REG - EFG Holding S.A.E. - Final Results IFRS 2024
Wed 19:00
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RNS Number : 9268G EFG Holding S.A.E. 30 April 2025
http://www.rns-pdf.londonstockexchange.com/rns/9268G_1-2025-4-30.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9268G_1-2025-4-30.pdf)
EFG Holding Company
(Previously EFG - Hermes Holding Company)
(Egyptian Joint Stock Company)
Consolidated financial statements.
For the year ended 31 December 2024
-
Table of contents
Page(s)
Independent auditor's report 1 - 4
Consolidated statement of financial position 5
Consolidated statement of profit or loss 6
Consolidated statement of comprehensive income 7
Consolidated statement of changes in equity 8 - 9
Consolidated statement of cash flows 10 - 11
Notes to the consolidated financial statements 12 - 121
Consolidated statement of financial position
As at 31 December 2024
Notes 2024 2023
EGP Thousand EGP Thousand
(Restated)
Assets
Cash and cash equivalents 5 42,847,357 28,222,210
Balance with Central Bank 5.1 8,693,380 4,030,033
Loans and advances to customers 8 57,928,603 40,221,897
Accounts receivable 7 15,773,382 6,770,962
Investments at fair value through profit and loss 6 23,488,674 9,196,191
Investments at fair value through OCI 9 12,374,218 11,647,611
Investments at amortized cost 12 12,487,545 11,233,860
Assets held for sale 11 106,304 -
Equity accounted investees 10 804,867 844,793
Investment properties 13 90,283 98,701
Other assets 16 6,583,336 5,021,903
Goodwill and other intangible assets 15 2,490,920 2,318,723
Deferred tax assets 22 233,912 126,411
Property and equipment 14 2,975,630 2,177,789
Total assets 186,878,411 121,911,084
Liabilities
Due to banks and financial institutions 17 22,762,916 14,055,729
Customer deposits 18 67,208,585 50,634,207
Loans and borrowings 24 11,489,567 8,130,903
Creditors and other credit balances 21 11,130,638 6,216,904
Accounts payable - customers credit balances FVTPL 19 7,901,466 680,319
Accounts payable - customers credit balances 19.1 20,566,943 11,319,690
Issued bonds 20 1,432,665 749,003
Provisions 23 1,913,277 1,099,271
Current tax liability 30.1 1,020,705 638,583
Deferred tax liabilities 22 2,083,684 987,436
Total liabilities 147,510,446 94,512,045
Equity
Share capital 25 7,298,030 7,298,030
Legal reserve 993,689 972,344
Share premium 1,797,838 1,668,624
Other reserves 11,800,563 4,843,110
Retained earnings 12,568,681 8,534,456
Treasury shares 25.1 (399,975) -
Equity attributable to owners of the Group 34,058,826 23,316,564
Non - controlling interests 26 5,309,139 4,082,475
Total equity 39,367,965 27,399,039
Total liabilities and equity 186,878,411 121,911,084
These financial statements were approved and authorised for issue on 30 April
2025 and signed by:
Mona Zulficar Karim Awad
Chairperson Group Chief Executive Officer
The accompanying notes 1 to 37 form an integral part of these consolidated
financial statements.
Consolidated statement of profit or loss
For the year ended 31 December 2024
Notes 2024 2023
EGP Thousand EGP Thousand
(Restated)
Interest income 32 22,319,642 13,484,814
Interest expense (15,310,258) (8,867,099)
Net interest income 7,009,384 4,617,715
Fee and commission income 32 11,452,386 7,161,919
Fee and commission expense (1,357,101) (719,609)
Net fee and commission income 10,095,285 6,442,310
Realized securities' (loss)/ gain 2 (57,356) 171,671
Net changes in the fair value of investments at FVTPL 6 2,844,098 1,411,890
Dividend income 32 85,998 81,477
Other revenues 28 462,570 307,796
Net gains on derecognition of financial assets at amortized cost 32 960,692 432,931
Impairment loss on financial assets - net of recoveries 29 (773,002) (1,030,333)
Foreign currencies exchange differences 32 2,907,706 1,154,847
Share of gain from equity accounted investees 32 48,853 45,048
23,584,228 13,635,352
General and administrative expenses 31 (14,713,532) (8,950,858)
Financial guarantee provision 23 (40,678) (38,055)
Impairment loss on goodwill and intangible assets 32 - (12,002)
Provisions 23 (738,908) (224,814)
Depreciation and amortisation 31.2 (633,597) (481,384)
Profit before tax 7,457,513 3,928,239
Income tax expense 30 (2,370,417) (1,093,997)
Profit for the year 5,087,096 2,834,242
Attributable to:
Shareholders of the Holding Company 4,098,933 2,212,222
Non-controlling interests 988,163 622,020
5,087,096 2,834,242
Earnings per share:
Basic earnings per share - EGP 34 2.84 1.52
Diluted earnings per share - EGP 34 2.84 1.52
The accompanying notes 1 to 37 form an integral part of these consolidated
financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2024
Notes 2024 2023
EGP Thousand EGP Thousand
(Restated)
Profit for the year 5,087,096 2,834,242
Other comprehensive income items:
Items that may be reclassified to the consolidated statement of profit or loss
Foreign operations - foreign currency translation differences 7,055,262 1,919,416
Foreign currency translation differences - reclassified to profit or loss (26,944) (198,160)
Net gain/ (loss) on investments in debt instruments at FVOCI- net change in 186,661 (33,483)
fair value
Investments at fair value through OCI-net change in fair value - reclassified 213,739 215,549
to profit or loss
Tax relating to such items 22 (102,709) 14,319
7,326,009 1,917,641
Items that will not be reclassified to the consolidated statement of profit or
loss
Investment at fair value through OCI - reclassified to retained earnings 555 (1,064)
Net gain/ (loss) on investments in equity instruments designated at fair value 20,241 (222,270)
through OCI - net change in fair value
Actuarial gain re-measurement of employees' benefits obligations 21.2 2,178 3,512
Share of other comprehensive income of equity accounted investees 4,672 1,310
Other comprehensive income, net of tax 7,353,655 1,699,129
Total comprehensive income for the year 12,440,751 4,533,371
Attributable to:
Shareholders of the Holding Company 11,076,685 3,824,822
Non-controlling interests 1,364,066 708,549
12,440,751 4,533,371
The accompanying notes 1 to 37 form an integral part of these consolidated
financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2024
EGP Thousand Share Legal Share premium General reserve Translation reserve Fair value reserve Employee stock ownership plan reserve Operational risk reserve Retained earnings Total Non-controlling interests Total Equity
Capital reserve
Balance as at 31 December 2022 5,838,424 867,455 1,668,624 158 3,979,860 (1,224,388) 289,011 80,915 7,423,239 18,923,298 3,445,286 22,368,584
Total comprehensive income
Profit - - - - - - - - 2,212,222 2,212,222 622,020 2,834,242
Other comprehensive income - - - - 1,670,159 (61,071) - - 3,512 1,612,600 86,529 1,699,129
Total comprehensive income - - - - 1,670,159 (61,071) - - 2,215,734 3,824,822 708,549 4,533,371
Transactions with owners of the Group
Contributions and distributions
Dividends 1,459,606 - - - - - - - (1,460,450) (844) (135,421) (136,265)
Transferred to legal reserve - 104,889 - - - - - - (104,889) - - -
Employee stock ownership plan (ESOP) - - - - - - 130,939 - - 130,939 - 130,939
Operational risk reserve - - - - - - - (22,473) 22,473 - - -
Sale of equity securities through OCI - - - - - - - - 1,064 1,064 - 1,064
Changes in ownership interests
Acquisition of subsidiary with NCI - - - - - - - - - - 10,918 10,918
Changes in ownership interests without change in control - - - - - - - - 437,285 437,285 53,143 490,428
Restated balance as at 31 December 2023 7,298,030 972,344 1,668,624 158 5,650,019 (1,285,459) 419,950 58,442 8,534,456 23,316,564 4,082,475 27,399,039
The accompanying notes 1 to 37 form an
integral part of these consolidated financial statements.
Consolidated statement of changes in equity (continued)
For the year ended 31 December 2024
EGP Thousand Share Legal Share premium General reserve Translation reserve Fair value reserve Employee stock ownership plan reserve Operational risk reserve Treasury shares Retained earnings Total Non-controlling interests Total Equity
Capital reserve
Balance as at 31 December 2023, as previously reported 7,298,030 972,344 1,668,624 158 5,650,019 (1,285,459) 419,950 58,442 - 8,538,917 23,321,025 4,074,904 27,395,929
Impact of purchase price allocation on subsidiary (note 37) - - - - - - - - - (4,461) (4,461) 7,571 3,110
Restated balance as at 31 December 2023 7,298,030 972,344 1,668,624 158 5,650,019 (1,285,459) 419,950 58,442 - 8,534,456 23,316,564 4,082,475 27,399,039
Total comprehensive income
Profit - - - - - - - - - 4,098,933 4,098,933 988,163 5,087,096
Other comprehensive income - - - - 6,728,166 247,408 - - - 2,178 6,977,752 375,903 7,353,655
Total comprehensive income - - - - 6,728,166 247,408 - - - 4,101,111 11,076,685 1,364,066 12,440,751
Transactions with owners of the Group
Contributions and distributions
Dividends - - - - - - - - - (5,809) (5,809) (139,963) (145,772)
Transferred to legal reserve - 21,345 - - - - - - - (21,345) - - -
Transferred to share premium - - 129,214 - - - (55,276) - - - 73,938 - 73,938
Operational risk reserve - - - - - - - 37,155 - (37,155) - - -
Purchasing of treasury shares - - - - - - - - (399,975) - (399,975) - (399,975)
Sale of equity securities through OCI - - - - - - - - - 2,975 2,975 1,296 4,271
Changes in ownership interests
Changes in ownership interests without a change in control - - - - - - - - - (5,552) (5,552) 1,265 (4,287)
Balance as at 31 December 2024 7,298,030 993,689 1,797,838 158 12,378,185 (1,038,051) 364,674 95,597 (399,975) 12,568,681 34,058,826 5,309,139 39,367,965
The accompanying notes 1 to 37 form an
integral part of these consolidated financial statements.
Consolidated statement of cash flows
For the year ended 31 December 2024
Notes 2024 2023
EGP Thousand EGP Thousand
(Restated)
Cash flows from operating activities
Profit for the year before income tax 7,457,513 3,928,239
Adjustments for:
Depreciation and amortization 31.2 633,597 481,384
Provisions movements 23 502,961 148,077
Gains on sale of property, plant and equipment 28 (22,882) (3,251)
Gain from securitization (960,692) (432,931)
Gain on sale of investment property (7,648) (56,438)
Loss on sale of investment at FVTOCI 203,295 6,382
Amortization of premium / issue discount (2,171,081) (1,270,786)
Changes in the fair value of investments at fair value through profit (2,844,098) (1,411,890)
and loss
Share of gain from equity accounted investees 32 (48,853) (45,048)
Impairment loss on assets 29,15 773,002 1,042,335
Share-based payment 73,938 130,938
Employees' benefits 21.2 15,477 10,239
Foreign currency translation differences 6,395,850 2,113,321
Foreign currency exchange differences 32 (2,907,706) (1,154,847)
Gain on selling of investments in subsidiaries and associates (2,599) (116,059)
Operating profit before changes in assets and liabilities 7,090,074 3,369,665
Changes in assets and liabilities:
Other assets (154,703) (2,284,677)
Creditors and other credit balances (2,800,194) 1,551,020
Accounts receivables (3,869,228) 1,854,893
Accounts payable (895,777) (2,654,272)
Accounts payable - customers credit balance at fair value 7,221,146 301,280
through profit and loss
Loans and facilities to customers (20,424,633) (10,303,164)
Due from banks (4,699,056) (2,142,353)
Due to banks (3,196,040) 1,890,134
Customers deposits 9,102,583 1,181,427
Employees' benefits obligations paid 21.2 (37,828) (1,916)
Investments at fair value through profit and loss 466,184 (445,075)
Income tax paid (1,052,558) (772,664)
Net cash used in operating activities (13,250,030) (8,455,702)
Cash flows from investing activities:
Payments to purchase property, plant and equipment (1,241,297) (736,314)
and other intangible assets
Proceeds from sale of property, plant and equipment 36,355 28,763
Proceeds from sale of investment property 9,579 70,176
Proceeds from sale of investments at FVTOCI 29,663,914 25,559,674
Payments to purchase investments at FVTOCI (26,353,791) (17,781,236)
Payments to purchase investment in subsidiaries (5,562) (69,682)
Proceeds from sale of investment in subsidiaries - 179,259
Payments to purchase equity accounted investees (71,000) -
Proceeds from sale of equity accounted investees 13,083 -
Dividends collected 16,185 23,102
Net cash generated from investing activities 2,067,466 7,273,742
The accompanying notes 1 to 37 form an integral part of these consolidated
financial statements.
Consolidated statement of cash flows (continued)
For the year ended 31 December 2024
Notes 2024 2023
EGP Thousand EGP Thousand
(Restated)
Cash flows from financing activities:
Dividends paid (621,494) (495,060)
Proceeds from securitization 4,935,750 5,035,109
Proceeds from issued bonds 1,432,665 249,003
Payment for issued bonds (749,003) -
Proceeds from financial institutions 2,142,133 -
Payment to financial institutions - (13,515)
Proceeds from loans and borrowings 4,914,826 3,571,284
Payment for loans and borrowings (1,752,246) (1,083,222)
Purchase of treasury shares (399,975) -
Net cash generated from financing activities 9,902,656 7,263,599
Net change in cash and cash equivalents (1,279,908) 6,081,639
Cash and cash equivalents at 1 January 20,295,762 12,750,151
Effect of exchange rate changes 5,526,122 1,460,302
Cash from acquisition of subsidiaries - 3,670
Cash and cash equivalents at 31 December 5 24,541,976 20,295,762
The accompanying notes 1 to 37 form an integral part of these consolidated
financial statements.
1 Incorporation and principal activities
1.1 Incorporation
- EFG Holding Company (Previously EFG Hermes Holding Company)
(Egyptian Joint Stock Company) (the "Group" or "Holding Company") is an
Egyptian Joint Stock Company subject to the provisions of the Capital Market
Law No.95 of 1992 and its executive regulations. The Group's registered office
is located in Smart Village building No. B129, phase 3, KM 28 Cairo /
Alexandria Desert Road, 6 October 12577 Egypt.
- The name of the company has been changed to EFG Holding through the
approval of the General Assembly dated May 24, 2023 and was reflected in the
commercial register on June 14, 2023.
- EFG Holding shares are listed on the Egyptian Ex-change (EGX) and
the London Stock Exchange (LSE) in the form of USD-denominated Global
Depository Receipts ("GDRs").
1.2 Purpose of the Group
EFG Holding Company (Previously EFG Hermes Holding Company) is a premiere
financial services corporation that offers diverse investment banking services
including securities brokerage, investment banking, asset management and
private equity. In addition, the Group also has non-bank finance products,
which include leasing and micro-finance, instalment services, factoring,
securitization, collection and tasquek. The purpose of the Group also includes
participation in the establishment of companies which issue securities or in
increasing their share capital, custody activities, margin trading and
commercial bank activities.
2 Basis of preparation
Statement of compliance
The consolidated financial statements of the Group have been prepared in
accordance with IFRS accounting standards and interpretations issued by the
IFRS Interpretations Committee (IFRIC) applicable to companies reporting under
IFRS accounting standards. The financial statements comply with IFRS
accounting standards as issued by the International Accounting Standards Board
(IASB).
Basis of measurement
These consolidated financial statements have been prepared under the
historical cost basis, except for the following:
· Financial assets measured at fair value through profit or loss;
· Financial assets at fair value through other comprehensive income;
· Assets held for sale at fair value at the lower of their carrying
amount and fair value less costs to sell; and
· Accounts payable - customers credit balance at fair value through
profit and loss.
Functional and presentation currency
The Group's consolidated financial statements are presented in Egyptian Pound
("EGP") because the EGP forms the major currency in which the Group transacts
and funds its business. The EGP is also the Group's functional currency
because It is the most significant currency relevant to the underlying
transactions, events and conditions of the Group and its subsidiaries, as well
as representing a significant proportion of its funds generated from financing
activities.
The Group has decided to present its statement of financial position in order
of liquidity rather than bifurcating its assets and liabilities into a
current/ non - current classification, as the banking subsidiary consolidated
in these financial statements, which represents majority of the Group assets
and liabilities, were presented in a liquidity order format.
2 Basis of preparation (continued)
Use of estimates and judgements
The preparation of consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates.
In applying the Group's accounting policies, IFRS Accounting Standards require
management to select suitable accounting policies, apply them consistently and
make judgements, estimates and assumptions that are reasonable and prudent and
would result in relevant and reliable information. Management, based on
guidance in IFRS Accounting Standards and the IASB's framework for the
preparation and presentation of financial statements has made these estimates,
judgements and assumptions. Listed below are those estimates and judgement
which could have the most significant effect on the amounts recognised in the
consolidated financial statements.
Estimates and underlying assumptions are reviewed on an ongoing basis and are
based on historical experiences and other factors, including expectation of
future events that may have a financial impact on the Group and considered to
be reasonable under the circumstances. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future
periods affected.
(a) Going concern
The Group's management has made an assessment of the Group's ability to
continue as a going concern and is satisfied that the Group has resources to
continue in business for the foreseeable future. In making this assessment,
management has considered a wide range of information including projections of
profitability, regulatory capital requirements and funding needs. The
assessment also includes consideration of reasonably possible downside
economic scenarios and their potential impacts on the profitability, capital
and liquidity of the Group. In making this assessment, the Group has
considered the impact of climate related matters on their going concern
assessment.
Furthermore, management is not aware of any material uncertainties that may
cast significant doubt upon the Group's ability to continue as a going
concern. Therefore, the consolidated financial statements continue to be
prepared on going concern basis.
(b) Impairment charge on financial assets
Impairment losses are evaluated as described in Note 3.11
The measurement of impairment losses under IFRS 9 across all categories of
financial assets requires assumptions, in particular, in the estimation of the
amount and timing of future cash flows and collateral values when determining
impairment losses and the assessment of a significant increase in credit risk.
These estimates are driven by a number of factors, changes in which can result
in different levels of allowances.
The Group's ECL calculations are outputs of multiple models with a number of
underlying assumptions regarding the choice of variable inputs and their
interdependencies. Elements of the ECL models that are considered accounting
judgements and estimates include:
· The Group's internal credit grading model, which assigns PDs to the
individual grades.
· The Group's criteria for assessing if there has been a significant
increase in credit risk and so allowances for financial assets should be
measured on a lifetime ECL basis and the qualitative assessment.
· The segmentation of financial assets when their ECL is assessed on a
collective basis.
· Development of ECL models, including the various formulas and the
choice of inputs.
· Determination of impacts between economic inputs, such as gross
domestic product and collateral values etc. on PDs, EADs and LGDs.
· Selection of forward looking macroeconomic scenarios and their
probability weightings, to derive the economic inputs into the ECL models.
It is the Group's policy is to regularly review its models in the context of
actual loss experience and adjust when necessary.
2 Basis of preparation (continued)
Use of estimates and judgements (continued)
(c) Impairment charge on property and equipment and investment properties
Impairment losses are evaluated as described in note 3.15.
In determining the net realisable value, the Group uses the selling prices
determined by external independent valuer companies, having appropriate
recognised professional qualifications and recent experience in the location
and category of property being valued. The selling prices are based on market
values, being the estimated amount for which a property could be exchanged on
the date of the valuation between a willing buyer and a willing seller in an
arm's length transaction.
(d) Valuation of financial instruments
The fair value of financial instruments is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date under current
market conditions (i.e., an exit price) regardless of whether that price is
directly observable or estimated using another valuation technique. When the
fair values of financial assets and financial liabilities recorded in the
statement of financial position cannot be derived from active markets, they
are determined using a variety of valuation techniques that include the use of
valuation models. The valuation techniques of financial instruments may
require certain unobservable inputs to be estimated by management.
