Banks to watch in 2013, EFG Hermes

One of the biggest banking stories in the Middle East and north Africa (MENA) region in 2012 was the joint venture formed between Egypt’s EFG Hermes and Qatari investment bank QInvest.

The merger will see QInvest inject $250m in capital into EFG Hermes for a 60% stake in the business, which will rank as the biggest investment bank across the MENA region. The new entity – retaining the name EFG Hermes – will offer through its subsidiaries a full range of investment banking services, owning and operating the investment banking, securities brokerage, asset management, research and infrastructure fund businesses and will be headquartered in Cairo, with offices around the region.

The joint venture brings together two banks with similar ambitions, both of which can benefit from QInvest’s deep pockets.

On the back of the capital injection, EFG Hermes is prioritising further penetrating core markets such as Egypt, Saudi Arabia, Qatar and the United Arab Emirates, before expanding into emerging markets such as Iraq and Libya. It is targeting an increase in assets under management from the current $3.4bn to $5bn within the next few years.

Aside from the added financial power, the new entity will also benefit from QInvest’s strong foothold in the booming economy of Qatar, where it has firm relationships with the country’s sovereign wealth funds which are active investors across a range of sectors globally.

“We’re very excited about this joint venture because it partners the investment banking capabilities of EFG Hermes with QInvest’s financial resources, product knowledge, and a customer base that we haven’t historically had,” said Kashif Siddiqui, managing director and head of asset management at EFG Hermes, and future co-chief executive of the entity, in an interview with The Banker in November 2012.   

“Our view was that as we seek to grow our business, this was a great opportunity to partner with a like-minded institution that has similar ambitions and can help us accelerate our growth in a region that, frankly speaking, is fragmented. The strategy will definitely be pan-regional as opposed to picking a specific country and saying that we want to be the number one player there.”

Furthermore, while QInvest is a relatively small investment bank, having only been set up in 2007, it can also lend considerable expertise in Islamic finance.

“We think the Islamic product suite has tremendous potential over the next five to 10 years,” said Karim Awad, managing director and head of investment banking at EFG Hermes, and also a future co-chief executive of the new entity.

“Certainly, sukuk are a big focus, both on the primary issuance side where QInvest has strong capabilities, but also in terms of offering the sukuk to investors across the region. There are many interesting projects we can achieve more quickly together than we could have done individually.”