CICH Group Update
2021 Highlights
CICH had a record 9M12 reaching EGP 412 million in net profits, mainly driven by IB, Merchant Banking, and Microfinance arm. Lending portfolio was flat through 9M21 at EGP 12.0 billion. Microfinance grew significantly in portfolio size to offset the decline in the leasing business.
Blended NIMs improved to reach 7.6% versus 7.1% in the comparable period mainly driven by the higher contribution of the microfinance business.
Blended ROE for 9M21 is around 17% up from 13%.
2021 included one-offs in revenues around EGP100-170 million on the back of Taaleem IPO, offset by one-off in OPEX amounting to EGP150 related to ESOP on the back of Banque Misr acquisition, and another one worth of EGP75 million related to a loss in Corplease previously securitized portfolio.
2022 Outlook
Lending portfolio NIMs should improve with the increased contribution of microfinance.
Bottom line to grow at a healthy rate above 2021, which was 41% YoY in 9M21, incremental to 2021 bottom line including one-offs throughout the year with a sustainable ROE north of 20%.
CICH will continue to securitize in 2022.
Microfinance – Reefy
9M21 Update
Solid year coming from focused productivity of loan officers coupled with robust growth in branch network.
Outstanding portfolio went up by 67% over 9M21, where loan disbursements per branch was up by 50, and the aggregate loan disbursements went up by 75%
So far, they’ve been able to generate healthy NIMs of 37% for 9M21 slightly lower than last year as a result of higher leverage ratio.
Cost of risk was brought down to 2% up from 4% in 2020, driven by improved collection process, where collection rates were around 98% over 9M21.
CICH signed loans worth of EGP 150 million with HSBC and EGP 80 million with EBRD, dedicated to financing women in business.
Management expects solid loan disbursements and NIM performance to continue through 4Q21.
2022 outlook
Portfolio will grow slightly lower than 2021 which is expected to close 60% higher by year end.
Robust topline growth but slower bottom-line growth driven by a very aggressive expansion plan for branch network (10 new branches per quarter to reach 145 branches by year-end) versus 2021 which was focused on ramping up the branches added in 2020. New branches take around 6-9 months to break-even.
Bottom line grows in the range of 25-30%.
Margins will slightly come under pressure on higher leverage (up from 6x as of Sep-21) ratio but still record a healthy 35%.
CoR will slightly increase from 2%, on increased branch expansion, but will remain below the 4% that was recorded in 2020. With a maintained coverage around 100-150%.
Leasing – Corplease
It was a challenging year for the leasing business where outstanding loan portfolio declined by 10% to EGP 9.8 billion due 1) intensified competition coming from banks which led them to lower pricing on new bookings, 2) lower blended NIMs driven by lower contribution of FC lending which has higher spreads ( came in below the usual 25% of new loan booking) and finally 3) loss on valuation of securitized portfolio of EGP74 million versus a gain of EGP51 million in the comparable period.
New bookings YTD came in flat at EGP3.5 billion, but there was a slight uptick in new booking during 4Q21 that will help them close the year ahead of last year’s new bookings of EGP4.8 billion.
Closed 11th securitization issuance of EGP 2.4 billion with estimated profit of 5-6% of transaction size.
Most of the competition in the leasing business is coming from banks which affects the new bookings spread so that’s why the performance has been lagging the past couple of months. Another key reason is that we’ve seen less contribution of FC lending which typically has higher yields than LC lending.
Factoring is to be launched in 2022 which is expected to significantly boost the portfolio
Running at a very low cost of risk below the 1% and NPLs of around 2%, which is more than 100% covered.
2022 will see factoring business up and running, with a very solid pipeline whether for leasing or factoring.
Currently running slightly above 3x debt to equity ratio.
2022 outlook
Growth north of 30% in outstanding portfolio focusing on FC lending.
NIMs expected to improve since most of the pipeline is in FC which has higher spreads.
Maintained CoR around 1%, with coverage above 100%.
Mortgage
Has been growing steadily since they started operations in less than 12 months, with very highly underleveraged where debt to equity is just above the 1x mark, which leaves ample room for growth.
During 9M21 portfolio grew by 23% tp reach EGP200 million
Generated NIMs are within a range of 6 to 7%
Business is mainly retail focused and competition is intense which pressure NIMs.
2022 Outlook
NIMs are expected to decline as business grows and leverage increases to rest at 4-5% similar to the leasing business.
Will boost portfolio growth through signing portfolio acquisitions mandates with palm hills and other developers.
Consumer Finance
Portfolio is north of EGP100 million versus EGP40 million in 9M20.
The business has been growing significantly regarding number of clients and portfolio size but still is loss making.
IB platform
CICH had solid year in terms of advisory business, with closed deals north of USD 1.6 billion including Taaleem and E-finance IPO, Sodic acquisition, Blom bank sale and ABUK stake sale.
This also reflects on brokerage business and is expected to be sustained throughout 2022 given that the company has a solid pipeline whether in the M&A or ECM side.
2022 Outlook:
Brokerage operations to have higher market share by 50% in 2022 from a current of 9.6%. Management is optimistic on foreign intuitions participation in the market which should bode well for CICH since its institution based.
IB has a solid pipeline of M&As and IPOs non-of them is officially disclosed, similar to 2021.
Merchant banking
Launched MCI Captain Partners which is a JV between CICH (60% ) and Banque Misr (40%), where they concluded a stake acquisition of 27% stake in CLHO.
They plan to oversee other investments as well and to replicate Taaleem model on that business.
Foreign Currency Exposure
FC exposure is mostly on the capex side of the FC portion of the leasing business, especially IT related capex. but most of their operations are in EGP or based in Egypt.
Cash Dividends
Cash Dividends distribution is on the table as they started last year to pay dividends, but it depends on the cash position at the end of the year since a large chunk of the cash gets utilized by the merchant banking activities.