Blog

Egypt’s investment bank EFG Hermes has completed its 12th securitized bond issuance for financial technology firm Valu, totaling $13.5 million (EGP 667.3 million), according to a statement released on Sunday.

Issuance details

The subsidiary of EFG Holding Company said the issuance is part of a newly approved securitization program valued at $324.5 million (EGP 16 billion).

The bond is backed by a receivables portfolio assigned to EFG for securitization. It will consist of two tranches: the first, valued at $8.39 million (EGP 413.7 million), with a 6-month term, and the second, valued at $5.14 million (EGP 253.6 million), with a 12-month term.

EFG Hermes served as the sole financial advisor, transaction manager, bookrunner, underwriter, and arranger for the issuance. First Abu Dhabi Bank Misr (FABMISR) acted as an underwriter, while Arab African International Bank (AAIB) served as the custodian bank. The statement also noted that subscribers to the issuance included Arab Banking Corporation (ABC), Attijariwafa Bank Egypt, and others. Moreover, Dreny & Partners was the legal advisor, and Baker Tilly was the auditor. 

“EFG Hermes is proud to support initiatives that fuel economic growth and create impactful opportunities, and we remain dedicated to working alongside Valu as it continues to lead and expand the fintech landscape,” said Maie Hamdy, Managing Director – Debt Capital Markets at EFG Hermes in a statement.

Financial performance

EFG Holding has reported a 95% year-on-year jump in second-quarter net profit after tax and minority interest to $16.1 million (EGP 791 million), according to its latest earnings report.The group’s revenue surged 63% year-on-year to $103.6 million (EGP 5.1 billion) for the quarter compared to the same period last year. 

The increase was driven by strong revenues from the Investment Banking division and growth across the rest of the group’s core business areas.

Recent deals

Last month, EFG Hermes finalized the sale of Helmerich & Payne, Inc.’s entire stake in ADNOC Drilling for $197 million, conducted through an accelerated book build (ABB). 

The investment bank was appointed as the joint global coordinator for the ABB to help Helmerich & Payne divest from its shares in the state-owned drilling company. 

In July, EFG Hermes advised UAE-based Electra Investment Holding on its $449 million acquisition of a stake in Elsewedy Electric. A month earlier, EFG Hermes completed advisory services for the $11 billion secondary public offering of Saudi Aramco on the Saudi Exchange.

Additionally, in May, EFG Hermes facilitated a $935 million Accelerated Equity Offering (AEO) for UAE’s ADNOC Drilling.

Forbes ranking

EFG Holding ranks 11th on Forbes Middle East’s Egypt’s Top 50 Listed Companies 2024 list. Karim Awad, the group CEO and chairman of the Executive Committee of EFG Hermes, ranks ninth on Forbes Middle East’s Top 30 Asset Managers 2024 list. 

Key background 

Established in 2017, Valu, subsidiary of EFG Holding Company, is a Buy-Now, Pay-Later (BNPL) fintech platform that offers customizable financing plans for up to 60 months across more than 6,000 points of sale and over 1,500 online stores. It also also offers investment products, an instant cash redemption program, savings solutions, and a financing solution to facilitate the purchase of big-ticket items. 

Morocco is set to receive $687.8 million (€650 million) in financial assistance from the African Development Bank (AfDB) to enhance its transport infrastructure in preparation for the 2030 World Cup, according to a report.

AfDB support

AfDB President Akinwumi Adesina, after meeting the government officials, said financing to develop Morocco’s rail and airport infrastructure for the World Cup would be put to the board for approval, state-run news agency MAP reported Thursday.

Morocco will host the World Cup 2030, along with Spain and Portugal. The North African country plans to develop air, road, and rail infrastructure projects for the mega soccer event.

Besides, Morocco plans to build a large stadium in Benslimane, near Casablanca, and upgrade six other facilities.

Emphasizing the bank’s ongoing support for Morocco’s structural reforms, Adesina noted that Morocco is the institution’s leading partner, with an active portfolio of 37 projects totaling $3.6 billion, covering infrastructure, energy, water, sanitation, and the private sector, the MAP report added. 

