Bahrain-based GFH acquired 12 US hotels in a joint venture deal as the company continues to expand in the country. Reuters
Bahrain-based GFH acquired 12 US hotels in a joint venture deal as the company continues to expand in the country. Reuters

GFH third quarter profit climbs 23.3% on investment banking activities



GFH Financial Group, the Bahrain-based Sharia-compliant investment firm, said third quarter net income surged 23.3 per cent, boosted by its investment banking business.

Net profit attributable to shareholders in the three months to the end of September reached $30.9 million (Dh113.4m), GFH said in a statement on Monday. Its consolidated income for the third quarter also jumped 22.5 per cent to $31.26m.

The investment bank also reported a $103.4m net income for the first nine months of the year, a 19 per cent rise from a year earlier, it said. The company attributed the rise in part to strong contributions from investment activities.

“Significant improvements for the first nine months of the year can be attributed to growing contributions from the Group’s investment banking activities, which forms the core of our business and focus as we go forward,” Jassim Alseddiqi, Chairman of GFH Financial Group, said. “With this sustained momentum and progress, we expect to make even further gains by year end.”

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Equity attributable to shareholders came in at $1.09 billion for the first nine months of the year, dropping from $1.13bn at the end of the same period in 2017. The total assets of the group, however, increased 11 per cent to $4.43bn for the period.

In October, the Manama-headquartered firm received "conditional approval" from the central bank on an offer to sell its real estate portfolio for $1bn. It expects to receive an upfront payment ranging from $259m to $380m, with the remainder based on a joint development agreement over five years, the company said in a statement at the time. GFH is seeking regulatory approval to list its shares on Saudi Arabia's Tadawul benchmark gauge in addition to its shares trading in Bahrain, Kuwait and Dubai.

In May, the company acquired 85 per cent of UAE-based retail app, The Entertainer, through a deal which gives GFH about 5 to 10 per cent control. GFH will invest up to $150m in The Entertainer throughout the holding period.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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