GFH Financial Group BSC (GFH) Earnings Call Transcript

A very good afternoon, and a warm welcome to GFH Financial Group's First Half of 2025 Results Presentation. My name is Bhaskar Mehta, and I'm pleased to present you with the highlights of our financial performance during this period. For the first half of the year, the group delivered strong financial results, making steady progress in executing its strategic priorities and reinforcing the foundation for future growth. This performance reflects the resilience of our diversified business model and our ability to generate sustainable profitability. In line with our commitment to delivering on our promises to shareholders and following the successful achievement of our strategic and financial objectives, the Board has resolved to recommend the distribution of interim dividends as a testament to our dedication to create sustained shareholder value. Let me begin by giving you a summary of our key financial highlights for the first half of 2025. We are pleased to report another period of positive performance with net profit attributable to shareholders of $67 million, representing 10.7% year-on-year growth. Consolidated net profit for the 6 months was close to $70 million with an increase of 2.7% year-on-year. Our total income rose for the period by 7.5% to $357 million. All the core business lines of the group continued their contributions to the revenue and overall growth of the bank. 13% growth year-on-year in asset management income contributed. Total expenses rose by 10.7%, in line with the group's strong business growth. Notably, impairment allowances decreased underscoring enhanced asset quality, prudent risk management and the strength of the commercial banking portfolio for the bank. Earnings per share for the period grew by 13% to $1.93 per share. Total assets were up by 12.1% year-to-date to $12.4 billion as of 30th of June 2025. The group's assets and funds under management is $23.7 billion, which grew by 9.9%. Stable liquid assets with 49% of the assets in cash and treasury portfolio stands at $6.1 billion, making the balance sheet resilient. Total equity attributable to shareholders increased from $981 million at 31st December 2024 to $1 billion at the end of quarter 2 2025. Our performance translates into a higher return on equity as of June 2025, which stands at 13.4%. Robust capitalization, liquidity and funding level are our strength. We remain well capitalized with our capital adequacy ratio at 16.69%, our equity ratio at 155% and net stable funding ratio at 142%. The group continues to maintain strong liquidity and all our equity ratios are well above the minimum regulatory thresholds. We will now move on to the main highlights for each of the business lines, along with their contribution to H1 revenues. Starting from investment banking, our core business line, investment banking remained a key growth engine, contributing 27% of the total income of the group for the period. During the second quarter, we successfully made and placed multiple new investments with stable yielding sectors and high-growth regional and global markets, reinforcing the group's execution capabilities. We will now highlight the key transitions across key markets that took place in the second quarter. These transitions highlight our ability to source and secure attractive deals across geographies while continuing to deliver stable income-generating opportunities to our investors. GFH Capital, our KSA-based subsidiary signed a strategic partnership with commercial real estate company, Al Tijaria. This partnership will lead to develop a successful logistics platform regionally, and it underscores the group's capabilities in structuring and delivering investment opportunities to its partners. GFH Partners, our U.A.E.-based subsidiary in collaboration with U.S.-based partners acquired $195 million fully occupied health care real estate portfolio in Texas, Arizona and Colorado, mostly leads to investment-grade tenants. Furthermore, GFH Partners invested $190 million in a diversified portfolio of logistics and industrial facilities such as fiber optic manufacturing plant and several transportation logistics properties designed for multiple uses. Furthermore, and as we continue to broaden our investment portfolio in the GCC, we have acquired assets and development properties in Saudi Arabia and the U.A.E. totaling $125 million, including a fully leased warehouse in Southern Riyadh. The investment in the KSA is aligned with the project growth of the Saudi transport and logistics sector contribution to Kingdom's GDP from 6% in 2021 to 10% by 2030 under Vision 2030 National Industrial Development and Logistics Program. The strong momentum reflects both the depth of our platform and the confidence of our partners. Moving to Commercial Banking. The group's commercial banking arm, Khaleeji Bank continued its growth momentum in the first half of 2025, delivering strong profitability. This business line contributed close to 22% to the group total income in first half of 2025. For the 6-month period ended 30th June 2025, Khaleeji Bank reported net profit attributable to shareholders of $14.9 million compared with $13.6 million for the first half of last year, which is an increase of 9.26%. Total income for first half of 2025 amounted to $74.2 million compared to $65.1 million in the same period last year with a growth of 13.81%. The growth in the revenues were driven by income from financing contracts and enhancing asset quality, resulting in higher net profit supported by prudent risk management policies. These results reinforce Khaleeji Bank's position as a leading Islamic financial institution in Bahrain, combining steady growth with a strong commitment to shareholder value creation. Moving to Treasury and proprietary investments. 