EFG Hermes will cut costs further after posting second-quarter loss

The main offices of EFG Hermes on the western edge of Cairo. The bank completed a round of job cuts in the second quarter. Dana Smillie for The National

EFG Hermes, the Middle East's leading investment bank, has vowed to push ahead with cost-cutting after reporting a second quarter loss of 29 million Egyptian pounds (Dh15.2m).

In an earnings statement released yesterday, the bank said its performance had been dented by impairment charges of 246.7m pounds, some linked to legacy investments.

The loss follows a 71.2m pound profit in the same period of last year. But the bank said it remained focused on cost cutting through reducing its head count and selling non-core assets. The aim was to reduce operating costs to 500m pounds next year.

The bank completed another round of job cuts during the second quarter, it said.

"This is very much in line with our long-standing policy of growing our staff base through promotion from within," said Karim Awad, the co-chief executive of investment banking at EFG Hermes, whose shareholders include Dubai Financial Group and the Abu Dhabi Investment Authority.

"Measures to reduce a multitude of other costs including occupancy, travel and administrative expenses - as well as generating yields from our idle real estate portfolio - are well underway and are expected to deliver clear benefits in the near future," he said.

Struggling against the backdrop of Egypt's political turmoil, EFG Hermes has also had to contend with an unwelcome takeover battle. Earlier this summer Planet Investment Banking, a buyout group supported by Arabian Gulf and Egyptian investors, announced a bid valuing the group at about US$1 billion.

It sought to derail the EFG Hermes board's approval of a proposed tie-up with Qatar's QInvest to create a joint venture called EFG-Hermes Qatar.

EFG Hermes yesterday said that it had finalised the sale of its former headquarters in Giza for 38m pounds, a step which would generate a capital gain in the third quarter. Other options for non-core assets were being evaluated and would be revealed to the market later. "Our strategy regarding the disposal of non-core assets is in place," said Mr Awad.

"But its execution will be a function of market conditions."

The ability to grow its revenues in Egypt was constrained, given the extent of instability in the market, he said.

But Mr Awad said the company was maintaining its strategy of growing its business in the Gulf to bridge the revenue gap in Egypt.

"This will remain our emphasis in the future, and we are simultaneously very mindful of opportunities to generate new fees through opportunities in Egypt," he added.