Adesina’s discussions with government officials also focused on the country’s youth employment challenges and skills development, and the multilateral bank pledged to support it in these priority areas.

Crucial quote

“This year, the AfDB has approved $1.5 billion in financing for the Kingdom, reflecting the importance of this partnership,” Adesina told MAP.

Economic growth

Morocco’s central bank expects the country’s economic growth to ease to 2.8% in 2024, from 3.4% last year, according to a report in September. 

The International Monetary Fund (IMF) said in October that Morocco’s economic growth is expected at 2.8% in 2024—in line with the central bank—and 3.6% in 2025. The IMF forecasts inflation in Morocco to be moderate, with a rate of 1.7% expected in 2024, marginally rising to 2.3% in 2025.

The US household wealth reportedly surged to a fresh record high of $163.8 trillion in the second quarter, largely buoyed by gains in both real estate prices and stock holdings.

Real estate, equity

  • The household sector’s real estate value climbed about $1.75 trillion, the most in a year, while the value of equity holdings rose about $662 billion, Bloomberg reported Thursday, citing a Federal Reserve report. 
  • The household wealth report comes less than a week ahead of the Federal Reserve’s much-awaited meeting to reduce borrowing costs for the first time since the pandemic crisis period.
  • Market operators are expecting the decision as inflation has cooled and in hopes of preventing a slowing labor market from worsening.
  • The rise in the net worth of households and non-profits to $161 trillion at the end of the first quarter was fuelled by a $1.8 trillion gain in the value of real estate holdings and a $700 billion rise in the value of equity holdings, Reuters reported.
  • Furthermore, household debts for the April-June period increased at an annualized rate of 3.2%, the fastest growth since the third quarter of 2022. 
  • Cash on hand dropped modestly, with bank balances, money market funds and foreign currency holdings ruling at $18.44 trillion by the end of June, down from a record $18.51 trillion at the end of March.
  • The US personal consumption expenditures (PCE) price index rose 0.2% in July, up 2.5% from the same period a year ago, according to a report in August.
  • The stock market reportedly ended at near-record levels in the second quarter, with the benchmark S&P 500 index offering a total return of 4.3% including reinvested dividends.

US economic growth

The US economy grew by 3% year-on-year in the second quarter, thanks to a jump in consumer spending and business investment, the Commerce Department’s Bureau of Economic Analysis said in August. The latest gross domestic product (GDP) growth rate was upward from an initial estimate of 2.8%.

The second quarter GDP growth reflected a sharp increase from the sluggish 1.4% growth recorded in the first quarter due to subdued consumer spending.

What to watch for

The next Federal Open Market Committee meeting will be held on September 17 and 18, 2024, which is expected to cut interest rates.

The value of real estate transactions in Abu Dhabi amounted to $4.3 billion (AED 15.9 billion) in the first quarter of 2024, with a total of 5,127 sales and mortgage transactions recorded in the period.

First quarter sales

The total value of sales in Abu Dhabi from the beginning of 2024 until Tuesday reached $2.6 billion (AED 9.6 billion), with a total of 2,919 buying and selling transactions recorded in the emirate, the UAE’s state-run Emirates News Agency (WAM) reported Tuesday, citing data from the DARI platform of the Department of Municipalities and Transport (DMT).

As many as 1,167 ready-made real estate units and 1,752 off-plan were sold, with 2,208 real estate mortgages worth $1.7 billion (AED 6.3 billion) recorded during the first three months of this year. 

The report showed the largest real estate transactions in Abu Dhabi during the last week were recorded on Saadiyat Island and Yas Island. The total value of transactions on Yas Island amounted to $6.3 million (AED 23.5 million), while on Saadiyat Island, it reached $3.9 million (AED 14.3 million). 

Activity in last year

The value of buying and selling transactions soared by 159.5% to $16.6 billion (AED 61 billion) in 2023, with the number of transactions surging by 73.7% to 15,653, DMT’s Abu Dhabi Real Estate Centre (ADREC) reported last month.