(e) Defined benefit plan
The cost of end of service defined benefit and the present value of the
related obligation are determined using actuarial valuations. An actuarial
valuation involves making various assumptions which may differ from actual
developments in the future. These include the determination of the discount
rate, future salary increases, withdrawal before normal retirement age and
mortality rates. Due to the complexity of the valuation, the underlying
assumptions and its long-term nature, a defined benefit obligation is highly
sensitive to changes in these assumptions. All assumptions are reviewed at
each reporting date.
Additional information on these assumptions is disclosed in note 21.2.
(f) Financial asset and liability classification
The Group's accounting policies provide scope for the classification and
assessment of the business model for financial assets and liabilities to be
designated on inception into different accounting categories. The
classification criteria are mentioned in policy note 3.11.
Classification and measurement of financial assets depends on the results of
the SPPI and the business model test. The Group determines the business model
at a level that reflects how groups of financial assets are managed together
to achieve a particular business objective. This assessment includes judgement
reflecting all relevant evidence including how the performance of the assets
is evaluated and their performance measured, the risks that affect the
performance of the assets and how these are managed and how the managers of
the assets are compensated. The Group monitors financial assets measured at
amortised cost or fair value through other comprehensive income that are
derecognised prior to their maturity to understand the reason for their
disposal and whether the reasons are consistent with the objective of the
business for which the asset was held. Monitoring is part of the group's
continuous assessment of whether the business model for which the remaining
financial assets are held continues to be appropriate and if it is not
appropriate whether there has been a change in business model and so a
prospective change to the classification of those assets. No such changes were
required during the periods presented.
(g) Operating segments
In preparation of the segment information disclosure, management has made
certain assumptions to arrive at the segment reporting. These assumptions
would be reassessed by management on a periodic basis. Operating segments are
detailed in note 32.
2 Basis of preparation (continued)
Use of estimates and judgements (continued)
(h) Goodwill impairment testing
The Group estimates that reasonably possible changes in the assumptions used
for the impairment would not cause the recoverable amount of either CGU to
decline below the carrying amount. An impairment loss is recognised if the
carrying amount of an asset or its CGU exceeds its recoverable amount. CGU is
the smallest identifiable asset group that generates cash flows that largely
are independent from other assets and groups. Impairment losses are recognised
in the Group consolidated statement of profit or loss statement. Impairment
losses recognised in respect of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated to the units and then to reduce the
carrying amount of other assets in the unit (group or units) on a pro rata
basis.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
(i) Tax
The measurement of deferred tax reflects the tax consequences that would
follow the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities. In
determining the amount of current and deferred tax, the Group considers the
impact of tax exposures, including whether additional taxes and interest maybe
due. This assessment relies on estimates and assumptions and may involve a
series of judgements about future events. New information may become available
that causes the Group to change its judgement regarding the adequacy of
existing tax liabilities; such changes to tax liabilities would impact tax
expense in the period in which such a determination is made (refer note 22).
3 Summary of material accounting policies
3.1 New or revised Standards or Interpretations
The Standards and amendments that are effective for the first time in 2024 and
could be applicable to the Group are:
· Classification of Liabilities as Current or Non-current (Amendments to
IAS 1)
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
· Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
· Non-current Liabilities with Covenants (Amendments to IAS 1)
These amendments do not have a significant impact on these financial
statements and therefore the disclosures have not been made.
Standards, amendments and Interpretations to existing Standards that are not
yet effective and have not been adopted early by the Group.
Other Standards and amendments that are not yet effective and have not been
adopted early by the Group include:
· Lack of Exchangeability (Amendments to IAS 21)
· Amendments to the Classification and Measurement of Financial
Instruments (Amendments to IFRS 9 and IFRS 7)
· IFRS 18 'Presentation and Disclosure in Financial Statements'
· IFRS 19 'Subsidiaries without Public Accountability: Disclosures'
These amendments are not expected to have a significant impact on the
financial statements in the period of initial application and therefore no
disclosures have been made.
As at the date of authorization of these financial statements, several new,
but not yet effective, Standards and amendments to existing Standards, and
Interpretations have been published by the IASB or IFRIC. None of these
standards or amendments to existing Standards have been adopted early by the
Group and no Interpretations have been issued that are applicable and need to
be taken into consideration by the Group at either reporting date.
Management anticipates that all relevant pronouncements will be adopted for
the first period beginning on or after the effective date of the
pronouncement. New Standards, amendments and Interpretations not adopted in
the current year have not been disclosed as they are not expected to have a
material impact on the Group's financial statements.
3.2 Basis of consolidation
Business combination
The Group accounts for business combinations using the acquisition method when
control is transferred to the Group.
The consideration transferred in the acquisition comprises of:
· fair values of the assets transferred
· liabilities incurred to the former owners of the acquired business
· equity interests issued by the Group
· fair value of any asset or liability resulting from a contingent
consideration arrangement, and
· fair value of any pre-existing equity interest in the subsidiary.
3 Summary of material accounting policies (continued)
3.2 Basis of consolidation (conitinued)
Business combination (continued)
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. The Group recognises
any non-controlling interest in the acquired entity on an
acquisition-by-acquisition basis either at fair value or at the
non-controlling interest's proportionate share of the acquired entity's net
identifiable assets.
Transaction costs are expensed as incurred, except if related to the issue of
debt or equity securities in which case those instruments are recognized at
fair value, net of transaction costs.
The excess of the consideration transferred, amount of any non-controlling
interest in the acquired entity and acquisition-date fair value of any
previous equity interest in the acquired entity, over the fair value of the
net identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of the business
acquired, the difference is recognised directly in profit or loss as a bargain
purchase.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of
exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions. Contingent
consideration is classified either as equity or a financial liability. Amounts
classified as a financial liability are subsequently remeasured to fair value,
with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer's previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date. Any gains or
losses arising from such remeasurement are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date
on which control ceases.
3 Summary of material accounting policies (continued)
3.2 Basis of consolidation (continued)
Subsidiaries (continued)
The consolidated financial statements comprise the financial statements of the
Group and those of its following subsidiaries:
Name of subsidiary Direct ownership % Indirect ownership %
EFG Hermes International Securities Brokerage 99.87 0.09
EFG Hermes Fund Management 88.51 11.49
Hermes Portfolio and Fund Management 78.81 21.19
Hermes Securities Brokerage 97.58 2.42
Hermes Corporate Finance 99.42 0.48
EFG - Hermes Advisory Inc. 100.00 -
EFG- Hermes Financial Management (Egypt) Ltd. - 100
EFG - Hermes Promoting & Underwriting 99.88 -
Bayonne Enterprises Ltd. 100 -
EFG- Hermes Fixed Income 99.00 1
EFG Hermes for Digital solutions -(Previously) 96.30 3.70
EFG- Hermes Private Equity
EFG- Hermes Private Equity-BVI - 100
EFG- Hermes UAE LLC. 100 -
Flemming CIIC Holding 100 -
Flemming Mansour Securities - 99.33
Flemming CIIC Securities - 96
Flemming CIIC Corporate Finance - 74.92
EFG- Hermes UAE Ltd. 100 -
EFG- Hermes Holding - Lebanon 99 -
EFG- Hermes KSA 73.30 26.70
EFG- Hermes Lebanon 99 0.97
Mena Opportunities Management Limited - 95
Mena (BVI) Holding Ltd. - 95
EFG - Hermes Mena Securities Ltd. - 100
Middle East North Africa Financial Investments W.L.L - 100
EFG- Hermes Regional Investment Ltd. - 100
Offset Holding KSC * - 50
EFG- Hermes IFA Financial Brokerage - 63.08
IDEAVELOPERS - 81
EFG- Hermes CB Holding Limited - 100
EFG- Hermes Global CB Holding Limited 100 -
Mena Long-Term Value Feeder Holdings Ltd. * - 50
Mena Long-Term Value Master Holdings Ltd. * - 45
Mena Long-Term Value Management Ltd. * - 45
EFG - Hermes CL Holding SAL - 100
EFG-Hermes IB Limited 100 -
EFG Hermes Securitization 100 -
EFG Hermes-Direct Investment Fund 64 -
Tanmeyah Micro Enterprise Services S.A.E - 94.06
EFG - Hermes Brokerage Holdings Ltd 100 -
EFG - Hermes USA 100 -
EFG Capital Partners III - 100
Health Management Company - 52.50
EFG - Hermes Kenya Ltd. - 100
EFG Finance Holding 99.82 0.18
EFG - Hermes UK Limited - 100
OLT Investment International Company (B.S.C) 99.90 -
Frontier Investment Management Partners LTD * - 50
EFG-Hermes SP limited - 100
U Consumer Finance- Valu (previously) - 94.96
3 Summary of material accounting policies (continued)
3.2 Basis of consolidation (continued)
Subsidiaries (continued)
Name of subsidiary Direct ownership % Indirect ownership %
EFG Corp - Solutions - 100
Beaufort Asset Managers LTD - 100
EFG Hermes Bangladesh Limited - 100
EFG Hermes FI Limited - 100
EFG Securitization - 100
EFG International Treasury Management Ltd 100 -
-EFG Hermes PE Holding LLC
Etkan for Inquiry and Collection and Business Processes - 100
RX Healthcare Management - 52.50
FIM Partners KSA * - 50
Egypt Education Fund GP Limited - 80
EFG Hermes Nigeria Limited - 100
EFG-Hermes Int. Fin Corp 100 --
FIM Partners UK Ltd - 50
EFG Hermes Sukuk 90 10
Beaufort Holding LTD. - 100
Beaufort Management LTD. - 100
Vortex IV GP LTD. - 100
Beaufort SLP Holding - 100
Beaufort Private Investment Holding LTD. - 100
Bank NXT- (Previously - Arab Investment Bank) 51 -
EFG VA Holdco Limited - 100
EFG VA Investco Limited - 100
Lighthouse Energy GP Limited - 100
Beaufort SLP II Limited - 100
Lighthouse Energy GP II - 100
Beaufort Management Spain - 100
EFG Singapore PTE LTD - 100
Fatura Netherlands B.V - 94.06
Fatura L.L.C - 94.06
ASASY FOR DIGITAL CONTENT - 94.06
EFG Payment - 100
FIM Partners Muscat SPC* - 50
Noutah for electronic commerce - 94.06
EFG National Holding Limited-(Previously-VA ESOP Limited) - 100
EFG RMBV National Investco Limited - 100
EFG IB Holdco Limited - 100
EFG IB Investco Limited - 100
EFG For SME Financing - 100
Beaufort Managers SLP Limited - 100
EFG Finance B.V - 100
Valu for payments and Digital Solutions - 94.96
Paynas BV - 94.96
EFG Hermes PE Holdco Ltd - 100
EFG Hermes IB Holding Ltd. 100 -
* Management has determined that they do control those companies even though
the Holding Company may own 50% or less of the issued capital of those
entities. This is because the Holding Company is exposed and has the right to
the variable returns of those companies and is able to use its power over
those companies to affect those returns.
3 Summary of material accounting policies (continued)
3.2 Basis of consolidation (continued)
Non-controlling interests (NCI)
NCI are measured at their proportionate share of the acquiree's identifiable
net assets at the date of acquisition. Changes in the Group's interest in a
subsidiary that do not result in a loss of control are accounted for as equity
transactions.
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and
liabilities of the subsidiary, and any related NCI and other components of
equity. Any resulting gain or loss is recognised in profit or loss. Any
interest retained in the former subsidiary is measured at fair value when
control is lost.
Interests in equity-accounted investees
The Group's interests in equity-accounted investees comprise interests in
associates and joint ventures. Associates are those entities in which the
Group has significant influence, but not control or joint control, over the
financial and operating policies. A joint venture is an arrangement in which
the Group has joint control, where by the Group has rights to the net assets
of the arrangement. Rather than rights to its assets and obligations for its
liabilities. Interests in associates and the joint venture are accounted for
using the equity method. They are initially recognized at cost, which includes
transaction costs.
Subsequent to initial recognition, the consolidated financial statements
include the Group's share of the profit or loss and OCI of equity accounted
investees, until the date on which significant influence or joint control
ceases.
Transactions eliminated on consolidation
Intra-Group balances and transactions, and any unrealised income and expenses
arising from intra-Group transactions, are eliminated. Unrealised gains
arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Group's interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
3.3 Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated into the respective
functional currencies of Group companies at the exchange rates at the dates of
the transactions.
Monetary assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate at the reporting
date. Non-monetary assets and liabilities that are measured at fair value in a
foreign currency are translated into the functional currency at the exchange
rate when the fair value was determined. Non-monetary items that are measured
based on historical cost in a foreign currency are translated at the exchange
rate at the date of the transaction. Foreign currency differences are
recognised in consolidated statement of profit or loss.
However, foreign currency differences arising from the translation of the
following items are recognised in OCI:
- A financial liability designated as a hedge of the net investment in a
foreign operation to the extent that the hedge is effective; and
- Qualifying cash flow hedges to the extent that the hedges are
effective.
3 Summary of material accounting policies (continued)
3.3 Foreign currency (continued)
Foreign currency transactions (continued)
Exchange differences on a monetary item that is part of a net investment in a
foreign operation are recognised in other comprehensive income in consolidated
accounts. On disposal of a foreign operation, exchange differences previously
recognised in other comprehensive income are reclassified to the income
statement as a reclassification adjustment.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on acquisition, are translated at the exchange rates
at the reporting date. The income and expenses of foreign operations are
translated at the exchange rates at the dates of the transactions.
Foreign currency differences are recognized in OCI and accumulated in the
translation reserve, except to the extent that the translation difference is
allocated to NCI
When a foreign operation is disposed off in its entirety or partially such
that control, significant influence or joint control is lost, the cumulative
amount in the translation reserve related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on disposal. If the
Group disposes of part of its interest in a subsidiary but retains control,
then the relevant proportion of the cumulative amount is reattributed to NCI.
When the Group disposes of only part of an associate or joint venture while
retaining significant influence or joint control, the relevant proportion of
the cumulative amount is reclassified to profit or loss.
3.4 Discontinued operation
A discontinued operation is a component of the Group's business, the
operations and cash flows of which can be clearly distinguished from the rest
of the Group. Classification as a discontinued operation occurs at the earlier
of disposal or when the operation meets the criteria to be classified as
held-for-sale. When an operation is classified as a discontinued operation,
the comparative statement of profit or loss and OCI is re-presented as if the
operation had been discontinued from the start of the comparative period.
3.5 Revenue
Gain on sale of investments
Gain (loss) resulting from sale of investments are recognized on transaction
date and measured by the difference between cost and selling price less
selling commission and expenses.
In case of derecognition of investments in associates, the difference between
the carrying amount and the sum of both the consideration received and
cumulative gain or loss that had been recognized in shareholders' equity is
recognized in the consolidated statement of profit or loss.
Dividend income
Dividend income is recognized when declared and the right to receive payment
is established.
Custody fee
Custody fees are recognized when the service is provided. Assets held in a
fiduciary capacity are not treated as assets of the Group as they are only
held in trust where the Group acts as a custodian on customers' behalf. The
Group has no liability or obligations towards the customer on these assets
held in trust. Accordingly, these assets are not included in these
consolidated financial statements.
3 Summary of material accounting policies (continued)
3.5 Revenue (continued)
Interest income and expenses
Interest income and expense for all interest-bearing financial instruments,
except for those classified as FVTPL or designated at fair value through
profit or loss, are recognized within 'interest income' and 'interest expense'
in the consolidated statement of profit or loss using the effective interest
method. Interest income and expense are recognized in the consolidated
statement of profit or loss using the effective interest method. The
'effective interest rate' is the rate that exactly discounts estimated future
cash payments or receipts through the expected life of the financial
instrument to:
· the gross carrying amount of the financial asset; or
· the amortized cost of the financial liability.
When calculating the effective interest rate for financial instruments other
than credit-impaired assets, the Groups estimate future cash flows considering
all contractual terms of the financial instrument, but not expected credit
losses.
The calculation of the effective interest rate includes transaction costs and
fees and points paid or received that are an integral part of the effective
interest rate. Transaction costs include incremental costs that are directly
attributable to the acquisition or issue of a financial asset or financial
liability.
Presentation
Interest income and expense presented in the consolidated statement of profit
or loss and OCI include:
Interest on financial assets and financial liabilities measured at amortized
cost calculated on an effective interest basis; and
Interest on financial investment is measured at FVOCI calculated on an
effective interest basis; Interest income and expense on other financial
assets and financial liabilities at FVTPL are presented in net income from
other financial instruments at FVTPL.
Amortized cost and gross carrying amount
The 'amortized cost' of a financial asset or financial liability is the amount
at which the financial asset or financial liability is measured on initial
recognition minus the principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between
that initial amount and the maturity amount and, for financial assets,
adjusted for any expected credit loss allowance.
The gross carrying amount of a financial asset is the amortized cost of a
financial asset before adjusting for any expected credit loss allowance.
For financial assets that have become credit-impaired subsequent to initial
recognition, interest income is calculated by applying the effective interest
rate to the amortized cost of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income reverts to the gross
basis.
For financial assets that were credit-impaired on initial recognition,
interest income is calculated by applying the credit-adjusted effective
interest rate to the amortized cost of the asset. The calculation of interest
income does not revert to a gross basis, even if the credit risk of the asset
improves.
In calculating interest income and expense, the effective interest rate is
applied to the gross carrying amount of the asset (when the asset is not
credit-impaired) or to the amortized cost of the liability.
3 Summary of material accounting policies (continued)
3.5 Revenue (continued)
Fee and commission income
Fee and commission income and expense that are integral to the effective
interest rate of a financial asset or liability are included in the
measurement of the effective interest rate.
Other fee and commission income, including account servicing fees, placement
fees and syndication fees, are recognised as the related services are
performed.
A contract with a customer that results in a recognised financial instrument
in the Group's financial statements may be partially in the scope of IFRS 9
and partially in the scope of IFRS 15. If this is the case, then the Group
first applies IFRS 9 to separate and measure the part of the contract that is
in the scope of IFRS 9 and then applies IFRS 15 to the residual.
Other fees and commission expenses relates mainly to transaction and service
fees, which are expensed in the consolidated statement of profit or loss as
the services are received.
Brokerage commission
Brokerage commission resulting from purchase of and sale of securities in
favor of clients are recorded upon the execution of the transaction.
Management fee
Management fee is calculated as determined by the management contract of each
investment fund and portfolio and recorded on accrual basis.
Incentive fee
Incentive fee is calculated based on certain percentages of the annual return
realized by the fund and portfolio, however these incentive fee will not be
recognized until revenue realization conditions are satisfied and there is
adequate assurance of collection.
Investment property rental income
Rental income from investment property is recognized as revenue on a
straight-line basis over the term of the lease. Lease incentives granted are
recognized as an integral part of the total rental income, over the term of
the lease. Rental income from other property is recognized as other income.
Revenue from micro-finance services
- Revenue from micro-finance services is recognized based on time
proportion taking into consideration the rate of return on asset. Revenue
yield is recognized in the consolidated statement of profit or loss using the
effective interest method for all financial instruments that carry a yield,
the effective interest method is the method of measuring the amortized cost of
a financial asset and distributing the revenue over the lifetime of the
relevant instrument. The effective interest rate is the rate that discounts
estimated future cash receipts during the expected life of the financial
instrument to reach the book value of the financial asset.
- When classifying loans to customers as irregular, no income is
recognized on its return, and it is recognized in marginal records outside the
financial statements and are recognized as revenue in accordance with the cash
basis when it is collected.
- The commission income is represented in the value of the
difference between the yield of the financing granted micro-enterprises and
the accruals of the Group's bank by deducting the services provided directly
from the amounts collected from the entrepreneurs.
- The benefits and commissions resulting from the performance of the
service are recognized, according to the accrual basis as soon as the service
is provided to the client unless those revenues cover more of the financial
period are recognized on a time proportion basis.
- The administrative commission of the loan granted to customers is
collected on contracting in exchange for the issuance of the loan service and
administrative commission revenue are proven in the consolidated statement of
profit or loss upon the issuance of the loan to the client.
3 Summary of material accounting policies (continued)
3.5 Revenue (continued)
Revenue from micro-finance services (continued)
- A commission delay in payments of premiums is collected at rates
agreed upon within the contracts and are recognized as soon as customers
delayed payment on the basis of the extended delay.
Gains from securitization
Gains from securitization is measured as the difference between the fair value
of the consideration received or is still due to the Group at the end of
securitization process and the carrying amount of the securitization
portfolios in the Group's books on the date of the transfer agreement.
