Striding purposefully ahead despite the headwinds

For the first six months of 2020, GFH Financial Group made steady progress, despite the current challenges and the impact of COVID-19 on their business and global markets. While net profit for the first six months of the year was impacted by the current conditions, the Group’s achievements and underlying strong financial health and operational performance was reflected in ongoing investor and market confidence. For the period, the Group successfully placed more than US$120 million in investments with clients, issued Sukuk to regional and international investors and had its ratings reaffirmed by Fitch. Building on their strong momentum and liquidity, the remainder of 2020 will see the Group focus on continued value creation through further growth and diversification of their operations and investment portfolios.

“We are pleased to continue to report strong revenue generation especially from our core investment banking activities and from the strategic and resilient portfolio of investments we have built. Despite the daunting challenges presented by COVID-19, we have seen our investments continue to perform well. With the issuance of Sukuks in the first half of 2020, our liquidity position has been even further enhanced and our ability to continue to effectively implement of our strategy reinforced.” Hisham Alrayes, CEO of GFH Financial Group.

Please give some insight into your latest quarterly results announcement. What factors do you think have been key in shaping the results?

Our result were shaped by continued strong revenue generation from our diversified business lines and model. This included positive contributions from our core investment banking activities and investments that continued to deliver solid yields and returns. On the treasury side, a new and growing area of our business, we were also successful in identifying and acquiring Sukuk and other treasury products at reduced prices in light of current market conditions and the sharp drops that have resulted in prices of certain financial instruments. We also took important steps to clean up and streamline our balance sheet on the commercial banking side. We moved to restructure the business via a Tier 1 Sukuk issuance and realigned our activities in order to deliver stronger results and achieve more positive contributions to the Group from its business line in the future. In general and in light of current circumstances, we also remained very cost conscious, evaluating new ways to implement controls on spending and to achieve cost rationalisation across the Group and our subsidiaries where possible.

Why have you seen a growth in liquidity during the current scenario and what does this say to you about confidence levels of depositors and investors?

Since beginning of COVID crises, we focused on strengthening liquidity in anticipation of market cycles. We are extremely pleased with the growth in liquidity. It is a real reflection of the confidence the market continues to have in GFH and our strategy as well as our progress and prospects for the future as we continue to work hard to diversify and expand our business in strategic areas and geographies. Since the start of the year we have successfully completed the issuance of US$500 million Sukuk with the participation of international and regional investors.

Each of your business lines have been profitable despite the current circumstances. What characteristics of your business model has made this possible? 

Diversification has been a key pillar in GFH’s strategy as we have transformed ourselves into a full-fledged financial group with multiple, profitable business lines and sources of income. Over the past years, we have focused on building our position in a number of key areas including investment banking, real estate, treasury, commercial banking and wealth management. We are extremely pleased that they are all operating soundly, achieving progress and contributing to the strong revenue growth we continue to witness. During different market cycles, performance can be up or down, but our model will be stronger due to diversification. We will continue to target to add more lines in future.

You have grown your assets under management, doing this largely inorganically. What does this mean in terms of your ambition as a business and your appetite for growth?

Another important part of our strategy for expansion has been the growth of our assets under management through strategic acquisitions that complement our business and enable us to grow in a more quick and efficient way. Today we sit on USD 10bn in assets and assets under management as a result of the past five years growth on a consolidation basis. We have pursued both organic and inorganic growth and taken advantage of opportunities that would enable us to reach our objectives. We are actively evaluating opportunities and see a great deal of potential and scope for GFH to use our expertise and funds. One recent example was the acquisition of a further 21.8% stake in Global Banking Corporation. This transaction reflects our continued focus and ability to capture strategic opportunities for growth and revenue generation and nicely complements some of our other associated investments while increasing the size of our assets under management. The acquisition will also give us access to key portfolios and contribute to GFH’s profitability during the year. We will keep looking for similar opportunities as we go forward and keep expanding our AUMs and achieve the strategic growth we are seeking according to our plans. 

What is your assessment of the outlook for investment in the regions’ markets?

There continue to be challenges for investors and the markets globally, including our region. However, despite current circumstances, we continue to see strong demand from our clients and investors for assets and opportunities that can provide solid income generation and cash flows. We have certainly demonstrated our ability to find such assets, acquire them, place them with our investors and investment managers, then successfully exit them. In the first half of the year, and despite the current challenges, we have already placed US$120 million of investments with our clients and we will continue to undertake strategic new deals that we believe will be well received.

What do think will be the ongoing impact of the Corona virus pandemic on the region?

We believe that the pandemic has transformed many aspects of our personal and professional lives and, in particular, an increased use of technology in how we run our businesses, manage our employees and communicate and serve our clients. While making significant change was challenging in part at the outset, we believe that today we have become more nimble and run more efficiency and that technology is helping to further transform our businesses and lives in positive ways.

Looking at the impact of the pandemic on the economies of the region, certainly the changes we have seen and their impact has been unprecedented. This applies across the board, but very significantly to certain sectors such as hospitality and tourism which have been deeply affected. At the same time, governments are facing liquidity challenges as state revenues fall and this has resulted many having issued government debt to bridge the gap.

We believe these factors, among others, while challenging also create opportunities for skilled investors, like GFH, and we are looking to capitalise on them as we go forward in ways that will not only benefit the Group and our shareholders and investors but more generally the economies of the region where we are active.