Real estate activity in Abu Dhabi, including buying, selling, and mortgage transactions, collectively witnessed a 12.2% rise based on a total of 22,751 transactions recorded in 2023, representing a 19.5% increase in the number of transactions compared to the previous year.

There was also a notable rise in the number of investors participating in the emirate’s real estate market last year.

Inflated prices

On the back of higher demand in Abu Dhabi’s occupier market, rental rates have been on the rise since the last quarter of 2023, a report from Coldwell Banker Richard Ellis (CBRE) showed. 

Average apartment prices in Abu Dhabi’s residential market increased by 1.1% in the fourth quarter, whereas average villa prices remained almost unchanged from the comparable period a year earlier.

Aerial view of Shanghai skyline and cityscape at sunset,China.

Shanghai would be the first major city in China to implement tax incentives to boost the country’s struggling property sector, state news agency Xinhua reported Monday. 

Tax incentives

The Shanghai Housing and Urban-Rural Development Commission, Housing Administration Bureau, Finance Bureau, and Tax Bureau jointly announced the new rules, which are set to take effect on December 1. 

Under the new rules, Shanghai residents who want to sell their existing properties will be exempt from paying VAT. The financial capital also raised the standard for levying deed tax to properties larger than 140 square meters from 90 square meters. 

The city will also eliminate the division between ordinary and non-ordinary housing when it levies value-added taxes and personal income taxes on sales, becoming the first “tier one” city to do so. 

“The tax savings of tens of thousands of yuan for sellers, coupled with reductions in deed tax for buyers, provide both parties with more room for negotiation. This creates a favorable environment for transactions, making it easier to close deals and help maintain a relatively high level of market activity,” Xinhua quoted Lu Wenxi, market analyst at the real estate agency Centaline Property as saying. 

Other major cities are expected to implement similar moves to stem the slump in property markets. 

“Shanghai’s recent move is a continuation of these nationwide policies, all designed to restore confidence and rejuvenate sentiment in the housing sector. We anticipate that more cities will unveil similar incentives in the coming weeks,” Reuters quoted Bruce Pang, chief economist at JLL, as saying. 

Analysts generally agreed that this is not a long-term fix and that authorities will need to introduce additional policy measures to address the broader issues undermining consumer confidence. 

Resale home prices in Shanghai fell for the 16th consecutive month in October, down 6.7% from a year earlier, according to official data. 

Similar moves

The world’s second-biggest economy has been facing an unprecedented crisis in real estate sector, a key engine of growth. 

Last week, the Chinese Ministry of Finance said the country will increase deed tax incentives to actively support people’s essential housing needs and improve their housing conditions, according to Xinhua. 

The new policies, which will take effect in December, were jointly introduced by the Ministry of Finance, the State Tax Administration, and the Ministry of Housing and Urban-Rural Development. 

Under the new policies, individuals purchasing their only residential property or a second home, as long as the area does not exceed 140 square meters, will pay deed tax at a rate of 1% anywhere in the country. For properties with an area exceeding 140 square meters, the deed tax will be levied at a rate of 1.5%. 

Zhang Dawei, chief analyst with real estate agency Centaline Property, said that the regulations will mainly benefit those who plan to purchase bigger homes, reported Xinhua. He added that revised tax standards are expected to encourage purchase demand for both improved housing and second homes. 

The transaction volume of new homes surged by 0.9% in China in October, reversing a decline that started in June last year. Second-hand home transactions also rose for the seventh consecutive month and by 8.9%. 

In May, China announced numerous measures to stabilize its property sector, including the central bank facilitating $138 billion (RMB 1 trillion) in extra funding and easing mortgage rules. 

Co-Founder and Executive Chairman, Mike Jatania, AUREA Group

Under the leadership of Co-Founder and Executive Chairman, Mike Jatania, AUREA Group’s acquisition of The Body Shop signals a transformative new chapter for the iconic brand, with bold plans and deepened engagement in the Middle East.