3.6 Income tax
Income tax expense comprises current and deferred tax. It is recognized in
profit or loss except to the extent that it relates to a business combination,
or items recognized directly in equity or in OCI.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable
income or loss for the year and any adjustment to the tax payable or
receivable in respect of previous years. The amount of current tax payable or
receivable is the best estimate of the tax amount expected to be paid or
received that reflects uncertainty related to income taxes, if any. It is
measured using tax rates enacted or substantively enacted at the reporting
date. Current tax also includes any tax arising from dividends. Current tax
assets and liabilities are offset only if certain criteria are met.
Deferred tax
Deferred tax is recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Deferred tax is not recognized for:
- Temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss;
- Temporary differences related to investments in subsidiaries,
associates and joint arrangements to the extent that the Group is able to
control the timing of the reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable future.
- Taxable temporary differences arising on the initial recognition
of goodwill.
Deferred tax assets are recognized for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used.
Future taxable profits are determined based on business plans for individual
subsidiaries in the Group. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realized; such reductions are reversed when the
probability of future taxable profits improves.
Unrecognized deferred tax assets are reassessed at each reporting date and
recognized to the extent that it has become probable that future taxable
profits will be available against which they can be used. Deferred tax is
measured at the tax rates that are expected to be applied to temporary
differences when they reverse, using tax rates enacted or substantively
enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would
follow from the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities. For this
purpose, the carrying amount of investment property measured at fair value is
presumed to be recovered through sale, and the Group has not rebutted this
presumption.
Deferred tax assets and liabilities are offset only if certain criteria are
met.
3 Summary of material accounting policies (continued)
3.7 Property and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated
depreciation and any accumulated impairment losses. If significant parts of an
item of property, plant and equipment have different useful lives, then they
are accounted for as separate items (major components) of property, plant and
equipment. Any gain or loss on disposal of an item of property, plant and
equipment is recognized in profit or loss.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure will flow to the Group.
Depreciation
Depreciation is calculated to write off the cost of items of property, plant
and equipment less their estimated residual values using the straight-line
method over their estimated useful lives, and is generally recognized in
profit or loss. Leased assets are depreciated over the shorter of the lease
term and their useful lives unless it is reasonably certain that the Group
will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives of property, plant and equipment for current and
comparative periods are as follows:
Estimated useful life (years)
Buildings 20 - 50
Office furniture, equipment & electrical appliances 2 - 16.67
Computer equipment 3.33 - 5
Transportation means 3.33 - 5
Depreciation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
Reclassification to investment property
When the use of a property changes from owner-occupied to investment property,
it is reclassified to investment property
3.8 Projects under construction
Projects under construction are recognized initially at cost, the book value
is amended by any impairment concerning the value of these projects. Cost
includes all expenditures directly attributable to bringing the asset to a
working condition for its intended use. Property and equipment under
construction are transferred to property and equipment caption when they are
completed and are ready for their intended use.
3.9 Intangible assets and goodwill
Goodwill
Goodwill arising on the acquisition of subsidiaries is measured at cost less
accumulated impairment losses. Goodwill is initially measured at cost, being
the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interests, and any previous interest held, over
the net identifiable assets acquired and liabilities assumed. If the fair
value of the net assets acquired is in excess of the aggregate consideration
transferred or is in an excess of the fair value of net assets acquired over
the aggregate consideration transferred, then the gain is recognised in profit
or loss.
3 Summary of material accounting policies (continued)
3.9 Intangible assets and goodwill (continued)
Goodwill (continued)
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated to each of the
Group's cash-generating units ("CGU") that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the
operation within that unit is disposed of, the goodwill associated with the
disposed operation is included in the carrying amount of the operation when
determining the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed
operation and the portion of the cash-generating unit retained.
Research and development
Expenditure on research activities is recognized in profit or loss as
incurred.
Development expenditure is capitalised only if the expenditure can be measured
reliably, the product or process is technically and commercially feasible,
future economic benefits are probable, and the Group intends to and has
sufficient resources to complete development and to use or sell the asset.
Otherwise, it is recognized in profit or loss as incurred.
Subsequent to initial recognition, development expenditure is measured at cost
less accumulated amortisation and any accumulated impairment losses.
Other intangible assets
Other intangible assets are measured at cost less accumulated amortisation and
any accumulated impairment losses.
3.10 Investment property
Investment properties are measured initially at cost, including transaction
costs. Transaction costs include transfer taxes, professional fees for legal
services and (only in case of investment property held under a lease) initial
leasing commissions to bring the properties to the condition necessary for
them to be capable of operating.
Subsequent to initial recognition investment property is measured at cost less
accumulated depreciation and impairment loss, if any. Investment property is
depreciated on a straight-line basis over its useful life. The estimated
useful life of investment property is 33 years.
3.11 Assets held for sale
Non-current assets, or disposal Groups comprising assets and liabilities, are
classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use.
Such assets, or disposal Groups, are generally measured at the lower of their
carrying amount and fair value less costs to sell. Any impairment loss on a
disposal Group is allocated first to goodwill, and then to the remaining
assets and liabilities on a pro rata basis, except that no loss is allocated
to inventories, financial assets, deferred tax assets, employee benefit
assets, investment property or biological assets, which continue to be
measured in accordance with the Group's accounting policies. Impairment losses
on initial classification as held-for-sale or held-for distribution and
subsequent gains and losses on remeasurement are recognised in profit or loss.
3 Summary of material accounting policies (continued)
3.11 Assets held for sale (continued)
Once classified as held-for-sale, intangible assets and property, plant and
equipment are no longer amortized or depreciated, and any equity-accounted
investee is no longer equity accounted.
3.12 Financial instruments
Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised when
they are originated. All other financial assets and financial liabilities are
initially recognised when the Group becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant
financing component) or financial liability is initially measured at fair
value plus, for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition or issue. A trade receivable without a
significant financing component is initially measured at the transaction
price.
Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at:
amortized cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition
unless the Group changes its business model for managing financial assets, in
which case all affected financial assets are reclassified on the first day of
the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the
following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
A debt investment is measured at FVOCI if it meets both of the following
conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is achieved by
both collecting contractual cash flows and selling financial assets; and
- its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding
On initial recognition of an equity investment that is not held for trading,
the Group may irrevocably elect to present subsequent changes in the
investment's fair value in OCI. This election is made on an
instrument‑by‑instrument basis.
All financial assets not classified as measured at amortized cost or FVOCI as
described above are measured at FVTPL. This includes all derivative financial
assets. On initial recognition, the Group may irrevocably designate a
financial asset that otherwise meets the requirements to be measured at
amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
3 Summary of material accounting policies (continued)
3.12 Financial instruments (continued)
Classification and subsequent measurement (continued)
Financial assets (continued)
Financial assets - Business model assessment
The Group makes an assessment of the objective of the business model in which
a financial asset is held at a portfolio level because this best reflects the
way the business is managed and information is provided to management. The
information considered includes:
- The stated policies and objectives for the portfolio and the
operation of those policies in practice. These include whether management's
strategy focuses on earning contractual interest income, maintaining a
particular interest rate profile, matching the duration of the financial
assets to the duration of any related liabilities or expected cash outflows or
realizing cash flows through the sale of the assets;
- How the performance of the portfolio is evaluated and reported to
the Group's management;
- The risks that affect the performance of the business model (and
the financial assets held within that business model) and how those risks are
managed;
- How managers of the business are compensated - e.g. whether
compensation is based on the fair value of the assets managed or the
contractual cash flows collected; and
- The frequency, volume and timing of sales of financial assets in
prior periods, the reasons for such sales and expectations about future sales
activity.
Transfers of financial assets to third parties in transactions that do not
qualify for derecognition are not considered sales for this purpose,
consistent with the Group's continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose
performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets - Assessment whether contractual cash flows are solely
payments of principal and interest
For the purposes of this assessment, 'principal' is defined as the fair value
of the financial asset on initial recognition. 'Interest' is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the Group considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making this assessment,
the Group considers:
- Contingent events that would change the amount or timing of cash
flows;
- Terms that may adjust the contractual coupon rate, including variable
rate‑ features;
- Prepayment and extension features; and
- Terms that limit the Group's claim to cash flows from specified assets
(e.g. non‑recourse features)
3 Summary of material accounting policies (continued)
3.12 Financial instruments (continued)
Financial assets - Assessment whether contractual cash flows are solely
payments of principal and interest (continued)
A prepayment feature is consistent with the solely payments of principal and
interest criterion if the prepayment amount substantially represents unpaid
amounts of principal and interest on the principal amount outstanding, which
may include reasonable compensation for early termination of the contract.
Additionally, for a financial asset acquired at a discount or premium to its
contractual par amount, a feature that permits or requires prepayment at an
amount that substantially represents the contractual par amount plus accrued
(but unpaid) contractual interest (which may also include reasonable
compensation for early termination) is treated as consistent with this
criterion if the fair value of the prepayment feature is insignificant at
initial recognition.
Financial assets - Subsequent measurement and gains and losses
Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortized cost These assets are subsequently measured at amortized cost using the effective
interest method. The amortized cost is reduced by impairment losses. Interest
income, foreign exchange gains and losses and impairment are recognised in
profit or loss. Any gain or loss on derecognition is recognised in profit or
loss.
Debt investments at FVOCI These assets are subsequently measured at fair value. Interest income
calculated using the effective interest method, foreign exchange gains and
losses and impairment are recognised in profit or loss. Other net gains and
losses are recognised in OCI. On derecognition, gains and losses accumulated
in OCI are reclassified to profit or loss.
Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are recognised
as income in profit or loss unless the dividend clearly represents a recovery
of part of the cost of the investment. Other net gains and losses are
recognised in OCI and are never reclassified to profit or loss.
Financial liabilities - Classification, subsequent measurement and gains and
losses
Financial liabilities are classified as measured at amortized cost or FVTPL. A
financial liability is classified as at FVTPL if it is classified as
held‑for‑trading, it is a derivative or it is designated as such on
initial recognition. Financial liabilities at FVTPL are measured at fair value
and net gains and losses, including any interest expense, are recognised in
profit or loss. Other financial liabilities are subsequently measured at
amortized cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss. Any gain
or loss on derecognition is also recognised in profit or loss.
Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all
of the risks and rewards of ownership of the financial asset are transferred
or in which the Group neither transfers nor retains substantially all of the
risks and rewards of ownership and it does not retain control of the financial
asset.
3 Summary of material accounting policies (continued)
3.12 Financial instruments (continued)
Derecognition (continued)
Financial assets (continued)
The Group derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all
of the risks and rewards of ownership of the financial asset are transferred
or in which the Group neither transfers nor retains substantially all of the
risks and rewards of ownership and it does not retain control of the financial
asset.
The Group enters into transactions whereby it transfers assets recognised in
its statement of financial position but retains either all or substantially
all of the risks and rewards of the transferred assets. In these cases, the
transferred assets are not derecognised.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations
are discharged or cancelled, or expire. The Group also derecognises a
financial liability when its terms are modified and the cash flows of the
modified liability are substantially different, in which case a new financial
liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying
amount extinguished and the consideration paid (including any non‑cash
assets transferred or liabilities assumed) is recognised in profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount
presented in the consolidated statement of financial position when, and only
when, the Group currently has a legally enforceable right to set off the
amounts and it intends either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
3.13 Fair value measurement
The fair value of financial instruments are determined based on the market
value of the financial instrument or similar financial instruments at the date
of the financial statements without deducting any estimated future selling
costs.
3.14 Share capital
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares are
recognized as a deduction from equity. Income tax relating to transaction
costs of an equity transaction are accounted for in accordance with IAS 12.
Repurchase and reissue of ordinary shares (treasury shares)
When shares recognized as equity are repurchased, the amount of the
consideration paid, which includes directly attributable costs is recognized
as a deduction from equity. Repurchased shares are classified as treasury
shares and are presented in the treasury share reserve. When treasury shares
are sold or reissued subsequently, the amount received is recognized as an
increase in equity and the resulting surplus or deficit on the transaction is
presented within share premium.
3 Summary of material accounting policies (continued)
3.15 Legal reserve
The Group's statutes provide for deduction of a sum equal to 5% of the annual
net profit for formation of the legal reserve. Such deduction will be ceased
when the total reserve reaches an amount equal to half of the Group's issued
capital and when the reserve falls below this limit, it shall be necessary to
resume.
3.16 Impairment
Non-derivative financial assets
Financial instruments and contract assets
The Group recognizes loss allowances for Expected Credit Loss (ECLs) on:
- Financial assets measured at amortized cost;
- Debt investments measured at FVOCI;
- Contract assets.
The Group also recognizes loss allowances for ECLs on loans receivables.
The Group measures loss allowances at an amount equal to lifetime ECLs, except
for the following, which are measured at 12‑month ECLs:
- Debt securities that are determined to have low credit risk at the
reporting date; and
- Other debt securities and bank balances for which credit risk (i.e.
the risk of default occurring over the expected life of the financial
instrument) has not increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Group
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Group's historical
experience and informed credit assessment, that includes forward‑looking
information.
The Group assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due. unless it can be rebutted.
The Group considers a financial asset to be in default when:
- The debtor is unlikely to pay its credit obligations to the Group in
full, without recourse by the Group to actions such as realising security (if
any is held); or
- The financial asset is more than 90 days past due unless it can be
rebutted.
Lifetime ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument. 12‑month ECLs are the portion
of ECLs that result from default events that are possible within the 12 months
after the reporting date (or a shorter period if the expected life of the
instrument is less than 12 months). The maximum period considered when
estimating ECLs is the maximum contractual period over which the Group is
exposed to credit risk.
Measurement of ECLs
ECLs are an unbiased probability‑weighted estimate of credit losses. Credit
losses are measured as the present value of all cash shortfalls (i.e., the
difference between the cash flows due to the entity in accordance with the
contract and the cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
3 Summary of material accounting policies (continued)
3.16 Impairment (continued)
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at
amortized cost and debt securities at FVOCI are credit‑impaired. A financial
asset is 'credit‑impaired' when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have
occurred.
Evidence that a financial asset is credit‑impaired includes the following
observable data:
- Significant financial difficulty of the debtor;
- A breach of contract such as a default or being more than 90 days past
due;
- The restructuring of a loan or advance by the Group on terms that the
Group would not consider otherwise;
- It is probable that the debtor will enter bankruptcy or other
financial reorganisation; or
- The disappearance of an active market for a security because of
financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortized cost are deducted
from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss
and is recognized in OCI.
Write-off
The gross carrying amount of a financial asset is written off when the Group
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof. For individual customers, the Group has a policy of
writing off the gross carrying amount when the financial asset is 180 days
past due based on historical experience of recoveries of similar assets. For
corporate customers, the Group individually makes an assessment with respect
to the timing and amount of write‑off based on whether there is a reasonable
expectation of recovery. The Group expects no significant recovery from the
amount written off. However, financial assets that are written off could still
be subject to enforcement activities in order to comply with the Group's
procedures for recovery of amounts due.
Non-financial assets
- At each reporting date, the Group reviews the carrying amounts of its
non‑financial assets (other than, investment property, contract assets and
deferred tax assets) to determine whether there is any indication of
impairment. If any such indication exists, then the asset's recoverable amount
is estimated. Goodwill is tested annually for impairment.
- For impairment testing, assets are Grouped together into the smallest
Group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or CGUs. Goodwill
arising from a business combination is allocated to CGUs or Groups of CGUs
that are expected to benefit from the synergies of the combination.
- The recoverable amount of an asset or CGU is the greater of its value
in use and its fair value less costs to sell. Value in use is based on the
estimated future cash flows, discounted to their present value using a
pre‑tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
- An impairment loss is recognised if the carrying amount of an asset or
CGU exceeds its recoverable amount.
3 Summary of material accounting policies (continued)
3.16 Impairment (continued)
Non-financial assets (continued)
- Impairment losses are recognised in profit or loss. They are allocated
first to reduce the carrying amount of any goodwill allocated to the CGU, and
then to reduce the carrying amounts of the other assets in the CGU on a pro
rata basis.
- An impairment loss in respect of goodwill is not reversed. For other
assets, an impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
3.17 Investments at fair value through profit or loss
These are securities that the Group acquire principally for the purpose of
selling in the near term or holding as a part of portfolio that is managed
together for short term profit or position taking. These assets are initially
recognised at fair value and subsequently also measure at fair value in the
consolidated statement of financial position. All changes in fair values are
recognised as part of profit or loss.
3.18 Investments at fair value through other comprehensive income
Financial assets managed within a business model that is achieved by both
collecting contractual cash flows and selling and which contain contractual
terms that give rise on specified dates to cash flows that are solely payments
of principal and interest are measured at FVOCI.
These comprise primarily debt securities. They are recognised on the trade
date when the group enters into contractual arrangements to purchase and are
generally derecognised when they are either sold or redeemed.
Investments in equity instruments at FVTOCI are initially measured at fair
value plus transaction costs. Subsequently, they are measured at fair value
with gains and losses arising from changes in fair value recognised in other
comprehensive income and accumulated in the investment revaluation reserve.
The cumulative gain or loss will not be reclassified to profit or loss on
disposal
of the investments.
Investments in debt instruments at FVTOCI are initially measured at fair value
plus transaction costs. Subsequently, they are measured at fair value with
gains and losses arising from changes in fair value recognised in other
comprehensive income and accumulated in the investment revaluation reserve.
The cumulative gain or loss will be reclassified to profit or loss on disposal
of the investments.
3.19 Financial instruments measured at amortised cost
Financial assets that are held to collect the contractual cash flows and which
contain contractual terms that give rise on specified dates to cash flows that
are solely payments of principal and interest are measured at amortised cost.
Such financial assets include most loans and advances to banks and customers
and some debt securities. In addition, most financial liabilities are measured
at amortised cost. The group accounts for regular way amortised cost financial
instruments using trade date accounting. The carrying value of these financial
assets at initial recognition includes any directly attributable transactions
costs.
3.20 Provisions
Provisions are recognized when the Group has a legal or constructive current
obligation as a result of a past event and it is probable that a flow of
economic benefits will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessment of the time
value of money and, where appropriate, the risks specific to the liability.
Provisions are reviewed at the financial position date and amended (when
necessary) to represent the best current estimate.
3 Summary of material accounting policies (continued)
3.21 Trade, and notes receivables, debtors and other debit balances
Trade, notes receivables, debtors and other debit balances are stated at
nominal value less impairment losses.
The Group's lessees and the leased assets are regularly classified &
evaluated, and their obligations are reduced by the rent value paid in each
financial period, and with the assurance of the availability of adequate
guarantee to collect the client's rent values.
3.22 Cash and cash equivalents
For the purpose of preparing the statement of cash flows, cash and cash
equivalents include the balances, whose maturity do not exceed three months
from the date of acquisition, cash on hand, cheques under collection and due
from banks and financial institutions.
3.23 Profit sharing to employees
The Holding Company pays 10% of its dividends as profit sharing to its
employees provided that it will not exceed total employees' annual salaries
and directly charged on the consolidated statement of profit or loss as per
IFRS accounting standards.
3.24 Employees benefits
Share based payments
Equity settled transactions
For equity-settled share-based payment transactions, the Group measures the
services received, and the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments granted. The fair value
of those equity instruments is measured at grant date.
Vesting conditions, other than market conditions, are taken into account by
adjusting the number of equity instruments included in the measurement of the
transaction amount so that, ultimately, the amount recognized for services
received as consideration for the equity instruments granted are based on the
number of equity instruments that eventually vest. Hence, on a cumulative
basis, no amount is recognized for services received if the equity instruments
granted do not vest because of failure to satisfy a vesting condition.
The Group recognizes an amount for the services received during the vesting
period based on the best available estimate of the number of equity
instruments expected to vest and revise that estimate, if necessary, if
subsequent information indicates that the number of equity instruments
expected to vest differs from previous estimates. On vesting date, the entity
shall revise the estimate to equal the number of equity instruments that
ultimately vested
3.25 Micro-enterprises receivables
Credit policy
Funding Consideration
- Funding is granted to clients who have previous experience not less
than one year in their current activity which is confirmed by the clients with
adequate documentation and field inquiry.
