a summary of our key financial highlights. 18.2% growth in net profit attributable to shareholders standing at USD 140 million for 12 months of 2025 compared to $119 million for similar period last year. We delivered double-digit growth in consolidated net profit for the full year 2025 by close to 13.2% year-on-over to $146 million. All the core business lines of the group continued their contributions to the revenue. Total income for the 12-month period increased by 8.4% to $720 million. In line with the strategic initiatives and business growth, total expenses increased by 6.9% at year-end. The group's earnings per share this year have risen to $3.9 sic [$3.92] presenting a 20% year on growth, reinforcing the group's profitable trajectory. The group's assets and funds under management has further grown by 8.4% to $23.6 billion as of 31st December 2025. This growth was underpinned by diversified portfolio of income-generating assets. We continue to maintain a strong liquidity position with liquid assets forming 45% of our total assets. 4.1% in total increase in total equity attributable to the shareholders is standing at $1 billion at year-end 2025, compared to $981 million at year-end 2024. Our performance translate to a higher return on average equity as of December 2025, which stands at 14% compared to 12% as of December 2024. We have shown robust capitalization, liquidity and funding levels. We continue to maintain strong capital and liquidity ratios with our capital adequacy ratio standing at 16.62%, liquidity coverage ratio at 178% and net stable funding ratio 135%. The group consistently operates about regulatory capital and liquidity thresholds, ensuring a robust and well capitalized position. We will now move on to the main highlights for each of our 3 business lines along with their contributions to this year revenues. During the year, the bank enhanced the presentation of the income line items to better reflect GFH evolving business model and to align the financial reporting with the group's core business lines. These changes are purely related to financial statement presentation and involve reclassification within the balance sheet and income statement. Importantly, there has been no restatement of prior year audited figures and the underlying financial performance of the group remains unchanged. This refinement is intended to provide investors with clear visibility to recover business activities and revenue streams as we continue to evolve and grow. We will now talk about each of the 3 units. The first is Wealth and Investment Management. This contributed 24% of the total income of the group. This segment includes the group asset management and portfolio management business lines that act as intermediaries by acquiring, managing and realizing investment assets for institutional and high net worth clients under both discretionary and participatory arrangements. The group also co-invest along with its clients for realizing dividends return from its AUM portfolio. Wealth and management -- investment management team undertake placement restructuring activities prior to sale of its products and subsequently performed asset and portfolio management services for its investors till exit, which generates ongoing management incentive and performance fees for the group. This business line also includes share of profits and distribution from equity accounted investments and other asset managers that are considered complementary to the group's asset management activities. The stability of wealth and investment management income demonstrates the expansion and strengthening of our asset management platform, driven by higher AUM, increased transition activity, improved investment performance and continued contribution from associates. During this quarter, we have made strategic investments across regions delivering consistent income generating returns, including the acquisition of major stake in Devmark real estate, a UAE leading real estate development project sales and marketing platform. This strategic commitment further represents an extension of the group's strategy to invest alongside exceptional management teams to expand our global footprint and create connectivity across our ecosystem. The group's participation has a cornerstone investor in the IPO of Mininglamp Technology, a data intelligence platform company in China. This participation aligns with our group strategy to support leading companies specialize in software, data intelligence and AI. Acquisition of a major stake in buying equipment rental, a leading GCC industrial services and equipment rental provider. This aligns with the group's strategy to expand footprint across the strategic GCC markets. Establishment of a UAE-focused industrial and logistics platform through a joint venture partnership with Gaw Capital Partners, a Dubai-based real estate investment firm. Through this partnership, the group seeks to combine regional and insights with global capabilities. We aim to continue to expand our portfolio by deploying new investments into stable yield-generating sectors while capturing growth opportunities across the GCC, United States, Europe and the United Kingdom. Now I'll talk about the second vertical, which is credit and financing income. The group's Credit and Financing business lines contributed 22% of the total group income. This business line includes all the corporate banking and retail banking activities of the group's subsidiary, Khaleeji Bank, our current capital underwriting activities to support the initial acquisition of assets for the wealth and investment management products and our participating in private credit opportunities. The segment records income growth of 38.9% year-on-year contributing $155.2 million at year-end 2025 compared to $111.7 million at year-end 2024, driven by disciplined loan growth and high-quality credit mix. During 2025, the financing income grew by 22% to $173.5 million from $142.4 million at year-end 2024. Khaleeji Bank, the group's retail banking arm has demonstrated a growth of 10.3% in net profit attributable to shareholders during the year, standing