The Body Shop, a global pioneer in ethical beauty, is embarking on a transformative journey under the stewardship of the AUREA Group. The private equity platform acquired the beauty brand in 2023, but for Co-Founder and Executive Chairman, Mike Jatania, the deal was far more than a business transaction; it was a rare chance to breathe new life into a much-loved brand.

“The Body Shop acquisition represents a unique opportunity to revitalize a globally recognized brand with a storied heritage in ethical beauty,” says Jatania, a veteran of the beauty industry with more than 30 years of experience in the business. For the AUREA Group co-founder, his company brings more to the table than investment. “Our operational experience, international networks, and strategic partnerships are designed to help founders of strong, value-driven brands scale exponentially,” he explains. 

With its fiftieth anniversary just two years away and sales in 70 countries, Jatania recognizes The Body Shop’s iconic status, but emphasizes the need for transformation to address evolving consumer demands. According to the AUREA Group co-founder and executive chairman, the brand has a tremendous heritage and relevance, but to meet the needs of today’s consumers, it needs renewed focus on product innovation and a consumer-first approach.

To deliver exactly that, Jatania has developed an agile strategy to transform the brand and address the growing demand for ethical, sustainable, and eco-friendly products. “We’re embracing global ingredients and sustainability stories while ensuring we act quickly to meet market expectations,” he explains. This renewed focus aims to reestablish The Body Shop as a leader in ethical beauty, catering to the diverse and dynamic needs of modern consumers.

One region poised to play a central role in The Body Shop’s evolution is the Middle East. The brand is already active in nine regional markets, including the U.A.E. and Saudi Arabia, and Jatania considers the region critical to the future of the business. As he points out, “markets like the U.A.E. are global hubs, attracting international consumers with growing awareness of sustainability and ethical brands.”

The region’s youthful demographic and cultural richness also present unique opportunities for innovation. Jatania highlights fragrance and skincare as key focus areas, noting the Middle East’s strong affinity for fragrance and the evolving needs of skincare consumers. “We’re bringing innovation to fragrance and skincare, catering to multi-generational families, from youth-focused products to pro-age and anti-aging solutions,” he says.

As The Body Shop’s evolutionary journey continues across the Middel East and beyond, what excites Jatania most about the future is the dynamic consumer landscape. “The demanding consumer keeps us agile and forward-thinking,” he notes. “Anticipating trends and meeting consumer expectations will drive our innovation and success.”

Under AUREA Group, The Body Shop is poised to redefine its legacy, merging ethical heritage with cutting-edge innovation. 

The thoughts expressed in this advertorial are solely those of the client.

HomeServices of America, Warren Buffett’s real estate brokerage, reached a $250 million settlement over allegations it kept fees artificially high—marking the last major company to settle in the landmark antitrust case against the real estate industry.

Key facts

  • Chris Kelly, executive vice president of HomeServices of America, told Forbes in a statement the settlement “underscores our commitment to protecting our agents, employees, and franchisees” by protecting them from related lawsuits.
  • Kelly said the brokerage has “always been confident in the legality and ethics of” its business practices and “the decision to settle was driven by a desire to eliminate the uncertainty brought by the protracted appellate and litigation process.”
  • Benjamin D. Brown, managing partner at Cohen Milstein Sellers & Toll—which represented the plaintiffs in the case—said the “significant settlement” brings them “a step closer to resolving this long-running case involving the industry-wide brokers’ commission scheme.”
  • The National Association of Realtors, HomeServices, and a number of other major brokerages were sued in 2019 by groups of home sellers who alleged they were paying oversized fees to brokers and agents.
  • HomeServices is a subsidiary of Buffett’s Berkshire Hathaway Energy, and the $250 million settlement is the highest amount any brokerage has paid to settle suits over the industry’s commission structure, the Wall Street Journal reported.
  • Despite the high settlement figure, plaintiffs who tried to tie the suit to Berkshire Hathaway Energy to improve their payouts had hoped for more, according to multiple reports.