- Funding is granted to the clients and instalments are suitable to
their predictable which it's instalment is suitable according to his
predictable income activity and this is done through analyzing clients'
revenues and expenses and their foreseeable marginal income, and this is done
by the specialists of the Group on the prepared form for this purpose
(financial study form and credit decision).
- Before grant funding, a client activity field inquiry is done.
- Recording inquiries results about client and guarantor with inquiring
forms of the Group which reveal client's activity (visit form & Inquiry
form).
3 Summary of material accounting policies (continued)
3.25 Micro-enterprises receivables(continued)
Credit policy (continued)
- The Group prohibit grant funding for new client unless the activity is
existing with previous one year experience where the granted funds are within
a minimum 1,000 EGP and maximum
30,000 EGP with loan duration of 12 months.
- Inquiries for clients are performed by I-Score Group before granting
and in case of approval on granting. The credit limit of the client is
considered when calculating the client's revenue and expenses.
Client's Life Insurance
The insurance process on the client is performed with the authorized companies
from insurance supervisory authority.
Impairment loss of micro financed loans
The Group at the date of the financial statements estimates the impairment
loss of micro financed loans, in the light of the basis and rules of granting
credit and forming the provisions according to the Board of Directors decision
of the Financial Supervisory Authority No. (173) issued on December 21, 2014,
to deal with the impairment loss.
The accounting policies relating to micro-enterprises receivables are detailed
under note 3.11.
3.26 Leases
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
As a lessee
At commencement or on modification of a contract that contains a lease
component, the Group allocates the consideration in the contract to each lease
component on the basis of its relative stand‑alone prices. However, for the
leases of property the Group has elected not to separate non‑lease
components and account for the lease and non‑lease components as a single
lease component.
The Group recognizes a right‑of‑use asset and a lease liability at the
lease commencement date. The right‑of‑use asset is initially measured at
cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is
located, less any lease incentives received.
The right of use asset is subsequently depreciated using the straight line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
3 Summary of material accounting policies (continued)
3.26 Leases (continued)
As a lessee (continued)
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the
fixed payments, including in‑substance fixed payments; variable lease
payments that depend on an index or a rate, initially measured using the index
or rate as at the commencement date; amounts expected to be payable under a
residual value guarantee; and the exercise price under a purchase option that
the Group is reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
The lease liability is measured at amortized cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension, or termination option or if there is a revised
in‑substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right‑of‑use asset or is recorded in
profit or loss if the carrying amount of the right‑of‑use asset has been
reduced to zero.
The Group presents right‑of‑use assets that do not meet the definition of
investment property in 'property, plant and equipment' and lease liabilities
in 'loans and borrowings' in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognize right‑of‑use assets and lease
liabilities for leases of low - value assets and short‑term leases,
including IT equipment. The Group recognizes the lease payments associated
with these leases as an expense on a straight‑line basis over the lease
term.
As a lessor
At inception or on modification of a contract that contains a lease component,
the Group allocates the consideration in the contract to each lease component
on the basis of their relative stand- alone prices.
When the Group acts as a lessor, it determines at lease inception whether each
lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the
lease transfers substantially all the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a
finance lease; if not, then it is an operating lease. As part of this
assessment, the Group considers certain indicators such as whether the lease
is for a major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the
head lease and the sub-lease separately. It assesses the lease classification
of a sub-lease with reference to the right-of-use asset arising from the head
lease, not with reference to the underlying asset. If a head lease is a
short-term lease to which the Group applies the exemption described above,
then it classifies the sub-lease as an operating lease.
3 Summary of material accounting policies (continued)
3.26 Leases (continued)
As a lessor (continued)
If an arrangement contains lease and non-lease components, then the Group
applies IFRS 15 to allocate the consideration in the contract.
The Group applies the derecognition and impairment requirements of IFRS 9 to
the net investment in the lease. The Group further regularly reviews estimated
unguaranteed residual values used in calculating the gross investment in the
lease. The Group recognizes lease payments received under operating leases as
income on a straight- line basis over the lease term as part of 'other
revenue'.
Sale and leaseback transactions are tested under IFRS 15 at the date of the
transaction, and if the transaction qualifies as a sale, the underlying asset
is derecognised and a right-of-use asset with a corresponding liability is
recognised equal to the retained interest in the asset. Any gain or loss is
recognised immediately in the consolidated income statement for the interest
in the asset transferred to the lessor. If the transaction does not qualify as
a sale under IFRS 15, a financial liability equal to the sale value is
recognised in the consolidated financial statements
3.27 Operating segment
A segment is a distinguishable component of the Group that is engaged either
in providing products or services (business segment) or in providing products
or services within a particular economic environment (geographical segment),
which is subject to risks and rewards that are different from those of other
segments. The Group's primary format for segment reporting is based on
business segment.
3.28 Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Group by the weighted average
number of ordinary shares outstanding during the year. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding
for the effects of all dilutive potential ordinary shares.
4 Significant management judgements and estimates
The preparation of the financial statements in conformity with IFRS Accounting
Standards requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Information about significant areas of estimation and uncertainty and critical
judgements in applying accounting policies that have the most significant
effect on the amounts recognised in the consolidated financial statements are
described below:
Impairment charge on financial assets
Impairment losses are evaluated as described in note 3.16.
The measurement of impairment losses under IFRS 9 across all categories of
financial assets requires judgement, in particular, the estimation of the
amount and timing of future cash flows and collateral values when determining
impairment losses and the assessment of a significant increase in credit risk.
These estimates are driven by a number of factors, changes in which can result
in different levels of allowances. The Group's ECL calculations are outputs of
complex models with a number of underlying assumptions regarding the choice of
variable inputs and their interdependencies. Elements of the ECL models that
are considered accounting judgements and estimates include:
· The Group's internal credit grading model, which assigns PDs to the individual grades
· The Group's criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a lifetime ECL basis and the qualitative assessment
· The segmentation of financial assets when their ECL is assessed on a collective basis
· Development of ECL models, including the various formulas and the choice of inputs
· Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment levels, GDP and inflation rate and the effect on PDs, EADs and LGDs
· Selection of forward-looking macroeconomic scenarios and their probability
weightings, to derive the economic inputs into the ECL models It is the
Group's policy to regularly review its models in the context of actual loss
experience and adjust when necessary.
Fair value measurement
The Group's determination of fair value hierarchy of financial instruments is
discussed in note 36.
The value of financial assets is determined by the the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
· In the absence of an active market to determine the fair value of financial instruments, the fair value is estimated using various valuation techniques, taking into consideration the prices of the transactions occurred recently, and guided by the current fair value of other similar tools substantially - discounted cash flow method - or any other evaluation method to get resulting values that can rely on.
4 Significant management judgements and estimates (continued)
Fair value measurement (continued)
· When using the discounted cash flow method to evaluate, the future cash flows are estimated based on the best estimates of management. The discount rate used is determined in the light of the prevailing market price at the date of the consolidated financial statements that are similar in nature and conditions.
The fair values of financial assets and financial liabilities that are traded
in active markets are based on quoted market prices or dealer price
quotations. For all other financial instruments, the Group determines fair
values using other valuation techniques.
For financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying degrees of
judgment depending on liquidity, concentration, uncertainty of market factors,
pricing assumptions and other risks affecting the specific instrument.
Valuation of financial instruments
The valuation techniques of financial instruments may require certain
unobservable inputs to be estimated by the management. These are discussed in
detail in note 36.
The Group measures fair values using the fair value hierarchy outlined in note
36, which reflects the significance of the inputs used in making the
measurements. The Group has an established control framework with respect to
the measurement of fair values.
This includes a valuation team that has overall responsibility for overseeing
all significant fair value measurements, including level 3 fair values, and
reports directly to the CFO. The valuation team regularly reviews significant
unobservable inputs and valuation adjustments.
The Group recognizes transfers between levels of the fair value hierarchy at
the end of reporting period during which the change has occurred. Valuation
techniques include net present value and discounted cash flow models,
comparison with similar instruments for which market observable prices exist.
Assumptions and inputs used in valuation techniques include risk-free and
benchmark interest rates, credit spreads and other premia used in estimating
discount rates, bond and equity prices, foreign currency exchange rates,
equity and equity index prices and expected price volatilities and
correlations. The objective of valuation techniques is to arrive at a fair
value measurement that reflects the price that would be received to sell the
asset or paid to transfer the liability in an orderly transaction between
market participants at the measurement date.
The Group uses widely recognized valuation models for determining the fair
value of common and more simple financial instruments, like interest rate and
currency swaps that use only observable market data and require little
management judgment and estimation. Observable prices or model inputs are
usually available in the market for listed debt and equity securities,
exchange-traded derivatives and simple over the counter derivatives such as
interest rate swaps. Availability of observable market prices and model inputs
reduces the need for management judgment and estimation and also reduces the
uncertainty associated with determining fair values.
Availability of observable market prices and inputs varies depending on the
products and markets and is prone to changes based on specific events and
general conditions in the financial markets.
The Group does not hold any derivatives at the year-end.
4 Significant management judgements and estimates (continued)
Determination of preliminary values of assets and liabilities acquired in
business combinations
While the Group uses its best estimates and assumptions to accurately apply
preliminary values to assets acquired and liabilities assumed at the
acquisition date as well as contingent consideration, where applicable, these
estimates are inherently uncertain and subject to refinement. As a result,
during the measurement period, which may be up to one year from the
acquisition date, the Group records adjustments to the assets acquired and
liabilities assumed with the corresponding offset to goodwill. Upon the
conclusion of the measurement period or final determination of the values of
the assets acquired or liabilities assumed, whichever comes first, any
subsequent adjustments are recorded in the consolidated statements of
operations. Accounting for business combinations requires management to make
significant estimates and assumptions, especially at the acquisition date,
including estimates for intangible assets, contractual obligations assumed,
pre-acquisition contingencies, and contingent consideration, where applicable.
Although the Company believes the assumptions and estimates it has made have
been reasonable and appropriate, they are based in part on historical
experience and information obtained from management of the acquired companies
and are inherently uncertain. Critical estimates in valuing certain of the
intangible assets acquired include; future expected cash flows, estimated
market royalty rates, customer attrition rates, cost of developed technology
and discount rates. Unanticipated events and circumstances may occur that may
affect the accuracy or validity of such assumptions, estimates, or actual
results. Acquisition-related expenses are recognized separately from the
business combination and are expensed as incurred.
5 Cash and cash equivalents
31 December 2024 31 December 2023
Cash on hand 254,489 255,811
Cheques under collection 115 141,951
Banks - current accounts 20,795,151 10,027,157
Banks - time deposits 21,808,653 17,801,324
Balance 42,858,408 28,226,243
Impairment loss (11,051) (4,033)
Total cash and time deposits (note 5.3) 42,847,357 28,222,210
5.1 Obligatory reserve balance with CBE amounted to EGP Thousand 8,693,380
as 31 December 2024 (2023: 4,030,033) relates to balances with the Central
Bank within the statutory reserve ratio. These deposits are subject to
regulatory restrictions and are therefore not available for general use not
available for use in the Group's day-to-day operation accordingly it is not
included in cash and cash equivalents.
5.2 For the purposes of presenting the statement of cash flows, cash and
cash equivalents include balances whose maturity dates do not exceed three
months from the date of placement.
5.3 The above figures reconcile to the amount of cash shown in the
statement of cash flows at the end of the financial year as follows:
31 December 2024 31 December 2023
Cash and time deposits as above 42,847,357 28,222,210
ECL For cash and cash equivalents 11,051 4,033
Time deposit maturing in more than 90 days (54,245) (18,538)
Bank overdraft (19,297,065) (11,347,885)
Treasury bills maturing in less than 90 days from date of purchase 1,034,878 3,435,942
Cash and cash equivalents 24,541,976 20,295,762
6 Investments at fair value through profit or loss
31 December 2024 31 December 2023
Mutual fund certificates 12,031,837 7,355,442
Equity securities 179,333 108,293
Debt securities 3,376,038 832,915
Treasury bills - 219,222
Structured notes 7,901,466 680,319
23,488,674 9,196,191
31 December 2024 31 December 2023
Listed 3,512,743 864,104
Unlisted 19,975,931 8,332,087
23,488,674 9,196,191
Amounts recognized in profit or loss
Net change in the fair value of investments at FVPL as at 31 December 2024
amounted to EGP Thousands 2,844,098 (year ended 31 December 2023: EGP
Thousands 1,411,890) being EGP Thousands 2,855,028 (31 December 2023: EGP
Thousands 1,516,810) gains and fair value losses of EGP Thousands 10,930 (31
December 2023: EGP Thousands 104,920). Those are recognized under changes in
the fair value of the investment at fair value through profit and loss on the
consolidated statement of profit or loss.
7 Accounts receivable
31 December 2024 31 December 2023
Accounts receivable 15,260,511 7,230,156
Other brokerage companies 1,001,976 57
Balance 16,262,487 7,230,213
Impairment loss (ECL)* (489,105) (459,251)
Balance 15,773,382 6,770,962
31 December 2024 31 December 2023
Balance at the beginning of the year 459,251 315,048
Impairment during the year (49,764) 133,080
Write off during the year (1,920) (257)
Disposals - (13,465)
Effect of foreign currency translation 81,538 24,845
Balance at the end of the year 489,105 459,251
Impairment loss *
8 Loans and advances to customers
31 December 2024 31 December 2023
Banking loans and facilities (Bank NXT) (8.1) 30,093,577 21,104,242
Other loans and advances to customers (8.2) 27,835,026 19,117,655
57,928,603 40,221,897
8 Loans and advances to customers (continued)
8.1 Banking loans and facilities (Bank NXT)
31 December 2024 31 December 2023
Retail
Overdraft 62,409 230,603
Credit cards 392,631 80,550
Personal loans 8,061,791 6,142,400
Mortgage loans 1,804,463 1,063,049
10,321,294 7,516,602
Corporate loans including small loans for economic activities
Debit current accounts 267,268 474,141
Direct loans 16,141,445 11,470,529
Syndicated loans 5,782,660 3,332,907
22,191,373 15,277,577
Gross loans and facilities to customers 32,512,667 22,794,179
Less:
Expected credit losses * (2,246,959) (1,622,463)
Suspended interest (643) (643)
Interest payable (171,488) (66,831)
(2,419,090) (1,689,937)
Banking loans and facilities (Bank NXT) - net 30,093,577 21,104,242
31 December 2024 31 December 2023
Expected credit loss*
Balance at the beginning of the year 1,622,463 1,412,416
Impairment during the year 303,774 631,388
Write off during the year (196,095) (623,678)
Recoveries 169,258 93,628
Effect of foreign currency translation 347,559 108,709
Balance at the end of the year 2,246,959 1,622,463
8.2 Other loans and advances to customers
31 December 2024 31 December 2023
Micro finance 6,511,264 5,059,721
Finance lease 14,419,802 9,306,990
Consumer finance 11,115,123 6,293,816
Factoring 4,619,596 2,401,033
SME lending 39,462 0
Other loans 2,599,774 2,350,756
Unearned interest (10,711,693) (5,787,545)
Balance 28,593,328 19,624,771
Expected credit loss* (758,302) (507,116)
27,835,026 19,117,655
31 December 2024 31 December 2023
Expected credit loss*
Balance at the beginning of the year 507,116 348,101
Impairment during the year 379,249 219,827
Write off during the year (151,961) (67,769)
Recoveries - 59
Effect of foreign currency translation 23,898 6,898
Balance at the end of the year 758,302 507,116
9 Investments at fair value through OCI
31 December 2024 31 December 2023
Equity securities 301,995 187,146
Mutual fund certificates 301,572 138,264
Debt instruments 11,770,651 11,322,201
12,374,218 11,647,611
31 December 2024 31 December 2023
Listed 4,222,540 4,299,771
Unlisted 8,151,678 7,347,840
12,374,218 11,647,611
Financial assets at fair value through other comprehensive income (FVOCI)
comprise:
- Equity securities and mutual funds certificates not held for trading
and which the Group has irrevocably elected at initial recognition to
recognise in this category. These are strategic investments, and the Group
considers this classification to be more relevant.
- Debt securities where the contractual cash flows are solely
principal, and interest and the objective of the Group's business model is
achieved both by collecting contractual cash flows and selling financial
assets.
10 Equity accounted investees
31 December 2024
Location Assets Liabilities Net gain (losses) Gross profit Ownership Value
%
Interest in Joint Ventures
Bedaya Mortgage Finance Co Egypt 2,636,704 2,381,476 3,550 43,861 33.34 90,478
EFG-EV Fintech Egypt 34,991 1,140 (712) 1,213 50.00 19,511
Interest in Associates
Kaf Life Insurance takaful Egypt 511,682 332,023 7,830 38,904 037.5 115,655
Zahraa Elmaadi Company * Egypt 2,668,051 798,153 343,780 451,075 20.33 380,225
Prime for investment fund management * Egypt 3,042 209 534 354 20.00 503
Paytech 3100 BV Netherlands 486,877 1,404 (563) - 40.66 197,860
Falcon Partners GP Limited UAE 2,195 1,435 (1,585) - 25.00 635
Total 804,867
10 Equity accounted investees (continued)
31 December 2023
Location Assets Liabilities Net gain (losses) Gross profit Ownership Value
%
Interest in Joint Ventures
Bedaya Mortgage Egypt 1,602,404 1,374,318 9,854 41,946 33.34 81,069
Finance Co
EFG-EV Finech Egypt 55,433 4,773 13,086 21,347 50.00 23,418
Paytabs Egypt 22,522 22,781 (11,255) 7,788 51.00 48,852
API Capital Management Limited UAE 21,376 6,021 (6,563) 775 50.00 9,139
Interest in Associates
Kaf Life Insurance takaful Egypt 370,168 256,611 (28,391) 27,957 37.5 49,648
Zahraa Elmaadi Egypt 2,531,888 871,390 219,016 311,089 20.33 337,646
Company*
Middle East Land Reclamation Egypt 47,974 192,215 (24,763) - 24.47 -
Company*
Prime for investment fund management* Egypt 2,637 159 297 21 20.00 512
Enmaa Financial Egypt 1,701,904 1,394,764 56,155 108,973 31.40 96,530
Leasing company*
Paytech 3100 BV Netherlands 486,877 1,112 (1,112) - 40.66 197,979
Total 844,793
* Equity accounted investees acquired through Bank NXT -(previously)Arab
Investment Bank (aiBank).
11 Assets held for sale
The group reclassified the value of its direct contribution to the capital of
Enmaa Finance Company with value of 92,596 thousand pounds, EFG Hermes
Pakistan with value of 3,542 thousand pounds and Paytabs with value of 10,166
thousand pounds to the item of assets held for sale.
The above values represent the fair value less cost to sell.
12 Investments at amortized cost
31 December 2024 31 December 2023
Debt instruments - Listed 7,051,166 7,209,859
Debt instruments - Un-listed 5,499,413 4,064,121
12,550,579 11,273,980
Impairment loss (63,034) (40,120)
Total 12,487,545 11,233,860
13 Investment properties
2024 2023
Cost
As at 1 January 149,337 169,540
Disposal for the year (3,900) (20,203)
As at 31 December 145,437 149,337
Accumulated deprecations
As at 1 January 50,636 50,555
Disposal for the year (1,185) (6,464)
Depreciation charge for the year (note 31.2) 5,703 6,545
As at 31 December 55,154 50,636
Net book amount 90,283 98,701
Investment property net carrying amounted to EGP Thousands 90,283 as at 31
December 2024, representing the following: -
-EGP Thousands 87,960 the book value of the area owned by EFG Holding Company
in Nile City building, and with a fair value of EGP Thousands 616,320.
-EGP Thousands 2,323 the book value of the area owned by Hermes Securities
Brokerage, one of the subsidiaries, in Elharam branch and with a fair value of
EGP Thousands 24,32.
