GFH Financial Group BSC (GFH) Earnings Call Transcript

A very good afternoon, and a warm welcome to GFH Financial Group's 9 Months and Third Quarter 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. It's been another quarter of meaningful progress and strong momentum. Our financial results show growth across key metrics and validate our strategic direction. As we look ahead, our focus remains on driving efficiency, unlocking new opportunities and delivering long-term value for our stakeholders. Our results for the first 9 months of 2025 reflect our continued ability to deliver sustainable and profitable growth with shareholder profits rising by 15% to $101.3 million maintaining growth amid challenging market conditions underscores the resilience and agility of our strategy. Our disciplined execution and focus on extracting value from our assets continue to drive robust returns for our shareholders while positioning the group for long-term performance. Let me begin by giving you a summary of our key financial highlights. We are pleased to report another period of positive performance with net profit attributable to shareholders standing at $101.3 million, represented a growth of 15.1% year-on-year. Consolidated net profit for the 9 months is $105 million with an increase of 9.8%. Double-digit growth in total income by 14.5% to $557 million. All the core business lines of the group continued their contribution to the revenue and overall growth of the bank. In line with the business growth, total expenses have risen to $287 million. EPS recorded strong double-digit growth of 16.5%, reaching $0.283 for the period. The group's assets and funds under management continue to grow. Stable liquid assets form 49% of our total assets. The total equity attributable to shareholders increased from $981 million at 31st December 2024 to $1.04 billion at 30th September 2025. Our performance translated into a high return on average equity as of September 2025, which stands at 13.3% compared to 11.9% as of December 2024. I'm going to talk about capitalization, liquidity and funding levels now. We remain well capitalized with our capital adequacy ratio of 17.06%, liquidity coverage ratio at 142% and net stable funding ratio at 139%. The group continues to maintain strong liquidity and all our regulatory 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 this period's revenue. Starting from Investment Banking. This business line remains a core engine of profitability, contributing 24% of the total income. The stability of investment banking income demonstrates the team's ability to originate, execute and manage transitions across varying market cycles. This quarter, we have entered into key investments to secure attractive deals across geographies and continue to deliver strong income-generating opportunities to our investors, including the group continues to have a strong presence in education sector with a $300 million fund, which aims to expand our exposure to high potential opportunities in the education sector, positioning us to capture long-term growth in resilient markets. Additionally, the group has also deployed a total of $106 million in Sharia-compliant financing transactions across Class A office and data centers across the United States. Both investment initiatives provide appealing returns in high demand sectors while upholding our core investment values. We will continue to broaden our portfolio by placing new investments in stable yielding sectors and leveraging opportunities in high-growth regional markets. Now we'll talk about Commercial Banking. Income from our commercial banking arm, Khaleeji Bank, continued to grow and contributes 22% of the total income. For the 9-month period ended 30th September 2025, Khaleeji Bank reported a net profit of $21.3 million attributable to the bank's shareholders compared to a net profit of $18.7 million in 2025, marking an increase of 13.8%. Total income of $116.2 million was recorded for the 9-month period compared with $96.1 million last year, which is up by 21%. Growth in revenue is driven by income from financing contracts and enhancing asset quality. The third vertical of Treasury and Proprietary Investment. The contribution from treasury and proprietary investments, monetizing of proprietary assets in positive markets increased from $244 million for the first 9 months ended 2024 to $303 million during the first 9 months of 2025. This business line contributed 54% of the total income for the group for the period. The group's stable liquid assets form 49% of the total assets. The treasury portfolio included -- including the cash stands at $5.9 billion, providing a robust liquidity position and strong balance sheet flexibility. Proprietary Investment continues to generate robust income from its existing portfolio. The continued restructuring and repositioning of the investment portfolio aims to capture emerging market opportunities resulting in strong returns. The group has successfully exited a real estate portfolio exceeding $140 million, generating strong returns and enhancing the group's capital efficiency and profit and portfolio quality. Now talking about some share price highlights, we would like to give some insights into the group's year-to-date share price performance. As evident, as of 13th November 2025, GFH stock price closed at AED 2.14 and our market capitalization stands at $2.2 billion. The stock price has shown a strong upward movement throughout the year and