Big number

$418 million. That’s how much the National Association of Realtors will pay in settlement fees over the next four years to end litigation with home sellers who sued over broker commissions and fees. As part of the settlement, the association also said agents for home sellers will no longer be required to give commission to buyers’ agents, changing the way homes are sold. The NAR settlement was announced last month and got preliminary approval from a judge earlier this week.

Key background

In October, a Missouri jury found home sellers had been paying inflated fees to their real estateagents and the verdict ordered damages of at least $1.8 billion from NAR, HomeServices of America and one other brokerage. Two other brokerages named in the suit settled out of court for about $140 million, CNN reported. Though NAR recently settled a number of lawsuits over the heightened fees, the association continued to deny any wrongdoing related to its compensation model. In court, the association argued it didn’t have a conspiracy around commissions and that allegations of set commission rates were unfounded, the New York Timesreported.

What to watch for

Other legal troubles for the NAR. Earlier this month, the Department of Justice announced it was reopening its investigation into the association. “The Antitrust Division is committed to fighting to lower the cost of buying and selling a home,” Assistant Attorney General Jonathan Kanter said in a statement on April 5.

Morgan Stanley posted a 32% increase in third-quarter profit to $3.2 billion, or $1.88 per share, on better-than-expected wealth management, trading, and banking results.

Q3 highlights

Earnings topped LSEG’s estimate of 1.58 per share. Revenue jumped 16% to $15.38 billion, higher than the estimated $14.41 billion.

The banking giant’s total client assets have surpassed $7.5 trillion across its wealth and investment management division supported by buoyant equity markets and net asset inflows. 

CEO Ted Pick said Wednesday the company’s business model is delivering strong returns while accreting capital, producing a return on tangible common equity (ROTCE) of 18.2% through the first three quarters of 2024. He said that institutional securities saw momentum in the markets and underwriting businesses on solid client engagement.

During the quarter, Morgan Stanley accrued $2.1 billion of common equity tier 1 capital and ended the quarter with a standardized common equity tier 1 capital ratio of 15.1%. 

The stock hit an all-time high Monday and has jumped 19.51% year-to-date.

Buoyant markets

Morgan Stanley has benefited from several positive factors or tailwinds, driving its performance, starting with buoyant markets that helped its massive wealth management business, a rebound in investment banking after a dismal 2023, and strong trading activity.

The bank’s institutional securities net revenues of $6.8 billion reflect strong performance in equity and fixed income on higher client activity and increased momentum in investment banking.

During the quarter, wealth management delivered a pre-tax margin of 28.3%. The bank said that its record net revenues of $7.3 billion reflect strong asset management and transactional revenues. 

Third-quarter investment management net revenues reached $1.5 billion, up from $1.3 billion a year ago. Pre-tax income was $260 million compared with $241 million a year ago.

The US-based asset manager BlackRock is reportedly holding discussions with billionaire Mukesh Ambani’s Jio Financial Services to establish a private credit venture in order to tap into India’s expanding direct lending market.

Private credit JV

BlackRock and Jio Financial Services will each hold 50% stakes in the joint venture (JV), which will lend to a wide range of businesses from large companies to startups, Bloomberg reported Wednesday, citing people familiar with the matter.

A final decision has not been reached yet, but if the two companies decide to move ahead, it would mark BlackRock’s third venture with Ambani’s firm since the two joined hands to initiate asset management and stock broking businesses in India.

Earlier this month, the two companies obtained approval from India’s market regulator to serve as co-sponsors and establish a mutual fund business.

In July, Jio Financial Services received approval from the Reserve Bank of India to transition from a Non-Banking Financial Company (NBFC) to a Core Investment Company (CIC). Ambani’s Reliance Industries spun off Jio Financial Services. Earlier, Ambani’s Reliance Industries Ltd demerged Reliance Strategic Investments Ltd to list Jio Financial Services.

India’s appeal

India has emerged as a key destination for private credit in Asia due to the increased funding needs of local companies. This has prompted global firms like Cerberus Capital Management, Apollo Global Management, and Varde Partners to step up their operations in the country.