14 Property and equipment
Land & buildings Leasehold improvements Office furniture, equipment & electrical appliances Computer equipment Vehicles Right-of-use assets Total
Cost
Balance as at 1 January 2023 1,220,153 282,242 521,280 690,849 53,351 440,942 3,208,817
Additions 173,789 159,262 164,284 153,743 32,258 193,595 876,931
Disposals (46) (8,102) (61,994) (36,654) (7,162) (27,722) (141,680)
Adjustments - - 309 (309) - 2,306 2,306
Acquisition of subsidiaries - - 376 844 - - 1,220
Foreign currency translation differences 3 (67) 53,252 36,753 3,022 50,778 143,741
Total cost as at 31 December 2023 1,393,899 433,335 677,507 845,226 81,469 659,899 4,091,335
Balance as at 1 January 2024 1,393,899 433,335 677,507 845,226 81,469 659,899 4,091,335
Additions 113,296 76,168 208,674 364,148 153,043 252,148 1,167,477
Disposals (1,137) (83) (6,497) (31,571) (19,654) (28,799) (87,741)
Foreign currency translation differences 272 12,448 162,620 128,551 13,200 233,636 550,727
Total cost as at 31 December 2024 1,506,330 521,868 1,042,304 1,306,354 228,058 1,116,884 5,721,798
14 Property and equipment (continued)
Land & buildings Leasehold improvements Office furniture, equipment & electrical appliances Computer equipment Vehicles Right-of-use assets Total
Accumulated depreciation
Balance as at 1 January 2023 204,595 229,323 374,819 492,495 36,205 235,337 1,572,774
Depreciation for the year (note 31.2) 45,269 33,573 53,962 99,619 9,473 96,817 338,713
Disposals' accumulated depreciation (46) (6,497) (46,293) (32,297) (4,728) (16,926) (106,787)
Adjustment - - - 4 - (12,248) (12,244)
Acquisition of subsidiaries - - 365 733 - - 1,098
Foreign currency translation differences 1 (68) 50,158 32,736 1,758 35,407 119,992
Balance as at 31 December 2023 249,819 256,331 433,011 593,290 42,708 338,387 1,913,546
Balance as at 1 January 2024 249,819 256,331 433,011 593,290 42,708 338,387 1,913,546
Depreciation for the year (note 31.2) 51,685 45,096 66,570 126,971 25,353 132,604 448,279
Disposals' accumulated depreciation (893) (83) (4,362) (27,373) (12,205) (24,783) (69,699)
Foreign currency translation differences 168 5,546 157,443 116,196 7,654 167,035 454,042
Balance as at 31 December 2024 300,779 306,890 652,662 809,084 63,510 613,243 2,746,168
Carrying amount
As at 31 December 2023 1,144,080 177,004 244,496 251,936 38,761 321,512 2,177,789
As at 31 December 2024 1,205,551 214,978 389,642 497,270 164,548 503,641 2,975,630
15 Goodwill and other intangible assets
31 December 2024 31 December 2023
Goodwill (note 15.1 & 15.2) 1,556,872 1,556,872
Customer relationships (note 15.1) 320,477 364,210
Retailer list (note 15.1) 33,962 41,651
Licenses (note 15.1) 20,088 14,029
Brand name (note 15.1) 34,704 34,704
Software (note 15.1) 524,817 307,257
2,490,920 2,318,723
15.1 Movement of goodwill and other intangible assets during the year is as
follows:
2024 Goodwill Customer relationships Retailer list Licenses Brand name Software Total
Balance as at 1 January as previously reported 1,704,024 346,387 41,651 14,029 34,704 174,818 2,315,613
Adjustment (note 15.2.1) (147,152) 17,823 - - - 132,439 3,110
Balance as at 1 January 1,556,872 364,210 41,651 14,029 34,704 307,257 2,318,723
Additions - - - - - 295,505 295,505
Disposals - - - (652) - (1,595) (2,247)
Amortisation during the year - (81,399) (7,689) (3,642) - (86,885) (179,615)
Disposals - - - 652 - 935 1,587
Foreign currency translation differences - 37,666 - 9,701 - 9,600 56,967
Balances as at 31 December 1,556,872 320,477 33,962 20,088 34,704 524,817 2,49p0,920
2023
Balance as at 1 January, as previously reported 1,751,894 64,547 - 14,403 - 123,905 1,954,749
Adjustment - Note 15.2.1 (495,846) 336,090 49,340 - 34,704 68,194 (7,518)
Balance as at 1 January 1,256,048 400,637 49,340 14,403 34,704 192,099 1,947,231
Additions - - - - - 20,665 20,665
Acquisition 312,826 18,483 - - - 153,766 485,075
Disposals - - - - - (613) (613)
Amortisation during the year - (70,166) (7,689) (2,461) - (51,112) (131,428)
Impairment during the year (12,002) - - - - - (12,002)
Disposals - - - - - 296 296
Acquisition - (660) - - - (10,294) (10,954)
Foreign currency translation differences - 15,916 - 2,087 - 2,450 20,453
Balance as at 31 December 1,556,872 364,210 41,651 14,029 34,704 307,257 2,318,723
15.2 Goodwill relates to the acquisitions of the below subsidiaries:
31 December 2024 31 December 2023
EFG- Hermes IFA Financial Brokerage Company Kuwait -KSC 179,148 179,148
Tanmeyah Micro Enterprise Services S.A.E 365,399 365,399
Frontier Investment Management Partners LTD 325,801 325,801
Fatura Netherlands B.V 373,698 373,698
Paynas BV (note 15.2.1) 312,826 312,826
1,556,872 1,556,872
15 Goodwill and other intangible assets (continued)
15.2.1 PPA effect on the acquisitions during 2023 as follows:
Acquisition of Paynas BV
On 30, September 2023 U Consumer Finance (Previously ValU) (Subsidiary)
acquired 94.96% of Paynas BV shares with an acquisition cost amounting to EGP
Thousands 397,894.
The Company's share in the acquired net liabilities on the date of acquisition
amounted to EGP Thousands (62,084). Accordingly, the goodwill arising on the
acquisition was recorded as EGP Thousands 459,978.
Paynas was the first fintech in Egypt to receive an Agent Banking License from
the CBE, enabling it to integrate SMBs into the financial system by digitizing
their wage payments via Paynas's payroll cards - issued in partnership with
Banque Misr and powered by Visa. This is provided in tandem with the Paynas
app, which provides employee management tools and financial benefits,
improving the financial wellness of SMB employees.
The acquisition builds on U's strategy to expand its product offering and
penetrate the B2B space, through leveraging the Paynas offering and network.
Furthermore, access to the data on the employee management platform will be
used to enrich and enhance credit decisions. This is in addition to the
strong technical and business capabilities of the team.
The following represents final Purchase price allocation (PPA)on the
acquisition date:
Paynas B.V PPA Effect Paynas B.V
On the date of acquisition After PPA
Acquired total assets 355,727 154,960 510,687
Acquired total liabilities (420,910) -- (420,910)
Net assets(liabilities) (65,183) 154,960 89,777
Non-controlling interests (3,099) 7,808 4,709
Group's share in the acquired net assets (liabilities) (62,084) -- 85,068
Consideration transferred 397,894 -- 397,894
Resulting goodwill 459,978 -- 312,826
Management of the Group has applied those changes prospectively (note 37).
15.2.2 Goodwill - Test for impairment
The Group assesses goodwill for impairment at least annually. This involves
estimating the recoverable amount of the relevant subsidiaries, being the
cash-generating units (CGUs). As of the reporting date, the estimated
recoverable amounts of the CGUs exceeded their respective carrying values.
The recoverable amounts were determined using the value-in-use approach,
applying the Discounted Cash Flow (DCF) method. Cash flow projections were
based on a five-year business plan approved by management. The key assumptions
used reflect management's expectations of market and industry trends and are
supported by historical data sourced from both internal and external sources.
Discount rates were derived from observable market benchmarks, including
government bond yields, equity risk premiums, and industry-specific beta
factors. Terminal growth rates were aligned with long-term macroeconomic
forecasts, including those published by the International Monetary Fund (IMF).
A capital structure assumption of 100% equity was applied across all
valuations.
In certain cases, the Dividend Discount Model (DDM) was applied where
appropriate, using the same valuation principles.
15 Goodwill and other intangible assets (continued)
15.2.2 Goodwill - Test for impairment (continued)
Hence, the Weighted Average Cost of Capital (WACC) was computed using growth
rates ranging from 2% to 5%, while the Equity Risk Premium ranged from 4% to
7%, resulting in WACC rates between 8% and 32%, depending on the entity being
assessed and subject to market and country conditions.
The Group has performed an analysis by varying these input factors by a
reasonably possible margin and assessing whether the change in input factors
result in any of the goodwill allocated to appropriate cash generating units
being impaired. Based on the above analysis, management has not recognized an
impairment for the year ended 31 December 2024 in relation to goodwill.
16 Other assets
31 December 2024 31 December 2023
Deposits with others (note 16.1) 382,767 403,361
Down payments to suppliers (note 16.2) 1,448,844 1,176,157
Prepaid expenses 486,118 259,999
Employees' advances 218,347 135,886
Accrued revenues (note 16.3) 2,470,694 1,796,384
Taxes withheld by others 74,310 41,232
Payments for investments 5 9,259
Settlement guarantee fund 38,536 19,869
Due from Egypt Gulf Bank- Tanmeyah clients 15,133 8,487
Receivables-sale of investments 1,364 177,803
Due from custodian 63,593 123,146
Due from payment channels 127,492 90,209
Securitization surplus 491,978 266,865
Sundry debtors 398,039 209,781
Assets acquired as settlement of debts (note 16.4) 442,567 330,652
Total 6,659,787 5,049,090
Deduct: Impairment loss (76,451) (27,187)
Balance 6,583,336 5,021,903
16.1 Deposits with others
- Deposits with others include an amount of EGP Thousands 22,163 in
the name of the subsidiaries, EFG-Hermes International Securities Brokerage
and Hermes Securities Brokerage Company which represent blocked deposits for
same day trading operations settlements which take place in the Egyptian Stock
Exchange. Both companies are not entitled to use these amounts without prior
approval from Misr Clearance Company.
- Deposits with others include an amount of EGP Thousands 265,792 in
the name of the subsidiary, EFG- Hermes KSA. This represents margin deposited
with the General Clearing Member (GCM) as required by the Clearing House
(Muqassa).
16.2 Down payments to suppliers
- Down payments to suppliers mainly related to subsidiaries, Bank NXT,
EFG Holding and Tanmeyah Micro Enterprise services S.A.E
16.3 Accrued Revenue
- Accrued revenues includes management fees and interest accrued on
Loans and advances to banks, Loans and advances to customers and investment.
16.4 Assets acquired as settlement of debts
- Assets acquired presented in other assets that have been acquired by
Bank NXT in exchange for debt account receivables and the assets acquired are
mainly land and buildings.
17 Due to banks and financial institutions
31 December 2024 31 December 2023
Financial institutions 2,923,742 31,750
Bank overdraft * 19,297,065 11,347,885
Deposits** 10,577 2,378,769
Due to Central Bank** -- 5,225
Current account** 531,532 292,100
22,762,916 14,055,729
* Bank overdraft is facilities granted from the banks which includes a pledged
governmental bond contract to secure a credit facility amounted to EGP
Thousands 1,065,632.
** Relate to Bank NXT- previously Arab Investment Bank (aiBank).
18 Customer Deposits (Bank NXT)
31 December 2024 31 December 2023
Call deposits 27,739,336 20,261,265
Term deposits 28,332,022 20,316,818
Saving and deposit certificates 10,074,913 9,322,930
Other deposits 1,062,314 733,194
Balance 67,208,585 50,634,207
Corporate deposits 45,754,381 35,505,821
Retail 21,454,204 15,128,386
Balance 67,208,585 50,634,207
19 Accounts payable - customers credit balance at fair value through profit
and loss
This amount represents payable to customers against the structured notes
issued by one of the Group companies. These Financial liabilities are linked
to assets/structured notes, where assets have been purchased on behalf of
customers and accordingly a liability equivalent to the FV of the assets is
resided in this entity. These structured notes are linked mainly to treasury
bills and quoted equity securities.
19.1 Accounts payable - customers credit balance
Accounts payable balances are mainly represented in the advances made by
clients to buy shares in the activity of brokerage. Coupons collected and
proceeds from the sale of shares for the benefit of clients are also being
added to these accounts.
20 Issued bonds
- During October 2024, EFG Corp-Solutions (a subsidiary - 100%) issued
the second issuance (third for the company) of the first program
(multi-tranche issuance program of tradable, non-convertible to shares,
registered bonds for three years with a value of EGP 3 billion) with a value
of EGP 400 million for five years.
- During June 2024 EFG Corp-Solutions (a subsidiary - 100%) issued the
second issuance of unsecured short-term bonds with a value of EGP 433 million
for one year. The bonds are tradable and non-convertible to shares for a
period of 12 months. The bonds proceeds will be used to finance different
company activities and meet its financial obligations.
- During April 2024 Hermes Securities Brokerage (a subsidiary - 100%)
issued short-term bonds with a value of EGP 600 million (Second issuance of
second program) that are tradable and non-convertible to shares for a period
of 12 months at a par value of EGP 100 (one hundred Egyptian pounds only) for
a bond to be paid at the end of the period with a variable annual rate based
on the net average rate of return on treasury bills in Egyptian pounds (364
days) after deducting the tax in addition to a margin (2%), note that the
first coupon equal 22.72% will be paid at the end after six months of the
issuance and the second coupon will be paid at the end of the issuance the
bonds will be fully consumed at the end of the issuance period and the bonds
non-expedited payment, the bonds proceeds will be used to finance different
company activities and meet its financial obligations.
21 Creditors and other credit balances
31 December 2024 31 December 2023
Accrued expenses 8,010,373 3,569,723
Dividends payable (prior years) 154,092 296,818
Deferred revenues 145,647 76,617
Suppliers 725,083 444,780
Clients' coupons - custody activity 204,017 276,902
Tax authority 135,312 89,275
Social Insurance Association 16,981 16,673
Payables- purchase of investments - 157,359
Medical takaful insurance tax 51,462 26,915
Deposits due to others -finance lease contracts 10,296 14,182
Pre collected instalments 601,304 494,994
Sundry creditors 425,972 265,069
Lease liabilities (21.1) 560,583 419,138
Employees' benefits obligations (21.2) 89,516 68,459
Balance 11,130,638 6,216,904
21.1 Lease Liabilities
31 December 2024 31 December 2023
Balance at the beginning of the year 419,140 412,473
Additions 246,312 29,462
Disposals (9,481) --
Accretion of interest 70,179 67,494
Paid during the year (245,847) (191,905)
Effect of foreign currency translation 80,280 101,614
Balance at the end of the year 560,583 419,138
21.2 Employees' benefits obligations
A- Movements in the net liabilities recognized in the consolidated
statement of financial position and their components are as follows:
31 December 2024 31 December 2023
Balance at the beginning of the year 68,459 50,812
Charge for the year 15,477 10,239
Actuarial gain on re-measurement of employees' benefit obligations (2,178) (3,512)
Paid during the year (37,828) (1,916)
Foreign currency translation difference 45,586 12,836
Balance at the end of the year 89,516 68,459
B- Amounts recognized included in consolidated statement of profit or
loss:
31 December 2024 31 December 2023
Current service cost 10,623 6,973
Interests on defined benefit obligation 4,854 3,266
Balance 15,477 10,239
C- The significant assumptions used in determining end-of-service benefit
obligations for the Group's plans are shown below:
As at 31 December 2024 As at 31 December 2023
Discount rate 6.25% 5.75%
Future salary increase rate 5.00% 5.00%
D- A quantitative sensitivity analysis for significant assumptions on the
defined benefit obligation are shown below:
As at 31 December 2024 As at 31 December 2023
Increase Decrease Increase Decrease
(1%) (1%) (1%) (1%)
Discount rate 82,030 98,796 62,538 75,293
Future salary increase rate 98,521 82,128 75,276 62,445
The sensitivity analysis above has been determined based on a method that
extrapolates the impact on the defined employees' benefits obligation as a
result of reasonable changes in key assumptions occurring at the end of
reporting period.
22 Deferred tax assets/(liabilities)
31 December
2024 Balance as at 1 January Recognized in profit or loss * Recognized in equity Foreign currency differences Net Deferred tax assets Deferred tax liabilities
Fixed assets depreciation (145,513) (58,802) - 570 (203,745) - (203,745)
Claims provision 40,997 23,915 - 607 65,519 65,519 -
Impairment loss on assets 1,417 799 - 51 2,267 2,267 -
Prior year losses carried forward 68,998 37,725 - 44,669 151,392 151,392 -
Investment at fair value (745,611) (655,723) (102,709) - (1,504,043) - (1,504,043)
Foreign currency translation differences (74,260) (261,438) - (1,109) (336,807) - (336,807)
Revaluation of investment property 1,867 -- - - 1,867 1,867 -
Investment in associates (11,592) 849 - - (10,743) - (10,743)
ESOP deferred 13,132 (265) - - 12,867 12,867 -
Securitization surplus Revaluation (10,460) (17,886) - - (28,346) - (28,346)
(861,025) (930,826) (102,709) 44,788 (1,849,772) 233,912 (2,083,684)
31 December
2023 Balance as at 1 January Acquisition Recognized in profit or loss * Recognised in equity Disposals Foreign currency differences Net Deferred tax assets Deferred tax liabilities
of subsidiaries (note 30)
Property and equipment depreciation (110,329) 522 (35,762) - - 56 (145,513) - (145,513)
Claims provision 185 - 40,804 - - 8 40,997 40,997 -
Impairment loss on assets 1,421 - - - - (4) 1,417 1,417 -
Prior year losses carried forward 51,804 - 11,149 - (4,968) 11,013 68,998 68,998 -
Investment at fair value (469,494) - (290,436) 14,319 - - (745,611) - (745,611)
Foreign currency translation differences (213,621) - 139,373 - - (12) (74,260) - (74,260)
Revaluation of investment property 1,867 - - - - - 1,867 1,867 -
Investment in associates (7,217) - (4,375) - - - (11,592) - (11,592)
ESOP deferred 9,209 - 3,923 - - - 13,132 13,132 -
Securitization surplus revaluation - - (10,460) - - - (10,460) - (10,460)
(736,175) 522 (145,784) 14,319 (4,968) 11,061 (861,025) 126,411 (987,436)
*The amounts recognized in profit or loss are related to only those components
where taxable temporary differences/deductible temporary differences arise.
23 Provisions
31 December 2024 31 December 2023
Claims provision 928,441 532,632
ECL on unfunded exposure (Bank NXT) 142,187 66,278
End of service benefits 801,766 467,663
Financial guarantee for contingent liabilities 40,883 32,698
1,913,277 1,099,271
2024 Claims provision End of service benefits* Financial guarantee for contingent liabilities ECL on unfunded exposure Total
(Bank NXT)
Balance as at 1 January 532,632 467,663 32,698 66,278 1,099,271
Charged during the year 588,952 75,927 40,678 74,029 779,586
Foreign currency differences 31,954 309,704 - 1,880 343,538
Used during the year (184,085) (47,310) - - (231,395)
Bad debt - - (32,493) - (32,493)
Released (note 28) (41,012) (4,218) - - (45,230)
Balance as at 31 December 928,441 801,766 40,883 142,187 1,913,277
2023 Claims provision End of service benefits* Financial guarantee for contingent liabilities ECL on unfunded exposure Total
(Bank NXT)
Balance as at 1 January 406,954 354,889 35,647 55,414 852,904
Charged during the year 163,247 52,317 38,055 9,250 262,869
Foreign currency differences 8,909 87,767 - 1,614 98,290
Used during the year (40,536) (27,310) (41,004) - (108,850)
Released (note 28) (5,942) - - - (5,942)
Balance as at 31 December 532,632 467,663 32,698 66,278 1,099,271
* Related to Group entities outside Egypt.
