One of the most active financial institutions in the region is Egyptian firm EFG Hermes.
Last month, it completed two deals, highlighting its ambitions in the Gulf and in wider international markets. EFG invested in one of Kuwait’s leading brokers, so gaining access to the second most important stock market in the region, and took a 9.97% stake in Panmure Gordon, one of the UK’s oldest and most blue-blooded independent investment banks.
At £3.2 million ($5.7 million), the Egyptian bank’s investment in Panmure Gordon is relatively small, says Hassan Heikal, chief executive at EFG Hermes. He admits that the move was an opportunistic one. "It will probably be a one-off," he says.
 |
|
"There are only 14 licensed brokers; therefore to take a controlling interest in one of the biggest is meaningful for us"
Hassan Heikal, EFG Hermes |
He adds that the investment strengthens the bank’s ability to service its client base in the Middle East, the UK and the US. "It makes sense for us to have a closer look at what’s happening in the international markets," he says.
Panmure Gordon is a mid-cap broker that specializes in research, sales and trading.
EFG’s investment in Kuwait is in Offset Holding KSC, which in turn owns a 90% stake in Gulf Financial Brokerage Company. The broker is the second biggest in Kuwait, with a 26% market share. It offers local and regional institutions traditional and online operations.
"There are only 14 licensed brokers; therefore to take a controlling interest in one of the biggest is meaningful for us," says Heikal.
The investment, for $126 million, extends the Egyptian bank’s reach in the Gulf. "We have most of the GCC [Gulf Cooperation Council countries] covered," he adds. The exceptions are Bahrain and Qatar. EFG is a member of the Qatar Financial Centre but does not have a licence to operate locally in Doha. As for Bahrain, the firm is expected to make a move, perhaps later this year.
Kuwait is the second-biggest stock market in the region after Saudi Arabia, with about $600 million in trading every day. New brokerage licences in the country are rare so, says Heikal, "there is substantial scarcity value in acquiring interests in a Kuwaiti brokerage firm."
EFH Hermes recently announced that its first-half profits jumped by 34% to hit E£758 million ($140.6 million). The bank’s revenues in equities and M&A in the Middle East and North Africa are more than double those of its nearest competitor.