Private credit deals in India surged to an all-time high for any six-month period during the first half of 2024, with $6 billion deployed across 96 deals, according to a recent report by Ernst and Young (E&Y). Key sectors for such deals included real estate, infrastructure, and healthcare.

The boost was primarily facilitated by a few “high-value performing and high-yield credit deals,” as Ambani’s Reliance Logistics and Warehousing, Vedanta Semiconductors, and Matrix Pharma collectively raised about $1.3 billion. 

Real estate remained a key focus for credit funds, with deployment across large borrowers such as Prestige Group, Puravankara Group, Kalpataru Group, and Shapoorji Group.

Forbes valuation

Ambani, the chairman and managing director at Reliance Industries, has a net worth of $106.5 billion as of October 16, 2024, making him Asia’s richest person and the world’s 11th wealthiest.

Moody’s Ratings upgraded its outlook on the US banking system from negative to stable on Monday, citing anticipated interest rate cuts and ongoing moderate economic growth as factors that will stabilize bank asset quality and enhance profitability.

Interest rate cuts

  • The US Federal Reserve cut rates for the first time in four years in September in the wake of easing recession risks and price pressures in the US economy.
  • Goldman Sachs expects the US Federal Reserve to implement consecutive 25-basis-point (bps) interest rate cuts from November 2024 through June 2025, bringing the terminal rate to a range of 3.25-3.5%, according to Reuters.
  • Last month, the Fed reduced the overnight rate by half a percentage point to a 4.75 to 5% range, citing increased confidence that inflation will continue to dip toward its 2% annual target. 
  • According to CME’s Fedwatch Tool, markets are pricing in a 94.1% likelihood of a 25 bps cut at the Fed’s next meeting, with only a 5.9% chance that the central bank will keep rates unchanged, the report added.
  • US annual inflation fell to 2.4% in September, exceeding expectations and reinforcing predictions that the Federal Reserve will cut interest rates by a quarter point at its upcoming meeting in November. Data released by the Bureau of Labor Statistics showed a decline from August’s 2.5% annual increase, though it was above economists’ expectations of 2.3%. 

What we know

Mortgage loans are among the sectors that will be most affected by lower interest rates in the US, as mortgage rates are closely tied to government bond yields, which reflect the Federal Reserve’s monetary policy, according to Future for Advanced Reseach and Studies. 

Consumer loans, including auto loans, will also become more affordable as the Fed reduces interest rates. Furthermore, companies will benefit from easier access to credit, as lower interest rates typically lead to increased employment opportunities and higher profits due to reduced borrowing costs.

Positive signs

The US banking industry has been facing earnings pressure from high interest rates, low share prices, credit uncertainty, a sluggish merger and acquisition market, geopolitical conflicts, unprecedented regulatory scrutiny, and upcoming regulatory uncertainty after the presidential election, according to KPMG’s 2024 US Banking Industry Outlook Survey.

However, signs of a brighter future are emerging, particularly among larger banking institutions, the survey noted. About two-thirds (66%) of bank executives expressed confidence in their organization’s growth prospects over the next year, with one-third (33%) being very confident. 

Size plays a significant role in growth potential as nearly all larger organizations with over $50 billion in assets (93%) are more confident than smaller ones with under $50 billion (48%)

US economic growth

Real gross domestic product (GDP) in the US increased at an annual rate of 3% in the second quarter of 2024, according to the third estimate released by the US Bureau of Economic Analysis. In the first quarter, the country’s economic growth was 1.6%.

Overall, real GDP is expected to increase 2.7% in 2024 and by 1.5% in 2025. Between 2026 and 2028, real GDP growth is forecasted to hover between 1.7% and 2.1% per annum.

Big number

$71.5 billion. This is the US banking industry’s profit for the second quarter of 2024, marking an 11.4% year-on-year rise due to shrinking expenses and higher non-interest income, according to the Federal Deposit Insurance Corporation. 

However, the FDIC cited several lingering areas of concern, including strain in commercial real estate and high credit card borrowing.