24 Loans and borrowings
Borrowers Borrowing Contract dates Maturity dates 31 December 2024 31 December 2023
limits
EFG Corp-Solutions * 900 million 27/05/2024 27/05/2031 618,713 115,329
,, 5 million 27/02/2020 27/02/2027 5,015 14,271
,, 485 million 3/12/2024 3/12/2031 440,681 587,119
,, 466 million 30/03/2023 31/03/2030 456,449 585,189
,, 2 billion 21/04/2024 21/04/2031 347,529 541,266
,, 548 million 23/04/2024 28/05/2033 548,415 568,459
,, 18.5 million 29/08/2022 28/08/2029 18,494 13,532
,, 152.5 million 15/01/2023 13/07/2027 0 83,943
,, 393 million 1/7/2024 21/08/2025 318,665 417,964
,, 10.5 million 25/06/2023 25/06/2030 7,033 44,516
,, 400 million 12/12/2023 12/12/2028 92,259 170,582
,, -- 6/9/2023 31/08/2024 0 27,622
,, 175 million 20/10/2024 20/10/2031 174,830 226,813
,, 610 million 19/10/2017 3/3/2027 609,960 492,800
,, 130 million 21/12/2023 12/12/2030 124,342 147,703
,, 3.3 million 7/2/2018 7/2/2025 3,349 27,591
,, 6.1 million 19/05/2020 19/05/2027 6,161 59,325
,, 600 million 9/6/2024 15/08/2028 488,264 36,747
,, 606.6 million 20/10/2024 20/10/2031 494,321 579,079
,, 13 million 26/11/2020 26/11/2027 13,006 54,757
,, 71 million 25/06/2024 11/7/2030 70,689 76,464
,, 200 million 8/10/2024 8/10/2029 41,396 0
4,879,571 4,871,071
EFG - Hermes Pakistan Limited 56,5 million 27/10/2021 10/5/2026 -- 41,085
Tanmeyah Micro Enterprise Services S.A.E 220 million 30/10/2024 30/10/2025 204,768 100,000
,, 200 million 20/10/2024 18/05/2025 166,805 188,956
,, 200 million 5/3/2024 4/3/2026 143,740 --
,, 250 million 28/07/2024 28/07/2025 238,154 --
753,467 288,956
U Consumer finance 600 million 15/02/2024 15/02/2026 598,438 349,647
,, 300 million 9/5/2022 15/02/2026 253,876 135,817
,, 325 million 7/6/2024 30/09/2027 324,264 221,579
,, 300 million 30/01/2023 28/02/2026 298,630 128,066
,, 50 million 2/2/2023 2/11/2026 49,394 21,661
,, 600 million 2/5/2023 2/5/2026 600,000 261,514
,, 400 million 15/8/2023 15/08/2026 392,361 342,314
,, 200 million 30/09/2024 1/4/2027 187,323 98,388
,, 340 million 13/07/2024 13/07/2027 338,530 340,356
,, 950 million 13/06/2024 13/06/2026 950,871 600,636
,, 500 million 15/07/2024 15/07/2026 473,800 --
,, 100 million 3/10/2024 3/9/2026 110,000 --
,, 500 million 12/1/2024 12/1/2026 499,967 --
5,077,454 2,499,978
EFG Finance Holding 120 million 20/10/2024 20/10/2028 105,887 120,000
,, 200 million 12/12/2023 12/12/2030 166,001 183,129
,, 400 million 2/3/2023 31/03/2028 380,538 --
652,426 303,129
EFG For SME 150 million 29/07/2024 28/07/2025 5,475 --
,, 150 million 18/11/2024 15/09/2025 1,501 --
6,976 0
Bank NXT 120 million 18/08/2014 1/2/2039 119,673 126,684
Balance 11,489,567 8,130,903
Distributed as follows:
Current 6,160,149 3,636,529
Non-current 5,329,418 4,494,374
11,489,567 8,130,903
- Most interest rates on loans and credit facilities are based on SOFR,
LIBOR, or the borrowing
rate announced by the Central Bank of Egypt (Corridor), plus a margin.
* EFG Hermes Corp - Solutions (wholly owned subsidiary), is committed to
settle the credit granted by waiving the rental value of the finance lease
contracts to the banks within the credit amount.
25 Share capital
31 December 2024 31 December 2023
EGP Thousands EGP Thousands
Authorized capital 30,000,000 30,000,000
Issued and Paid in Capital 7,298,030 7,298,030
Number of shares outstanding in Thousands 1,459,606 1,459,606
31 December 2024 31 December 2023
EGP EGP
Par value per share 5 5
- The Holding Company's General Assembly approved in its session held
on May 24, 2023 to increase the Holding Company's authorized capital from EGP
6 billion to EGP 30 billion and increase the Holding Company's issued
capital from EGP Thousands 5,838,424 to EGP Thousands 7,298,030 distributed on
1,459,606,008 shares with an increase amounting to EGP Thousands 1,459,606
distributed on 291,921,202 shares with par value EGP 5 through the issuance of
one free share for every four shares. This increase is transferred from the
company retained earnings that presented in December 31, 2022 financial
statements. The required procedures had been taken to register the increase in
the Commercial Register.
25.1 Treasury shares
The Holding Company's board of directors approved in its session held on May
22,2024 to purchase a number of 25 million shares of the Holding Company's
shares and the Holding Company has purchased a number of 23,713,000 shares
from Egyptian stock exchange market at cost of EGP thousand 399,975.
26 Non - controlling interests ("NCIs")
31 December 2024 31 December 2023
Non-controlling interests 5,309,139 4,082,475
Movement in NCIs during the year was as follows
Balance as at 1 January - as previously stated (note 37) 4,082,475 3,445,286
Adjustments during the year (note 37) - 7,571
Balance as at 1 January (note 37) 4,082,475 3,452,857
Comprehensive income for the year 1,364,066 708,786
Dividends during the year (139,963) (135,421)
Acquisition of a subsidiary - 3,110
Sale of equity securities through OCI 1,296 -
Changes in ownership interests without change in control 1,265 53,143
Balance as at 31 December 5,309,139 4,082,475
26 Non - controlling interests ("NCIs") (continued)
The Group considers the Bank NXT as a subsidiary that have a material
non-controlling interests to the Group. The principle place of business of
Bank NXT is the Arab Republic of Egypt. The proportion of ownership interests
and voting rights held by non-controlling interests in Bank NXT represents
48.979% as at 31 December 2024 (31 December 2023: 48.979%). Summarised
financial information of Bank NXT is disclosed under note 32 under the
Commercial bank (Bank NXT) business segment.
Accumulated non-controlling interests of Bank NXT amounted to EGP Thousand
4,218,199 as 31 December 2024 (2023: 3,355,396).
The profit allocated to non-controlling interests of Bank NXT during the year
ended 31 December 2024 amounted to EGP Thousand 860,846 (2023: 555,435)
27 Contingent liabilities
The Holding Company guarantees its subsidiary EFG- Hermes UAE LLC against the
Letters of Guarantee issued from banks amounting to:
31 December 31 December 2023
2024
AED 93,670 93,670
Equivalent to EGP 1,296,243 785,517
Assets under management (off-financial position item) 269,559,987 159,430,997
Securitization and Sukuk transactions
The Group has entered certain securitization and Sukuk transactions, the
assets and liabilities related to those transactions do not qualify for the
recognition criteria, accordingly the Group has not recognized those assets or
liabilities.
The assets and liabilities related to those transactions are represented in:
31 December 31 December 2023
2024
Client portfolios related to securitization transactions 12,803,298 15,241,137
Balances with custodians 1,177,445 1,292,213
Land and Buildings related to Sukuk transactions 600,000 600,000
Total Assets 14,580,743 17,133,350
Bonds 10,342,453 12,843,168
Sukuk 420,000 480,000
Total liabilities 10,762,453 13,323,168
27 Contingent liabilities (continued)
The contingent liabilities of Bank NXT - aiBank (previously) is as follows:
(i) Capital commitments
Financial investments
The value of commitments related to financial investments for which payments
were not requested until the date of the financial position as at 31 December:
USD Thousands
31 December 2024 Contribution amount Amount paid Residual amount
African Export -Import Bank 5,336 2,294 3,042
EGP Thousands
Contribution Amount Amount Paid Residual Amount
Long term assets 1,097,003 784,425 312,578
USD Thousands
Contribution Amount
31 December 2023 Amount paid Residual amount
African Export -Import Bank 4,890 2,116 2,774
EGP Thousands
Contribution Amount Amount Paid Residual Amount
Long term assets 1,015,907 804,476 211,431
(ii) Commitments on loans, guarantees and facilities are as follows:
31 December 2024 31 December 2023
Loan Commitments 14,182,263 933,981
Letters of guarantees 2,282,896 2,798,308
Letters of credit (Export and Import) 938,697 13,816
Acceptances of supplier facilities 356,038 649,754
17,759,894 4,395,859
28 Other Revenue
Other revenues include rental income and non-recurring income as follows:
For the year ended
31 December 31 December
2024 2023
Release of provisions (note 23) 45,230 5,942
Rental incomes 176,656 67,630
Gain on sale of property and equipment 22,882 3,251
Gain on sale of Investment property 7,648 56,438
Custodian rebates 27,604 16,141
Advisory fees 4,651 92,400
Other gains 177,899 65,994
462,570 307,796
29 Impairment loss on financial assets - net of recoveries
For the year ended
December December
2024 2023
Accounts receivable (49,764) 133,080
Funded facilities to customers 379,250 219,827
Banking loans and facilities (Bank NXT) 303,774 622,864
Cash and cash equivalents 5,977 265
Other assets 58,422 54,435
Investments FVOCI - debt instruments (14,881) (7,472)
Investments at amortized cost - debt instruments (789) 7,334
Equity accounted investees * 91,013 -
773,002 1,030,333
* This pertains to Paytabs (Joint Venture)
30 Income tax expense
For the year ended
December 2024 December 2023
Current income tax 1,439,591 948,213
Deferred income tax (note 22) 930,826 145,784
2,370,417 1,093,997
Effective tax rate December 2024 December 2023
Net profit (before tax) 7,457,513 3,928,239
Tax rate 22.50% 22.50%
Income tax calculated based on net income 1,677,940 883,854
Tax adjustments effect (238,349) 64,359
Movement in unrecognised deferred tax 930,826 145,784
Income tax 2,370,417 1,093,997
Effective tax rate 31.79% 27.85%
30.1 Current tax Liability
For the year ended
December 2024 December 2023
Balance at the beginning of year 638,583 473,873
Charge for the year 1,439,591 948,213
Withholding tax receivable (8,406) (12,454)
Income tax paid (1,052,558) (772,664)
Effect of foreign currency translation 3,495 1,615
Balance at the end of year 1,020,705 638,583
31 General and administrative expenses
For the year ended
31 December 31 December
2024 2023
Wages, salaries and similar items (note 31.1) 10,642,711 6,397,605
Marketing, technology and network expenses 1,174,566 649,957
Consultancy 835,706 549,330
Travel, accommodation and transportation 124,829 83,874
Leased line and communication expenses 561,565 351,313
Rent and utilities expenses 166,356 133,546
Other expenses 1,207,799 785,233
14,713,532 8,950,858
31.1 Share-based payments.
The Holding Company introduced an Employees Share Ownership plan (ESOP) in
accordance with the shareholder's approval at the extraordinary general
assembly meeting by issuing Free shares representing 5.5% of the issued
capital of the Company shall be granted to employees, managers and executive
board members of the Company and its subsidiaries.
The duration of this program is five years starting as of 1 January 2021 till
31 December 2025, the vesting period is 3-4 years starting from 1 January 2021
till 31 December 2024. The beneficiary entitled to shares granted to 4 equal
instalments.
The equity instruments for share-based payment are recognized at fair value on
the grant date and are recorded in the income statement with a corresponding
increase in equity. The value of expenses charged to the income statement
during the year amounted EGP Thousands 73,938.
Equity instruments during the year represents the following:
For the year ended
December December
2024 2023
No. of Shares No. of Shares
Total at the beginning of the year 68,057,297 56,204,722
Free shares distributed during the year - 13,657,274
Forfeited shares during the year (3,024,810) (1,804,699)
Exercised during the year (17,014,321) -
Total at the end of the year 48,018,166 68,057,297
31.2 Depreciation and amortisation expenses
For the year ended
31 December 31 December
2024 2023
Depreciation expenses - investment properties (note13) 5,703 6,545
Depreciation expenses - properties and equipment (including depreciation of 448,279 338,713
right-of-use assets) (note14)
Amortisation expenses - intangible assets (note 15) 179,615 136,126
633,597 481,384
32 Operating segments
Basis for operating segment
Segment information is presented in respect of the Group's business segments.
The primary format, business segment, is based on the Group's management and
internal reporting structure. Inter-segment pricing is determined on an arm's
length basis. Segment results, assets and liabilities include items directly
attributable to a segment. The revenue & expense and assets &
liabilities analyses in the table below are based on the type of business
activities and services that are distinguishable component.
For the year ended 31 December 2024 Holding & Treasury Brokerage Asset Management Investment Banking Private Finance Leasing Micro Consumer Factoring SME Lending Commercial banking Intersegment Total
Equity Holding Financing eliminations
Interest income 1,489,194 1,924,393 11,993 100,000 17,605 19,654 1,955,980 2,812,568 1,363,055 654,254 15,671 12,369,651 (414,376) 22,319,642
Interest Expense (1,410,188) (585,338) - (64,079) - (46,079) (1,561,820) (1,464,730) (1,460,603) (622,892) (118) (8,458,569) 364,158 (15,310,258)
Net Interest Income 79,006 1,339,055 11,993 35,921 17,605 (26,425) 394,160 1,347,838 (97,548) 31,362 15,553 3,911,082 (50,218) 7,009,384
Fee and commission income - 4,360,330 1,705,231 2,310,953 287,777 - 118,597 539,150 1,095,694 96,250 522 934,176 3,706 11,452,386
Fee and commission expense (6,044) (799,920) (210,876) 14 (431) (71) (41) (55,397) (30,177) (4) (38) (254,116) - (1,357,101)
Net Fees and commission Income (6,044) 3,560,410 1,494,355 2,310,967 287,346 (71) 118,556 483,753 1,065,517 96,246 484 680,060 3,706 10,095,285
Realized securities' (losses) (207,191) 18,212 1,098 - 23,853 (89) - - - - (117) 106,878 - (57,356)
Net changes in the fair value of investments at FVTPL 2,843,111 (3,650) 5,804 - (333) (1,576) - - 742 - - - - 2,844,098
Dividend Income 22,392 31,831 - - (36) - - - - - - 31,811 - 85,998
Other Revenues 149,005 97,959 7,423 4,652 17,501 - 2,226 104,332 11,750 - - 85,559 (17,837) 462,570
Foreign Currencies Exchange Differences 2,540,657 11,438 - - - (13,658) 145,753 1,525 96,086 37,785 (179) 88,299 - 2,907,706
Share of Gain from equity accounted investees - - - - (8,372) 2,403 - - - - - 54,822 - 48,853
Net gains on derecognition of financial assets measured at amortized cost - - - - - - 125,980 - 834,712 - - - - 960,692
Impairment loss on financial assets - net of recoveries 61,745 81,337 (2,142) (8,644) (37,328) (90,874) (81,226) (144,479) (171,822) (60,281) (1,028) (316,953) (1,307) (773,002)
5,482,681 5,136,592 1,518,531 2,342,896 300,236 (130,290) 705,449 1,792,969 1,739,437 105,112 14,713 4,641,558 (65,656) 23,584,228
General administrative expenses (2,994,815) (4,107,710) (1,062,591) (1,631,920) (412,469) (101,027) (166,911) (1,380,510) (1,087,961) (50,296) (21,991) (1,893,592) 198,261 (14,713,532)
Financial Guarantee Provision - - - - - - - (40,678) - - - - - (40,678)
Provisions (347,436) (81,591) (4,198) (86) (2,327) - - (149,590) (8,000) - - (145,680) - (738,908)
Depreciation and amortization (167,156) (45,343) (14,950) (507) (5,709) (39) (288) (77,882) (56,429) (609) (99) (131,981) (132,605) (633,597)
Profit before tax 1,973,274 901,948 436,792 710,383 (120,269) (231,356) 538,250 144,309 587,047 54,207 (7,377) 2,470,305 - 7,457,513
Income tax expense (755,108) (397,593) 20,916 (54,937) 399 2,479 (118,422) (74,809) (104,619) (15,432) (170) (873,121) - (2,370,417)
Profit for the year 1,218,166 504,355 457,708 655,446 (119,870) (228,877) 419,828 69,500 482,428 38,775 (7,547) 1,597,184 - 5,087,096
Total assets 25,335,823 45,846,393 2,246,988 1,673,334 562,549 374,288 8,738,515 6,859,121 10,562,145 4,589,069 90,752 79,999,434 - 186,878,411
Total liabilities 11,934,391 37,861,579 829,118 1,256,836 417,810 79,717 6,749,751 5,297,004 8,423,267 4,034,120 17,761 70,609,092 - 147,510,446
32 Operating segments (continued)
Basis for operating segment (continued)
For the year ended 31 December 2023 Holding & Treasury Brokerage Asset Management Investment Banking Private Finance Leasing Micro Consumer Factoring Commercial banking Intersegment Total
Equity Holding Financing eliminations
Interest income 886,840 1,004,774 5,133 42,644 26,751 6,229 1,140,559 1,491,099 868,308 385,040 7,669,036 (41,599) 13,484,814
Interest expense (706,588) (299,302) - (27,428) - - (923,705) (770,603) (727,788) (337,560) (5,129,506) 55,381 (8,867,099)
Net Interest Income 180,252 705,472 5,133 15,216 26,751 6,229 216,854 720,496 140,520 47,480 2,539,530 13,782 4,617,715
Fee and commission income (2) 2,706,287 1,260,115 718,976 226,211 1,131 47,054 573,158 547,637 65,582 1,015,823 (53) 7,161,919
Fee and commission expense (6,554) (434,997) (141,402) - (9,567) (661) (90) (15,607) (1,980) (51) (108,700) - (719,609)
Net fee and commission income (6,556) 2,271,290 1,118,713 718,976 216,644 470 46,964 557,551 545,657 65,531 907,123 (53) 6,442,310
Realized securities' Gain 5,707 14,528 - - 149 58 - - 2,350 - 148,879 - 171,671
Net changes in the fair value of investments at FVTPL 1,462,793 2,122 (104,769) - 264 51,480 - - - - - - 1,411,890
Foreign Currencies Exchange Differences 1,202,906 6,551 - - - 418 50,977 (4,262) (20,891) 6,622 (87,474) - 1,154,847
Dividend Income 17,521 50,465 - - - - - - - - 13,491 - 81,477
Share of Gain from equity accounted investees - - - - (4,166) (12,694) - - - - 61,908 - 45,048
Other Revenues 197,497 20,917 (80) 207 6,490 - 5,200 22,598 95,787 - 24,187 (65,007) 307,796
Net gains on derecognition of financial assets measured at amortized cost - - - - - - 42,594 - 390,337 - - - 432,931
Impairment loss on financial assets - net of recoveries (8,788) (122,880) (24,243) - (11,518) (627) (9,592) (98,423) (84,859) (43,383) (626,020) - (1,030,333)
3,051,332 2,948,465 994,754 734,399 234,614 45,334 352,997 1,197,960 1,068,901 76,250 2,981,624 (51,278) 13,635,352
General and administrative expenses (1,576,902) (2,446,343) (649,094) (807,003) (245,662) (98,350) (142,333) (1,051,360) (721,888) (42,766) (1,317,252) 148,095 (8,950,858)
Financial Guarantee Provision - - - - - - - (38,055) - - - - (38,055)
Impairment loss on goodwill and intangible assets - - - - - - - (12,002) - - - - (12,002)
Provisions (32,521) (40,777) 46 (3,561) (1,185) (1,712) - (24,261) (3,438) - (117,405) - (224,814)
Depreciation and Amortization (138,774) (38,445) (9,840) (342) (3,912) (7,333) (400) (69,172) (29,373) (1,857) (85,119) (96,817) (481,384)
Profit Before Income Tax 1,303,135 422,900 335,866 (76,507) (16,145) (62,061) 210,264 3,110 314,202 31,627 1,461,848 - 3,928,239
Income Tax expense (243,807) (225,501) (8,449) (16,048) (1,645) (1,314) (56,037) (49,697) (73,965) (7,263) (410,271) - (1,093,997)
Profit for the Period 1,059,328 197,399 327,417 (92,555) (17,790) (63,375) 154,227 (46,587) 240,237 24,364 1,051,577 - 2,834,242
Total assets 17,458,594 19,568,959 1,574,356 419,557 411,063 354,651 6,241,397 5,686,611 5,874,362 2,366,864 61,954,670 - 121,911,084
Total liabilities 6,528,678 15,223,112 511,463 378,051 295,123 44,684 5,929,381 4,330,108 4,784,171 1,621,261 54,866,013 - 94,512,045
32 Operating segments (continued)
Geographical segments
The Group operates in three main geographical areas: Egypt, GCC and other. In
presenting the geographic information, segment revenue has been based on the
geographical location of operation and the segment assets were based on the
geographical location of the assets. The Group's operations are reported under
geographical segments, reflecting their respective size of operation.