continue to outperform DFM Index by 78%, showcasing a strong price appreciation. This upward trend is driven by strong financial performance and increased investor confidence in our strategic direction. Some highlights on the digital banking. In quarter 3, we introduced key enhancements to our AI-based investor app to deliver a seamless experience for our customers and moved to scale AI adoption across both client and internal journeys. We launched Sara, our Bahraini AI call center agent, a human-like Arabic and English-speaking virtual agent that understands natural conversation, handles high-volume routine inquiries and supports clients 24x7 across voice and digital channels. Sara is powered by advanced AI analytics, transforming every interaction into structured insights on client needs, sentiment, recurring pain points and product opportunities. This enables consistent responses and shift us from reactive service to proactive data-driven improvement. We implemented AI co-pilot capabilities across GFH laying the foundation for a more productive and insight-driven operating model. We optimized key journeys such as transfers and manufacturing management by simplifying steps and refining on-screen messaging, delivering a smooth client experience and reducing operational queries and new work. We integrated with a digital banking to expand our reach and offer customers in Saudi Arabia more tailored products and services. And we will continue building strategic partnerships to further enhance our capabilities. By leveraging these advanced AI automation and productivity tools, our group is creating a frictionless pathway for clients to fund, explore and subscribe to investment opportunities across our digital ecosystem. Looking ahead, we remain fully committed to driving operational excellence and digital transformation across the group, leveraging technology to enhance efficiency and support scalable growth. Some key highlights on ESG. GFH continues to implement positive initiatives that further its commitment to ESG-related practices. Key initiatives during this quarter include offsetting carbon footprint for all employees in partnership with SAFA, making GFH the first company in Bahrain to adopt this pioneering initiative, upgrading to partner level partnership with the World Economic Forum, deepening the group's engagement in global discussions on finance, AI and advanced technologies. Continuing its Platinum Sponsorship of the Crown Prince's Scholarship program, reaffirming GFH commitment to empowering Bahraini youth and supporting educational excellence. Furthermore, GFH is recognized for excellence in Investor Relations by MEIRA in Oman as a leading corporate in Investor Relations in Bahrain. The recognition underscores our commitment to transparency, strong governance and best-in-class investor engagement. With this, I want to thank all our shareholders, partners and colleagues for their continued trust and commitment. The past 9 months have been marked by strong financial performance, solid progress across all the business lines and supported by a robust balance sheet and disciplined strategy execution. We remain confident in our ability to build on this momentum. As we continue to capitalize on opportunities, our focus will remain on generating sustainable value over the long term. Looking forward to updating you with our progress as we approach year-end. I would like to thank you for your time this afternoon and open the floor for any questions you may have.

Thank you for all the questions. We'll try to take as many as we can. The first question is, is the treasury income a one-off event or the upward trend is expected to continue in 2025 and 2026? Well, of course, this is a combination of a lot of things that we started deploying in quarter 2 also and the full impact is visible now. We continue to generate higher income on the spreads and on the rating products that we enter into. So overall, we are confident that we will execute the strategy on treasury and continue to be profitable for the bank. The second question is what is the future projects of GFH? Well, of course, we can't talk about all the projects, but there's a strong pipeline that we have in the verticals that we have created over the years in terms of private equity, in terms of proprietary investments, treasury, real estate and education, so we'll continue to execute our strategy and this strong pipeline of deals would be able to help us deliver the results that we aim to achieve. The next question is on the performance of Khaleeji Bank and the contribution? Well, Khaleeji continued to perform well. And this quarter, again, it was also helpful from the net funding margin with the cost of funding dropping and certain financing at a better rates. It helped us to generate a good spread income, which contributed to higher income of Khaleeji Bank. The last question is what is the revenue mix you are expecting in the coming periods? I think probably we'll continue with the 3 or 4 verticals that we are talking about. The good part for GFH is that these 3 or 4 verticals always give us a good diversification. So we'll continue to be focused on treasury and proprietary investments, commercial banking and investment banking as the verticals, which will contribute to generate recurring income for the bank in the coming periods also. With this, I would like to thank all of you for your participation and questions, and see you next quarter. Thank you very much.