at $30.7 million at December 2025 compared to $27.8 million at December 2024. Now the third vertical Strategy and Proprietary investments. All other activities that are undertaken at the group level, including treasury and residual proprietary asset portfolio management are considered as a part of the Proprietary treasury activities of the group. The Treasury team focused on achieving consistent outperformance against market returns to active and diversified portfolio management for the bank and its investors. The propriety investments are managed at a group level to carefully plan value realization, monetization and synergy across group entities by making positive contribution. This business line plays a key and fundamental role in boosting the group's profitability while managing healthy liquidity. Contribution from treasury and proprietary investments, including market opportunities and monetization of propriety assets recorded $39.3 million for the 12 months of 2025, compared to $382.4 million for the same period in 2024. This business line contributed 54% of the total income of the group for the period. We closed the year with a strong performance by the group's treasury business, which was mainly driven by the fixed income portfolio and the ALM and trading portfolio. We continue to maintain strong liquidity as our liquid assets from 45% of our total assets. The group treasury portfolio, including cash, stands at $5.5 billion, providing robust liquidity position and balance sheet flexibility. In line with its Board-approved strategy, the proprietary investment business line has been successful and exiting real estate assets from the portfolio contributing to gain from sale of assets. Now we are going to talk about our share price performance. We would like to give some insights into the group's share price performance. During the year, the group continued to deliver compelling shareholder returns through a combination of dividend distribution and share price appreciation. GFH share price increased by approximately 90% during 2025, and together with the interim and proposed dividends generated a strong total shareholder returns. This performance underscores growing investor confidence in GFH's strategy, disciplined execution and long-term value creation. In line with the group's results, the Board of Directors has recommended a total cash dividend of 10.11% on nominal value, which is equivalent to $0.0268 per share, excluding treasury shares, including $0.0053 interim cash dividends paid earlier, subject to regulatory and shareholders' approval. I will talk about our enhancement on digital banking for 2025. Throughout the year, GFH continued to strengthen the foundations underpin its growth by advancing key strategic priorities, including investment in technology, strengthen the digital capabilities across its platform and the enhancement of customer-centric capabilities and overall customer experience. These initiatives further reinforce the group's disciplined approach to growth and long-term allocation. Earlier this year, we introduced a conversational AI investment assisted with the GFH app, enabling clients to receive faster, more personalized insights on investment products and portfolio options. This marked a key milestone in embedding AI-driven capabilities into their digital investment journey. In addition, we progressed key enablers to support the next phase of digital and services, most notably advancing in app IBAN capabilities for client and involvement and improving beneficiary management with the app. This supports streamlining internal operational workflows through clear data capture, improved validations and reduced manual touch points, enabling stronger straight-through processing and more efficient exception handling. Building on this foundation, we launched Sara and Ahmed, a Bahraini human-like AI call center agents designed to provide consistent, intelligent and scalable trend servicing. These agents enhance response accuracy and enable proactive data-driven service improvements and reduce operational turnaround times across client interactions. At the same time, we expanded our regional reach by integrating with the digital bank in the Kingdom of Saudi Arabia with an aim to offer more tailored services to clients. In addition, we continue to optimize key digital journeys to improve the client experience. During the fourth quarter, we introduced [ eKey ] integration, enabling security digital verification through Bahrain's national digital [ identity ] platform. This significantly enhanced onboarding efficiency strengthened compliance controls and reduced friction in client activation. These integrations aligned with the group broad strategy to enhance client engagement, boost operational efficiency and create a seamless experience across all our digital ecosystem. 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'll talk about ESG and sustainability that the group has performed over the year. Across the group, we remain focused on advancing our ESG-related practices through range of positive initiatives. The initiatives, some of them which we have implemented this quarter include participating in the World Economic Forum Annual Meeting in Davos, positioning GFH alongside global leaders with a goal to shape the future of finance investment and economic transformation, supporting youth, entrepreneurship and innovation through leadership initiatives from podcast to educational content aligned with our commitment to empower the leader of tomorrow. We hosted specialized knowledge sessions under the group's internal Minds at Work platform, where the focus was on employee contribution to raise awareness on sustainability, governance and responsible business practices within the GFH corporate culture. We also sponsored and participated in innovation and management programs, including Manama Capital of Young Arabic entrepreneurs and Sustainability Forum Middle East, support human capital development across the region. We strengthened participation in global platform focus on innovation and sustainable growth through the group's contribution