The revenue analysis in the tables below is based on the location of the
operating Group, which is the same as the location of the major customers and
the location of the operating companies.
December 31, 2024
Egypt GCC Other Total
Total revenues 18,607,126 4,473,266 503,836 23,584,228
Segment assets 132,046,768 42,327,605 12,504,038 186,878,411
December 31, 2023
Egypt GCC Other Total
Total revenues 10,853,984 2,646,774 134,594 13,635,352
Segment assets 98,587,804 15,237,799 8,085,481 121,911,084
For the year ended
Interest income from: 31 December 2024 31 December 2023
Banks and financial institutions 1,462,542 777,923
Accounts receivables 942,710 441,275
Loans and facilities to customer 15,643,584 9,152,168
Investment through fair value 3,056,475 1,559,092
Investment at amortized cost 1,214,331 1,554,356
Balance 22,319,642 13,484,814
For the year ended
Interest expenses paid to: 31 December 2024 31 December 2023
Banks and financial institutions 2,794,351 2,381,322
Customer deposits 8,426,422 5,117,932
Loans and borrowings 3,848,268 1,231,978
Short term bonds 236,363 132,601
Interest on defined benefit obligation 4,854 3,266
Balance 15,310,258 8,867,099
33 Tax status (The Holding Company)
- As to Income Tax, the years till 2019 the competent Tax Inspectorate
inspected the Holding Company's books and all the disputed points have been
settled with the Internal Committee. As to the years 2020/2023, have not been
inspected yet.
- As to Salaries Tax, the Holding Company's books had been examined
till 2022, and all the disputed points have been settled with the Internal
committee and as to years 2023 have not been inspected yet.
- As to Stamp Tax, the Holding Company's books had been examined from
year 1998 till 2018 and all the disputed points have been settled with the
competent Tax Inspectorate and as to years 2019/2020 have been inspected and
appealed on some disputed items and as to years 2021/2024 have not been
inspected yet.
- As to Property Tax, for Smart Village building, the Holding Company
paid tax till December 31, 2024, and for Nile City's first building, the
Holding Company paid tax till December 31, 2024.
34 Earnings per share
Earnings per share is calculated by dividing the net profit for the year after
deduction of Tier 1 capital notes payment by the weighted average number of
ordinary shares in issue during the year as set out below:
31-Dec-24 31-Dec-23
Net profit for the year 4,098,933 2,212,222
Weighted average number of ordinary shares:
Number of shares issued/deemed to be outstanding from the beginning of the 1,459,606 1,167,685
year
Free shares dividend issued during the year 2023 - 291,921
Effect of treasury shares during the year 2024 (14,448) -
Weighted average number of ordinary shares 1,445,158 1,459,606
Basic earnings per share - EGP 2.84 1.52
Net profit for the year for calculating diluted earnings per share 4,098,933 2,212,222
Weighted average number of ordinary shares in issue for diluted earnings per 1,445,158 1,459,606
share
Diluted earnings per share - EGP 2.84 1.52
Basic and diluted earnings per share are the same due to the fact that the
Group has fully issued the shares under share-based payment scheme (note 25)
hence, the impact of dilution is nil for the year ended 31 December 2024 and
the year ended 31 December 2023.
35 Financial risk management
The Group, as a result of its activities, is exposed to various financial
risks, considering the risk acceptance is the basis of the financial activity.
Some risks or a group of risks are analyzed, assessed, and managed
collectively, and therefore the Group intends to achieve an appropriate
balance between risk and interest and to reduce the potential negative effects
on the financial performance of the Bank. The most significant types of
financial risks are credit risk, market risk and liquidity risk and other
operating risks. Market risk includes foreign exchange rate risk, and interest
rate risk.
Risk management policies are adopted to determine and analyse risks to limit,
control and monitor the risks and commit to limits through the reliable
techniques and updated information systems. The Bank periodically reviews and
modifies the risk management policies and systems to reflect changes in
markets, products, services, and the best recent applications.
Risks are managed by Risk Function in terms of the policies approved by the
Board of Directors. Risk Function determines, assesses and covers the
financial risks in close cooperation with the various operating units of the
Bank. The Board of Directors provides written principles for managing the
risks as a whole, in addition to written policies covering specific risk areas
such as credit risk, foreign exchange risk, interest rate risk and the use of
derivative and non-derivative instruments. In addition, the Risk Function is
independently responsible for periodic review of the risk management and
control environment.
35 Financial risk management (continued)
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, fair value interest rate risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk. The Group's overall
risk management program seeks to minimize potential adverse effects on the
Group's financial performance.
Management of financial risk in the commercial bank (Bank NXT) is conducted
through a separate organization from the investment bank due to regulatory
rules and operational necessity. Below is a summary of the risk management
framework in both business segments.
35.1 Risk management framework in the investment bank
The investment bank has a central treasury department that works closely with
the operating units throughout the Group. The board of directors provides,
through its audit and risk committee, guidance to management to issues
regarding risk. The board of directors is responsible for:
· Overseeing, ratifying, and reviewing the duties of the risk
management department.
· Approving the investment bank's risk appetite framework ("RAF")
and ensure it remains consistent with the Firm's short- and long-term
strategy, business and capital plans and risk capacity.
· Discuss and determine actions if any of the RAF measures are
breached.
Credit risk
I.
Investment Banking's Credit risk:
Credit Risk is the risk of loss arising from the inability or failure of a
customer, client or counterparty to meet its obligations.
We define the credit exposure to a client or counterparty as the loss
potential arising from all product classifications including brokerage's
margin lending, overdrafts, DVP, FOP, debt instrument's assets held for-sale
& assets held to maturity including T-bills & government bonds and
cash placement with commercial banks.
A. Margin Lending
Margin trades involve paying for part of the cost (50%) of a security; a loan
for the rest is loaned (50%) by our Brokerage arm to its clients and leaving
the securities on deposit under EFG's custody as collateral. Margin trades
also involve funding 100% of the trade whenever the client submits collateral
that maintains a loan ratio of 50%. The margin lending is bearing interest
charges calculated monthly
The Role of Risk Management
· The Credit Risk Officer within the Risk Management Function review and
scrutinize the margin trading portfolio on a daily basis.
· The Risk Management Function prepare and develop regular reports on the
portfolio associated risks and provide recommendations to facilitate the
decision-making process.
· The Risk Management Function is responsible to closely monitor the periodic
reports issued by the Margin Trading Desk.
· The Risk Management Function continuously monitor clients' limits to ensure
that no single client or group of clients exceeds 5% of HSB's margin portfolio
and ensure that the clients' holdings are diversified.
· Concentration limits (stock/client/country) limits set by the Risk
Management function.
· On Quarterly basis, the credit risk management runs the ECL model to
calculate the expected credit loss for the HSB's margin portfolio and to
monitor the change from stage to stage concerning margin exposure and the
quality of the collateral the risk management coordinate with the Finance
Department on the final ECL figure after running different scenarios to be
reflected in the Group's provision.
· On a weekly basis the risk management department runs historical and
hypothetical stress tests scenarios to assess the possible losses in the
margin book. The reports also include a multitude of risk metrics and reports
including time to liquidate exposures, clients' portfolios liquidation risk,
single stocks exposures and client's concentration risks.
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Credit risk (continued)
B. Client on-boarding
Margin Trading is applicable only to the approved list of stocks for Margin
Trading by the EFG Hermes' risk management.
a) Each client should meet min. requirement to be eligible for margin
trading. The risk management assess the client creditworthiness, Risk
tolerance & his/her trading experience.
b) the risk management has set the following limits to the margin trading:
· Single client exposure
· Single stock exposure/Collateral, Maximum single stock exposure:
· Marginable Stock/Collateral selection,
· Client with single stock as collateral,
· Margin to Free Float & Margin to market cap,
· Board member transactions,
II.
NBFI's Credit Risk:
The NBFI's is exposed to credit risk which is the risk resulting from a
party's failure to meet its contractual obligations towards the lending
entity. The credit risk is considered to be the most significant risk,
therefore requiring a prudent risk management framework. Credit risk is mainly
represented in lending activities that give rise to funding facilities.
Financial risk management and control are present in each subsidiary reporting
to its BOD and the head of each business unit regularly. All risk management
activities are further overlooked and managed in a centralized unit within the
NBFI which additionally reports to the Group's Board of Directors.
Credit risk measurement
Each subsidiary assesses the Probability of Default of its client using
internal credit underwriting criteria tailored to its business line. These
techniques have been developed internally and analyses its credit worthiness
and risk rating. Below is a summary for the internal Risk Rating for the
Corporate lending arms:
Corporate lending risk rating:
Corporate Risk Rating Matrix Grade
1 Low Risk
Performing
2 Moderate Risk
3 Satisfactory Risk
4 Adequate Risk
5 Acceptable Risk
6 Marginally Acceptable
7 Watch List
8 Substandard
Non-Performing
9 Doubtful
10 Loss
Credit risk classification
NBFI assesses the probability of default at the level of each client/ customer
using several different techniques based on the nature of the business. This
differs from corporate clients to retail whereby the creditworthiness of the
client/customers is verified using internally developed models and evaluation
techniques for the categories of counterparties, customers and the nature of
various facilities. A full study is completed for each client/customer using
external data received from the Central bank of Egypt, I-score etc. for
Corporate Clients, a full credit study is conducted based on qualitative and
quantitative parameters that fully assess the client's creditworthiness. Each
client is assigned a risk rating based on the in-depth credit study that
accordingly leads to a specific provision coverage.
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Credit risk (continued)
ECL Calculation
For all lending activities under the NBFI; forecasts are being built to assess
whether there is a significant increase in credit risk and for the accurate
estimation of the expected credit losses (ECL). Management determines the main
economic variables that affect credit risk and expected credit losses for each
credit portfolio by carrying out an analysis of historical data. The economic
variables and the related effect on both Probability of Default (PD) and the
Exposure at Default (EAD) and Loss Given Default (LGD) are different depending
on the line of business and collateral/financial asset supporting the
facility. This is further reviewed and validated by Group's Validation Unit
for prudency that undergoes the below:
- Carries out the "regression analysis" to determine the impact of such
economic variables on Probability of Default (PD). This allows the management
to better understand the historical effects arising from such variables on the
default rates and the inputs used in calculating the PD. Further to the key
economic scenarios, the validation unit establishes other potential scenarios
in addition to assumptions relating to each scenario separately.
- The lifetime probability of default (PD) relating to the key assumption and
other assumptions are used, as the outcome of scenario weights are determined
for each assumption with the related probabilities of each, in addition to the
supporting indicators and qualitative indicators. Based on the results of such
study, it is assessed whether this financial asset is located at the first,
second or third level, on the basis of which it is determined whether the
expected credit losses "ECL" will be computed on 12- month basis "12-month
ECL" or over lifetime of the financial instrument "Lifetime ECL".
- The expectations and probabilities of occurrence are subject to a high
degree of uncertainty, as it is known to any economic forecasts, therefore the
actual results may be significantly different from those anticipated. The
Validation unit makes the best estimate of these potential expectations and
carries out an analytical study of the irrelevant and non -similar factors for
the different credit portfolios to conclude appropriate assumptions for all
possible scenarios this is also through the use of "Back-testing Methodology".
Modifications of facilities terms and rescheduling
Each subsidiary under NBFI may modify the terms of the facilities granted to
the clients/customers due to commercial renegotiation or financial distress to
increase the chances of recovery. The activities of restructuring include
arrangements of extension of repayment terms, grace periods, exemption from
repayment or some or full interests. Restructuring policies and practices are
based on criteria that indicate that repayment is likely to continue. These
policies are constantly reviewed.
Reduction and risk avoidance policies
Under NBFI, each subsidiary manages its own risk thresholds including but not
limited to Credit limits, Group limits, concentration CAPs related to sectors,
tenors, industries, countries, debtors etc. Each subsidiary regulates the
levels of acceptable credit risk by setting limits to the amount of risk that
will be accepted. These risks are monitored constantly and are reviewed
annually or on a recurring basis, when necessary. All thresholds are approved
by the risk committee and BOD being the only body of authority allowed to
approve alterations to previous CAP's.
Risk Measurement Model
All subsidiaries under NBFI are required to build up provisions in accordance
with the instructions of creditworthiness and based on a specific formula set
forth by the FRA that is based on the client's customer's repayment behaviour
(Days Past Due-DPD). In the event that the required provisions in accordance
with the rules of the FRA exceeds the expected credit losses calculated for
the purposes of preparing the financial statements, the subsidiary is required
to set aside a reserve with the difference between both calculations and this
reserve is periodically adjusted by increase or decrease so that it is always
equal to the amount of the increase between the two provisions, and this
reserve is not distributable.
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Credit risk (continued)
Following is a table showing provision calculation based on FRA for the
various subsidiaries:
Leasing:
- Regarding the Performing/Regular Clients, a minimum of 1% provision
should be taken.
Level Delay Period in Days Category Provisioning Amount Comments
1 90 < days < 180 Follow up 10% of the uncovered amount of the asset N/A
2 180 < days < 275 Substandard 25% of the uncovered amount of the asset Non-Accrual/Marginalized interest
3 275 < days < 365 Doubtful 50% of the uncovered amount of the asset Non-Accrual/Marginalized interest
4 365 < days Inferior 100% of the uncovered amount of the asset Non-Accrual/Marginalized interest
- Regarding the non-performing/irregular clients: they are defined as
any client having overdue rentals exceeding 90 days whereby, the concept of
"Cross default" will be applied across the portfolio for each client
regardless of the repayment behaviour of individual contracts.
Asset Shrinkage Margin
Asset class Asset value consideration after Shrinkage %
RE 80% from the current market value after the asset re-evaluation
PV &CV 70% from the current market value after the asset re-evaluation
All other Assets 50% from the current market value after the asset re-evaluation
Intangible Assets 0% not considered as a client balance coverage
- Consequently, a provision % will be applied depending on the days
past due (as found in the table below) on the Remaining and Uncovered O/S
Dues 1 (#_ftn1) after applying shrinkage margins on Evaluated Assets.
- All assets related to Non-Performing Leases must be re-evaluated
every 6 months and above shrinkage margins to be applied based on each asset
class. Asset Cost after Shrinkage is to be compared to the O/S Dues and the
following action to be applied:
o If Asset after Shrinkage > O/S Dues: then the normal provision rate
(for performing loans) i.e., 1% is to be applied on the O/S Dues (O/S
Principal + Overdue Rents and Corridor).
o If Asset after Shrinkage < O/S Dues: then the provision % (as found in
above table) is to be applied on the uncovered portion of O/S dues.
Factoring:
- Regarding the Performing/Regular Clients, a minimum of 1% provision
should be taken.
- Regarding the non-performing/irregular clients the provisions
calculation below should be implemented after excluding the portfolio that is
secured by banks, correspondent factoring companies, credit insurance or any
other securities accepted by the FRA. Provisions for irregular clients will be
calculated as follows:
Overdue tenor Provision % Notes
From 60 days to 90 days 10% -
< 90 days to 120 days 25% -
< 120 days to 180 days 50% -
< 180 days to 365 days 70% Marginalizing interest
< 365 days 100% Marginalizing interest
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Credit risk (continued)
SMEs:
- Regarding the Performing/Regular Clients, a minimum of 1% provision
should be taken after one year of getting the activity license.
- Regarding the non-performing/ irregular clients: they are defined as
any client having overdue instalments and consequently a provision % will be
applied depending on the days past due as stipulated in the table below:
Level Delay Period in Days Category Provisioning Amount Comments
1 ≥ 30 days and ≤90 days Requires Follow-up 10% Non-Accrual/Marginalized interest
2 > 90 days and < 120 days Requires Follow-up 20% Non-Accrual/Marginalized interest
3 >120 days and ≥ 180 days Doubtful 50% Non-Accrual/Marginalized interest
4 > 180 days Inferior 10% Non-Accrual/Marginalized interest
Micro-Finance:
- The Group is required to take provision percentage based on Days
Past Due performance per customer as highlighted in the table below:
Delay Period in Days Provisioning Amount
Punctual clients that pay on due date or have delays not exceeding 7 days 2%
Have delays from > 7 days and < 30 days 10%
Have delays from > 30 days and < 60 days 25%
Have delays from > 60 days and < 90 days 50%
Have delays from > 90 days and < 120 days 70%
More than 120 days 100%
Clients have deferred instalments (not exceeding 3 instalments) 10%
Rescheduled customers 50%
*The above excludes the case of a deceased customer whereby the full provision
should be accounted for after excluding any insurance in favor of the Group
(if available)
*The above provisions should be calculated on the full O/S dues related to the
full facility of any customer and not only on the due instalment(s).
Consumer Finance:
- Regarding the Performing/Regular Clients: a minimum of 1% provision
should be taken for performing portfolio after one year of getting the
activity license.
- Regarding the non-performing/ irregular customers (not related to
movable assets financing): they are defined as any customer having overdue
instalments and consequently a provision % will be applied depending on the
days past due as stipulated in the below table:
Level Delay Period in Days Category Provisioning Amount Comments
1 ≥ 30 days and ≤90 days Requires Follow-up 10% Non-Accrual/Marginalized interest
2 > 90 days and < 120 days Requires Follow-up 30% Non-Accrual/Marginalized interest
3 >120 days and ≥ 180 days Doubtful 50% Non-Accrual/Marginalized interest
4 > 180 days Inferior 100% Non-Accrual/Marginalized interest
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Credit risk (continued)
- Regarding the non-performing/ irregular customers related to movable
asset financing: they are defined as any customer having overdue instalments
and consequently a provision % will be applied depending on the days past due
as stipulated in the below table and calculation is based on the book value of
the asset after discounting 70%.
Level Delay Period in Days Category Provisioning Amount Comments
1 ≥ 30 days and ≤90 days Requires Follow-up 10% of the uncovered amount of the asset -
2 > 90 days and < 120 days Requires Follow-up 30% of the uncovered amount of the asset Non-Accrual/Marginalized interest
3 >120 days and ≥ 180 days Doubtful 50% of the uncovered amount of the asset Non-Accrual/Marginalized interest
4 > 180 days Inferior 100% of the uncovered amount of the asset Non-Accrual/Marginalized interest
The following table provides information on the quality of financial assets
subject to ECL calculation during the financial year:
31 December 2024
Account Stage 1 Stage 2 Stage 3 Total
Banks and Time deposits
Banks 20,694,387 - - 20,694,387
Time Deposit 8,840,978 1,070,551 - 9,911,529
ECL (2,184) (4,855) - (7,039)
Net carrying amount 29,533,181 1,065,696 - 30,598,877
Loans and advances to customers
Loans and facilitates to customers 27,074,496 876,635 642,197 28,593,328
ECL (371,414) (78,426) (308,462) (758,302)
Net carrying amount 26,703,082 798,209 333,735 27,835,026
Accounts Receivable
Accounts Receivable 15,759,494 54,966 448,028 16,262,488
ECL (40,583) (4,669) (443,854) (489,106)
Net carrying amount 15,718,911 50,297 4,174 15,773,382
Investments FVTOCI
Debt Instruments 1,035,890 - - 1,035,890
ECL - - - -
Net carrying amount 1,035,890 - - 1,035,890
Other Assets
Other assets 3,748,945 46,029 74,166 3,869,140
ECL (2,960) (1,573) (58,626) (63,159)
Net carrying amount 3,745,985 44,456 15,540 3,805,981
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Credit risk (continued)
31 December 2023
Account Stage 1 Stage 2 Stage 3 Total
Banks and Time deposits
Banks 9,949,639 - - 9,949,639
Time Deposit 6,349,755 - - 6,349,755
ECL (1,317) - - (1,317)
Net carrying amount 16,298,077 - - 16,298,077
Loans and facilities to customers
Loans and facilitates to customers 18,804,223 479,614 340,932 19,624,769
ECL (290,445) (22,411) (194,258) (507,114)
Net carrying amount 18,513,778 457,203 146,674 19,117,655
Accounts Receivable
Accounts Receivable 6,548,486 67,472 614,254 7,230,212
ECL (48,013) (4,254) (406,983) (459,250)
Net carrying amount 6,500,473 63,218 207,271 6,770,962
Investments FVTOCI
Debt Instruments 2,657,276 - - 2,657,276
ECL - - - -
Net carrying amount 2,657,276 - - 2,657,276
Other Assets
Other assets 2,694,759 2,548 30,673 2,727,980
ECL (4,755) (155) (17,933) (22,843)
Net carrying amount 2,690,004 2,393 12,740 2,705,137
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Credit risk (continued)
Activity segments
The following table represents the analysis of the Investment Bank's main
credit exposure at carrying value categorized by the activities practiced by
the Investment bank's customers.