51% of the total income was generated from treasury and proprietary investments vertical. The performance of the treasury portfolio continues to be stronger, and we will continue to look for further opportunities to strengthen our portfolios even further in future. Furthermore, proprietary investment continued to generate income from its existing portfolio. During the second quarter, the group increased its ownership in Seef Properties, one of the leading real estate development and commercial centers management companies in the Kingdom of Bahrain to 27.98%. This strategic investment aligns with the group's strategy to expand a diversified income-generating portfolio. The increased stake is expected to further enhance long-term value creation through exposure to high-quality and income-generating assets. Querying to the group's share price movement and performance, GFH has delivered a robust year-to-date performance with its share price rising approximately 15%, positioning the share near the upper end of 52 week. The group's market capitalization stands at $1.3 billion. This growth reflects sustained investor confidence supported by the group's solid fundamentals, consistent execution of our strategy and underscores the group's resilience and ability to generate shareholder value in a dynamic market environment. The visible uptrend and relative strength, particularly in the recent months to bullish sentiment and continued market confidence in GFH. Furthermore, in line with our strategic agenda, GFH continues to onboard strategic shareholders, which reinforce the group's commitment to strengthen its shareholder profile. In line with our achievements and profitability and as mentioned earlier, the Board has resolved to recommend the distribution of interim dividends of $0.0053 per share. Moving to some other achievements for the bank for the first half on the digital banking side, we continue to execute on our digital strategy and make tangible efforts in this area. Our ambition is to spearhead digital innovation in the region by delivering the future of investing to our clients today. We have introduced a next-generation conversational artificial intelligence investment assistant, a transformative step in delivering faster, smarter and more personalized service to our clients. By integrating advanced AI capabilities, the group aims to enhance client predictive engagement, boost operational efficiency and create seamless pathway for our clients to explore new opportunities in future. Moving towards sustainability and ESG. GFH continued to implement positive initiatives, further its commitment to ESG-related policy and practices. Key initiatives during the second quarter were strengthening our social impact through education partnership. We partnered with Dubai KS to support the pact for IMPACT initiative, which assembled almost 2,000 school kits for underprivileged kids in the U.A.E., reflecting the group's commitment to inclusive education and volunteer engagement. In terms of recognition for ESG leadership and innovation, we are ranked among the top 3 ESG performer on the LSEG Index and listed as one of the Bahrain's top 50 companies. GFH was also the first GCC investment bank to launch a conversational AI assistant with this investment app. With this, I want to thank all our shareholders, partners and colleagues for their continued trust and commitment. The first half of 2025 has been marked by a strong financial performance, strategic acquisitions and meaningful progress across our business lines, all underpinned by a robust balance sheet and a disciplined execution of our strategy. We remain confident in our ability to sustain this momentum, capitalize on opportunities and deliver long-term sustainable value. We look forward to updating you on our progress in the quarters ahead. I would like to thank you all for your time this afternoon and open the floor for any questions you may have.

Well, thank you for all the questions. We'll try to cover as much as we can. I'll start with the first question that is what do you expect net income to be in second half of 2025? Well, obviously, we cannot give the forward-looking statements, but we have a robust pipeline of deals and the investments that we are in the mode of looking at this point right now. And with the kind of investments and with the kind of portfolio that we have, we continue to execute as per our strategy, and we are well positioned to achieve all the business targets for the second half of 2025. The second question is, can you inform us about the potential future projects in GCC region and the U.S.A.? And is there any new markets like Egypt and Syria? So, well, of course, we continue to explore the opportunities in the region and in U.S. also. For U.S., we have the asset managers based out in the different geographies and different sectors, which also helps us to do acquisitions and expand the bank. In terms of region, of course, with a strong presence in the region, we'll continue focusing in GCC, logistics and industrials. These are different areas where we have different projects. And we continue expanding in all the defensive sectors like education and health care also in the region. So in terms of our growth, yes, this is the target for us. The third question is that what contributed the total assets increase of 12.1%? Well, this is a combination. And in the second half of the year for this quarter, we expanded the balance sheet on the treasury side. We did a lot of deployment in treasury. We took the advantage of the market dynamics and deployed money there, and that is visible in this asset growth of 12.1% year-on-year. I think with this, probably I would once again, thanks a lot, everybody, who joined this session for us. And till the time for next quarter, wish you all good luck, and have a good day. Thank you very much. [Foreign Language]