to the future investment initiatives, reinforcing our commitment to responsible innovation and digital transformation. We continue to enhance the group's standing in governance and sustainability through regional recognition. The group has been awarded the best ESG Strategy Award from MEA Finance positioning, the group as a leader in the implementation of ESG principles in the region. Some of the awards and recognitions that we received over the year. Now we'll talk about these achievements and awards that we receive in 2025. This was another great year for international recognition for the group with multiple awards for our innovation and excellence. Some of them are Best Investment Bank by EMEA Finance, Best Private Real Estate Manager of the Year by Financial Times, Leading Corporate for Investor Relations in Bahrain by Media, Middle East Best for Alternative Investments by Euromoney, Best in Islamic Fintech solution implemented by EMEA Finance, Islamic Digital Banking Provider by EMEA Finance, Best Private Banks in Bahrain by Global Finance, Best Bahrain Islamic fund by Euromoney and Bahrain's Best for Alternative investments by Euromoney. All in all, this strong industry recognition underpins our position as a leading bank in the region. Now I would like to thank all our shareholders, partners and colleagues for their continued trust and commitment. 2025 has been marked by outstanding performance and solid growth across all business lines, supported by a robust balance sheet adequate liquidity and disciplined risk appetite supporting long-term stability and flexibility. As we took to the future, we remain focused on disciplined growth, portfolio resilience, continued digital innovation, enhancement of our customer experience and sustainable value creation. We are confident in our ability to sustain this momentum and capitalize on opportunities to deliver sustainable value for shareholders. and stakeholders alike. Looking forward to another year of continued progress. I would like to thank you for your time this afternoon and open the floor for any questions you may have.

Well, thank you very much for all the questions. We'll try to cover as much as we can. The first question is, what is your lines of investment in AI and the growth? Yes, forms part of our broader thematic investment strategy within the assets under management. We view artificial intelligence, not simply as a technology trend, but also as a structural transformation and reshaping multiple industries globally. Accordingly, we select investments in AI-driven businesses where we see strong fundamentals, scalable models and long-term growth potential. At the same time, we recognize that AI growth underpinned by a significant infrastructure requirements. As a result, we have good allocation of capital to sectors that enable and support the AI ecosystems, which includes digital infrastructure, data centers, logistics platforms, and energy solutions that power increasing computational demand. So that's our view on AI and our investments. The second question is assets under management plan for the current and next year and the geographic. So I think we continue to grow our assets under management. This is a part of the group's strategy also. It's a stable income-generating vertical for us and we grew in different sectors and different geographies. Our geographic priorities remain focused on the markets where we have an established presence and strong execution capability and a clear visibility on the returns. In terms of our expansion, we'll continue to invest in the geographies where we already have good positions, particularly in the UAE and the Kingdom of Saudi Arabia which remain important markets for the group. Beyond GCC, we have maintained an active presence in the United States, Europe and U.K., where we focus on income-generating assets and diversified investment platforms which provide portfolio resilience and stable cash flows. At the same time, from an overall growth perspective, we intend to expand our footprint in the emerging markets also. We see long-term structural growth themes in these regions especially in technology, data-driven industries, infrastructure and sector supporting economic transformations. The third question is, is there any project and investments in Kuwait? So Kuwait is, of course, a very important market for us, and we have been establishing our presence over the last few years. We have a subsidiary office also there and we continue to explore the right opportunities for 2026 also. Then the question is, please provide an update on Khaleeji Bank's financial performance for the year and the regulatory ratios. I think Khaleeji performed well. Financial performance of Khaleeji reflected strong liquidity positions. In terms of the ratios and liquidity, their LCR stands at a higher number of 400% and NSFR at 103%. They continue to operate well above all the regulatory ratios. And additionally, Khaleeji delivered a net profit of $30.7 million as of 31 December 2025, which was driven by a lot of factors, including the improvement in the net funding margin for Khaleeji, which has improved. I think this is what is the future plan acquisitions. I mean this is something which is always -- we maintain a very healthy pipeline. We can't talk about it right now, but we have a decent pipeline and we will see a definite movement in the coming months and quarters. The next question is the future vision and plan for both Health care platform and also the education one. Education one, of course, we continue to have a significant presence in the regional markets and in Education portfolio. For health care, we have -- we are planning to launch the IPO for Healian Healthcard in KSA in the coming 12 to 18 months and the teams are working consistently on that. So these 2 are definitely the areas of interest for us always. I think this is more or less everything that we have covered. Once again, thanks a lot, everyone, for being a part of this webcast, and we appreciate the support that we get from all of our shareholders from time to time. See you next quarter. Have a good well. Thank you.