EFG Hermes Holding rebrands to EFG Holding, signaling the firm’s transformation into a trailblazing financial institution with a Universal Bank in Egypt and the leading investment bank franchise in Frontier and Emerging Markets (FEM). EFG Holding is actively pursuing diverse strategies across three verticals, with a special emphasis on promoting financial inclusion among the Egyptians, a population of over 100 million people.
In a recent interview with Economy Middle East, Karim Awad, the group CEO and chairman of the executive committee at EFG Holding, shares insights into the decision-making process behind their efforts to diversify and digitize the financial sector. Awad recognizes that the primary driving force behind the holding’s diversification is the Egyptian people themselves. Let’s delve into the dynamic nature of EFG Holding and explore its vision for achieving sustainable growth in the constantly evolving economy of the Middle East.
What were the three primary factors that led to the diversification of the MENA-based investment bank into three distinct verticals? Are there any potential dilution risks associated with deviating from core branded activities?
I would say the three main drivers of the diversification strategy we adopted some years ago were, a) enhancing our products suite by offering our clients complimentary financing services that go along with our traditional investment banking services, b) providing better visibility to our shareholders through the less volatile earnings outlook associated with the NBFI and commercial banking business, and creating shareholders’ value by enhancing our return on equity, and c) playing an active role in the financial inclusion drive for Egypt, which is core to our ESG policy
Read: EFG Hermes Holding rebrands to EFG Holding
The risk of dilution is minimal because we consider our investment banking operations to be the vital foundation and main driving force behind our business. We are constantly expanding in this area, with a particular focus on the Gulf region, where we have established a strong reputation, whether on the sell-side or buy-side of the business. One of our primary objectives for the investment bank is to increase our market share, especially in our key target markets of the UAE and KSA. Just as important are the complementary lines of business we have strategically added over the past eight years which synergize well with our core operations and play a crucial role in our commitment to providing superior services for our clients.
How does EFG Hermes plan to maintain its leadership as an investment bank platform offering a comprehensive range of advisory and capital management services in FEM? Can you elaborate on your competitive advantage in investment banking, securities brokerage, research, private equity and asset management within these markets?
Our edge comes from our people. I firmly believe that over the years we have assembled an unmatched team of professionals who are always there to provide clients with the right advice, whether in brokerage, banking, research, asset management or private equity. Although we primarily focus on Egypt, UAE, KSA, and Kuwait, we have carefully and selectively expanded in FEM where we believe we can carve a niche and a top-five positioning in terms of market share. Regardless of the market, hiring the best people who embody the operational principles of EFG Holding and who provide their clients with honest, best-in-class advice will be vital in maintaining our leadership position as the investment bank of choice in all the markets in which we operate.
Is EFG Finance, the non-bank financial institutions platform, exclusively based in Egypt or does it also have a presence in FEM? Among the various services offered by EFG Corp-Solutions (leasing and factoring), Tanmeyah (microfinance), valU (lifestyle-enabling fintech), Bedaya (mortgage), PayTabs Egypt (e-payments), and Kaf (insurance), which three services do you believe have significant growth potential within your coverage area(s) and why?
Currently, the platform is entirely focused on Egypt which in itself is a huge market given its 100 million plus population and relatively low penetration, making our services in high demand. However, we believe that certain services we offer, particularly our lifestyle-enabling fintech platform valU, are quite exportable, and we are currently exploring potential markets as a starting point for this. I am optimistic about the growth prospects of valU, not only within Egypt but also beyond.
Our microfinance business, Tanmeyah, is another area that will drive the future growth of EFG Finance, especially as it upgrades its tech capabilities and enhance its operational efficiencies under a newly hired senior management team. Finally, we are currently waiting for the Egyptian FRA to grant us a license to start our SME lending business which is a third line for which I have very high hopes given the size of the market in Egypt, the synergies that it has with other existing business lines that we already operate in, and the ongoing government drive for financial inclusion.
What factors have contributed to the expansion of retail, corporate and Islamic banking offerings at aiBANK, and how does EFG Holding plan to sustain this growth? Furthermore, does the term “ai” in aiBANK refer to artificial intelligence, and if so, what role does this technology play in the bank’s operations?
In November 2021, we acquired a 51 percent stake in aiBANK, making it a part of our group for less than two years. Since then, we helped bring on a young and dynamic management team that has been driving growth, especially in terms of retail offering, which is a key focus for the bank going forward. We are also working with its management on a five-year strategy that should see the bank transform not only its product offering but, hopefully, its overall positioning in the Egyptian market as well. However, it should be noted that our role as EFG Holding is twofold: Firstly, we actively participate as board members. Secondly, and more significantly, we act as drivers of cross-selling opportunities between the products that we offer on the EFG Hermes (the Investment Bank) or the EFG Finance (the NBFI) platform) side and aiBANK (the Commercial Bank). The “ai” in aiBANK stands for Arab Investment, rather than Artificial Intelligence. However, we are currently looking at re-branding options to align the bank’s name with its new growth phase and future strategy.
How is EFG Holding utilizing technology to personalize the user experience (UX) across its three verticals and various contact points? This includes improving communication with clients, ensuring complete satisfaction with products and response time, enabling contactless journeys, and more.
Technology is a key driver of our growth as a firm and the main consumer of our annual capital expenditure budget. User experience is becoming paramount in what we do, not just on relatively newly launched products like valU but also on the more traditional ones like our securities brokerage, where we upgraded our online trading app, EFG Hermes One, to cater to the needs of our clients who want to trade the regional markets through us or the international markets through our partner Saxobank. The new SME company will bring another tech-based product to our clients in that segment. Ultimately, I hope that one day EFG will become a super app where retail or institutional clients can perform all their financial activities. Today, we have all the physical components in our group, but the next phase should see us harnessing technology to bring everything together in one seamless experience for our clients.
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