31 December 2024 Commercial activity Industrial Financial institutions Real estate companies Governmental sector Other Individuals Total
activity
Activities
Banks and Time deposits - - 30,598,877 - - - - 30,598,877
Loans and facilities to customers 7,885,923 982,959 521,702 6,677,525 - 1,644,000 10,122,917 27,835,026
Accounts Receivable 756,555 - 7,029,100 - - 90,572 7,897,155 15,773,382
Investment FVTPL 2,405 - 23,343,594 - - 142,675 - 23,488,674
Investment FVTOCI - - 1,192,446 190,004 - 1,172 - 1,383,622
Other assets 6,775 2,885 3,062,432 - 3,422 376,715 353,753 3,805,982
Total 8,651,658 985,844 65,748,151 6,867,529 3,422 2,255,134 18,373,825 102,885,563
31 December 2023
Banks and Time deposits - - 16,298,077 - - - - 16,298,077
Loans and facilities to customers 6,024,697 827,685 2,386,319 4,339,616 - 720,755 4,818,583 19,117,655
Accounts Receivable 17,391 - 3,980,598 - - 70,280 2,702,693 6,770,962
Investment FVTPL 24,393 - 9,093,822 - - 77,976 - 9,196,191
Investment FVTOCI - - 2,755,497 56,528 - 713 - 2,812,738
Other assets 14,368 123 2,510,598 - 3,757 171,853 4,437 2,705,136
Total 6,080,849 827,808 37,024,911 4,396,144 3,757 1,041,577 7,525,713 56,900,759
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Market risk
Market risk is defined as the potential loss in both on and off-balance sheet
positions resulting from movements in market risk factors such as foreign
exchange rates, interest rates, and equity prices.
Market risk is represented in the factors which affect values, earnings and
profits of all securities negotiated in stock exchange or affect the value,
earning and profit of a particular security.
According to the Group's investment policy, the following procedures are
undertaken to reduce the effect of this risk.
- Performing the necessary studies before investment decision to verify the
merits of the investment.
- Diversification of investments in different sectors and industries.
- Performing continuous studies required to follow up the Group's investments
and their development.
Foreign exchange risk
The investment bank operates internationally and is exposed to foreign
exchange risk arising from various currency exposures primarily with respect
to the US dollar and other GCC currencies. Foreign exchange risk arises from
future commercial transactions, recognized assets and liabilities and net
investments in foreign operations.
Management requires investment bank companies to manage their foreign currency
risk against their functional currency. Commercial transactions are conducted
either in the functional currency of the investment bank country or in
transaction currency.
The investment bank actively manages its currency exposure by holding
different currency positions in accordance with the RAF and may use
derivatives or hedging tools if needed. If the Egyptian pound had
weakened/strengthened by 10% against the US dollar with all other variables
held constant the Holding Company would have recognized gains or losses for
the year as follows:
Year ended Year ended
31 December 2024 31 December 2023
Weakened 10 % 1,289,806 797,165
Strengthened 10 % (1,289,806) (797,165)
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Market risk (continued)
Exposure to market risks- trading portfolios
Value at Risk is used to measure market risk exposure within the Group's
trading portfolios which comprise of trading investments at fair value through
profit or loss is Value at Risk ("VaR"). The VaR of a trading portfolio is the
expected loss that will arise on a portfolio over a specified period of time
(holding period) from an adverse market movement with a specified probability
(confidence level).
The VaR model uses historical simulation based on a 99% confidence level and
assumes a 1-day holding period.
VaR- Trading Book EGP'000
2024 52,093
2023 5,807
Trading Book Top Contribution VaR by Classification 2024 Percentage 2023 Percentage
Fixed Income 89.8 23.96
Funds 5.89 10.16
Equity 4.31 65.88
Exposure to market risks- investment portfolios
The principal analytical tool also used to measure and control market risk
exposure within the Group's investments portfolios which comprise of trading
investments at fair value through other comprehensive income is Value at Risk
("VaR"). The VaR model uses historical simulation based on a 99% confidence
level and assumes a 1-day holding period.
VaR- Investment Book EGP'000
2024 16,518
2023 24,166
Investment Book Top Contribution VaR by Classification 2024 Percentage 2023 Percentage
Equity 84.36 -1.81
Fixed Income 15.64 101.81
Interest rate risk
Interest rate risk stems from the sensitivity of earnings to future movements
in interest rates applied on assets and liabilities. The Group's management
closely monitors interest rate fluctuations on a continuous basis and ensures
that assets and liabilities are matched and re-priced in a timely manner.
The Group is exposed to interest rate risk as a result of mismatches or gaps
in the amounts of assets and liabilities that mature or are re-priced in a
given period. The most important source of interest rate risk derives from the
lending, funding and investing activities, where fluctuations in interest
rates are reflected in interest margins and earnings.
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Market risk (continued)
Interest rate risk (continued)
The tables below summaries the Investment Bank 's exposure to the interest
rate fluctuations risk:
31 December 2024 Up to 1 month More than More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without interest Total
1 month to 3 months
Financial Assets
Cash and cash equivalents 25,501,575 3,260,093 - 60 - 1,851,008 30,612,736
Accounts Receivable 4,848,339 73,396 5,344,520 - - 5,507,127 15,773,382
Loans and advances to customers 825,058 2,249,797 8,113,530 15,549,892 406,185 690,564 27,835,026
Investments at fair value through other comprehensive income - - - 1,040,605 60,638 282,379 1,383,622
Investments at Fair value through profit or loss 114,900 679,492 8,438,532 704,043 1,488,975 12,062,732 23,488,674
Investments in associates - - - - - 424,139 424,139
Other Assets 221,137 - - 182,536 - 3,402,309 3,805,982
Total financial assets at 31 December 2024 31,511,009 6,262,778 21,896,582 17,477,136 1,955,798 24,220,258 103,323,561
Up to 1 month More than More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without interest Total
1 month to 3 months
Financial liabilities
Due to banks and financial institutions and overdraft 2,354,369 1,652,760 17,774,022 439,656 - - 22,220,807
Loans and borrowing 73,739 127,911 2,088,839 9,073,764 5,639 - 11,369,892
Other liabilities 23,042 21,266 40,862 415,084 - 8,871,124 9,371,378
Accounts payable - customers credit balance at fair value through profit and - - 7,901,466 - - - 7,901,466
loss
Accounts payable - customers credit balance - - - - - 20,566,943 20,566,943
Issued bonds - - 1,032,665 400,000 - - 1,432,665
Total financial liabilities at 31 December 2024 2,451,150 1,801,937 28,837,854 10,328,504 5,639 29,438,067 72,863,151
31 December 2024 29,059,859 1,342,369 (3,822,800) 7,148,632 1,950,159 (5,217,809) 30,460,410
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Market risk (continued)
31 December 2023 Up to 1 month More than More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without interest Total
1 month to 3 months
Financial Assets
Cash and cash equivalents 14,121,425 107,800 622,333 60 - 1,633,737 16,485,355
Accounts Receivable 2,834,049 68,788 673,359 - - 3,194,766 6,770,962
Loans and advances to customers 2,779,417 1,307,581 5,557,851 8,888,869 15,051 568,886 19,117,655
Investments at fair value through other comprehensive income - 313,353 1,386,707 952,573 17,463 142,642 2,812,738
Investments at Fair value through profit or loss 41,952 - 680,319 790,292 9,127 7,674,501 9,196,191
Investments in associates - - - - - 410,105 410,105
Other Assets 319,788 6,842 43,362 18,339 - 2,316,806 2,705,137
Total financial assets at 31 December 2023 20,096,631 1,804,364 8,963,931 10,650,133 41,641 15,941,443 57,498,143
Financial liabilities
Due to banks and financial institutions and overdraft 3,041,063 400,223 7,931,921 6,429 - - 11,379,636
Loans and borrowing 81,398 48,582 2,657,769 5,590,416 10,831 - 8,388,996
Other liabilities - - - - - 4,836,363 4,836,363
Accounts payable - customers credit balance at fair value through profit and - - 680,319 - - - 680,319
loss
Accounts payable - customers credit balance - - - - - 11,319,690 11,319,690
Issued bonds - - 749,003 - - - 749,003
Total financial liabilities at 31 December 2023 3,122,461 448,805 12,019,012 5,596,845 10,831 16,156,053 37,354,007
31 December 2023 16,974,170 1,355,559 (3,055,081) 5,053,288 30,810 (214,610) 20,144,136
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Market risk (continued)
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its payment
obligations when they fall due under normal and stress circumstances. To limit
this risk, management has arranged diversified funding sources.
Cash flow forecasting is performed in the operating entities of the bank and
aggregated by the central treasury unit. The unit monitors the bank's
liquidity requirements to ensure it has sufficient cash to meet operational
needs while maintaining sufficient headroom on its committed short-term
facilities at all times so that the bank does not breach any capital adequacy
rules.
Surplus cash held by the operating entities over and above balance required
for working capital management are, with the input of central treasury, are
either up streamed to the Holding Company invested in time deposits, money
market accounts and investment funds.
31 December 2024 Up to 1 month More than 1 month to 3 months More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without maturity Total
Due to banks and financial institutions and overdraft 2,354,369 1,652,760 17,774,023 439,656 - - 22,220,808
Loans and borrowing 73,738 127,911 2,088,840 9,073,764 5,639 - 11,369,893
Other liabilities 494,802 4,115,836 4,011,498 588,488 - 160,755 9,371,378
Accounts payable - customers credit balance at fair value through profit and - - 7,901,466 - - - 7,901,466
loss
Accounts payable - customers credit balance 20,566,943 - - - - - 20,566,943
Issued bonds - - 1,032,665 400,000 - - 1,432,665
Current Tax Liability - - 615,193 - - - 615,193
Total financial liabilities according to the contractual maturity date 23,489,852 5,896,507 33,423,684 10,501,908 5,639 160,755 73,478,345
Total financial assets according to the contractual maturity date 40,811,360 7,441,765 28,310,473 19,312,238 1,957,941 6,260,601 104,094,378
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Market risk (continued)
Liquidity risk (continued)
31 December 2023 Up to 1 month More than 1 month to 3 months More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without maturity Total
Due to banks and financial institutions and overdraft 3,041,063 400,223 7,931,921 6,429 - - 11,379,636
Loans and borrowing 67,934 36,419 2,640,834 5,259,030 - - 8,004,216
Other liabilities 629,131 1,470,753 2,635,770 404,886 4,281 76,322 5,221,143
Accounts payable - customers credit balance at fair value through profit and - - 680,319 - - - 680,319
loss
Accounts payable - customers credit balance 11,319,690 - - - - - 11,319,690
Issued bonds - - 749,003 - - - 749,003
Current Tax Liability - - 441,790 - - - 441,790
Total financial liabilities according to the contractual maturity date 15,057,817 1,907,395 15,079,639 5,670,344 4,281 76,322 37,795,799
Total financial assets according to the contractual maturity date 26,228,715 3,083,867 10,852,466 11,079,694 176,451 6,076,950 57,498,142
35 Financial risk management (continued)
35.1 Risk management framework in the investment bank (continued)
Operational risk
Operational risk is the risk of direct or indirect loss due to an event or
action causing failure of technology, process infrastructure, personnel, and
other risks having an operational risk impact. The Group seeks to minimize
actual or potential losses from operational risk failure through a framework
of policies and procedures that identify, assess, control, manage, and report
those risks.
Controls include effective segregation of duties, access, authorization and
reconciliation procedures, staff education and assessment processes.
35.2 Risk management framework in Bank NXT
Credit risk
The Bank is exposed to credit risk which is the risk resulting from a party's
failure to meet its contractual obligations towards the Bank. The credit risk
is considered to be the most significant risk for the Bank, therefore
requiring careful management. Credit risk is mainly represented in lending
activities that give rise to loans, facilities and investment activities that
result in the Bank's assets including debt instruments.
Credit risk exists also in financial instruments outside the financial
position such as loan commitments. The financial risk management and control
are centralized in a financial risk management team in the Bank's Risk
Management Department which reports to the Board of Directors and head of each
business unit regularly.
Loans and facilities to banks and customers (including commitments and
financial guarantee contracts)
In measuring credit risk of Funded facilities to customers and to banks, the
Bank's rating system is based on three key pillars:
- Current exposures to the counterparty and its likely future
development, from which the Bank derive the (exposure at default);
- The risk of default failure (Loss given default); and
- The probability of default by the customer or counterparty on its
contractual obligations.
These credit risk measurements, are embedded in the Bank's daily operations
which reflect expected loss through the expected loss model required by the
Banking Supervision Committee, and the operational measures can contradict
with the burden of impairment in accordance with the previous standards that
depend on the losses that have realized on the date of the financial
statements (realized loss model) and not the expected losses as will come
after.
The Bank assesses the probability of default per each customer using internal
rating techniques tailored to the various categories of customers. These
techniques have been developed internally and the statistical analyses combine
credit officers' personal judgment to reach the appropriate viability rating.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Customers of the Bank are segmented into four viability rating classes. The
Bank's viability rating scale, which is shown below, reflects the range of
default probabilities defined for each rating class. This means that, in
principle, credit positions migrate between classes as the assessment of their
probability of default changes. The rating techniques are kept under review
and are upgraded as necessary. The Bank regularly validates the performance of
the viability rating techniques and their ability to predict cases of default.
Bank's internal rating classes Bank's rating Rating description
1 Performing debts
2 Standard monitoring
3 Special monitoring
4 Non- performing debts
The position exposed to default depends on the amounts expected by the Bank to
be outstanding when default occurs. For example, for a loan, this position is
the nominal value and for commitments, the Bank recognizes all amounts
actually withdrawn in addition to other amounts that are expected to have been
withdrawn up to the date of the delay if it occurs.
Loss given default or loss severity represents the Bank's expectation of the
extent of loss on a claim should a default occur. It is expressed as
percentage of loss to debt and typically varies by type of the debtor,
seniority of claim and availability of collateral or other credit coverages.
Estimation of exposure to credit risks to manage the credit risks is a complex
matter that requires the use of statistical and electronic models, as the
level of exposure to credit risks changes depending on the changes in market
conditions and other economic areas in a complex and rapid degree. The
exposure to credit risk changes depending on the changes in the level, value
and timing of expected cash flows and the passage of time. Accordingly,
assessment of the credit risk of the assets portfolio requires further
estimations of the probability of default and the related loss rates. The Bank
measures credit risk losses by using the probability of default (default in
contractual liabilities) based on the carrying amount balance of the financial
instrument at the date of Exposure at Default and loss given default.
Classification of credit risks
The Bank assesses the probability of default at the level of each customer /
related Group / credit product, by using techniques to classify the customers
into different categories, taking into account the minimum rating in
accordance with the CBE instructions in terms of determining the
creditworthiness of the customers and making the provisions issued during the
year 2005. Therefore, the Bank uses a Group of internally developed models and
evaluation techniques for the categories of counterparties, customers and the
nature of various loans in light of the available information that is
collected on the date of adoption of the used model (such as: level of income,
level of disposable income and guarantees for individual clients, revenues,
type of industry, and other financial and non-financial indicators of the
institutions). The Bank completes such indicators with a set of external data,
such as the inquiry reports issued by both CBE and credit reporting companies
on borrowers and the reports issued by the other local and external credit
rating agencies. Moreover, the models used by the Bank allow the systematic
exercise of expert assessment by credit risk officials in the final internal
credit rating. Therefore, this allows to consider other matters and indicators
that may not have been taken as part of other data inputs in the internally or
externally developed assessment models and techniques or through external
sources.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Classification of credit risks (continued)
Credit grades are assessed so that the risk of default increases incrementally
at each higher risk grade, namely the difference in default rates between the
rating grade A and A- is less than the difference in default rates between
rating grade B and B-. Additional considerations for each type of credit
portfolio held by the Bank are set out below:
Individuals, retail banking products and small & micro enterprises
After the date of initial recognition, the borrower's payment behaviour is
monitored periodically to calculate a measurement of the payment pattern. Any
other information known about the borrower, supposed to be determined by the
Bank, may have an impact the creditworthiness, such as unemployment rates and
non- payment precedents, as they are included to measure the payment pattern
and default rates are, accordingly, determined for each payment pattern
measurement.
(Large & Medium) Enterprises and Companies
The rating is determined at the level of the borrower / Groups with similar
credit risks. Any updated or new credit information or assessments are
included in the credit system constantly and periodically. In addition,
information about the creditworthiness of the borrower / Groups with similar
credit risks is also updated periodically from other sources such as financial
statements and other published financial and non-financial statements.
Debt Instruments, Treasury Bills and Government Bonds
The Bank uses the external ratings issued by the institutions mentioned in the
CBE's instructions to manage the credit risk in terms of the debt instruments
in the investment portfolio. These published classifications are monitored and
updated regularly and periodically. The default rates associated with each
rating are determined based on the rates realized over the previous twelve
months, as published by the aforementioned rating agencies. The loss rate of
the government and CBE debt instruments dominated in local currency is zero.
Future data used in the expected loss model
Future data is used in assessing whether there is a significant increase in
the credit risk of financial instruments and estimating the expected credit
losses (ECL). The management of Bank determines the main economic variables
that affect credit risk and expected credit losses for each credit portfolio
by carrying out an analysis of historical data. The economic variables and the
related effect on both Probability of Default "PD" and the Exposure at Default
"EAD" and Loss Given Default "LGD" are different depending on the financial
asset. The Bank will use expert opinions regarding these assumptions and
estimates, if necessary.
To determine the impact of such economic variables on both Probability of
Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD), the
management of the Bank carries out the "regression analysis" to understand the
historical effects arising from such variables on the default rates and the
inputs used in calculating both Exposure at Default (EAD) and Loss Given
Default (LGD). Further to the key economic scenarios, the management of Bank
establishes other potential scenarios in addition to assumptions relating to
each scenario separately.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Classification of credit risks (continued)
Future data used in the expected loss model (continued)
The lifetime probability of default (PD) relating to the key assumption and
other assumptions are used, as the outcome of multiplication is determined for
each assumption with the related probabilities of each, in addition to the
supporting indicators and qualitative indicators. Based on the results of such
study, it is assessed whether this financial asset is located at the first,
second or third level, on the basis of which it is determined whether the
expected credit losses "ECL" will be computed on 12- month bases "12-month
ECL" or over lifetime of the financial instrument "Lifetime ECL".
The expectations and probabilities of occurrence are subject to a high degree
of uncertainty, as it is known to any economic forecasts, therefore the actual
results may be significantly different from those anticipated. The Bank makes
the best estimate of these potential expectations and carries out an
analytical study of the irrelevant and non -similar factors for the different
credit portfolios to conclude appropriate assumptions for all possible
scenarios.
Variable Economic Assumptions
The most significant assumptions that have an impact on the expected credit
losses "ECL" are:
(i) Consumption Pricing Indicators (CPI)
(ii) Unemployment Rate
(iii) Gross Domestic Product (GDP)
(iv) Gross national saving/investment
(v) Real available income
Classification of the instruments relating to the losses measured on basis of
the similar Groups
For ECL provisions, Groups are classified on the basis of similar credit risk
characteristics, as risk exposure within the Bank is homogeneous. When
carrying out this classification, it is taken into consideration that there is
sufficient information that enables the Bank to classify the Bank with
statistical reliability. When sufficient information is not available, the
Bank takes into consideration the complementary internal / external reference
data.
Corporate loans
- Probability of default model (S& P) is used.
- A conciliation was made between "S&P" and "ORR".
- The model was updated by some economic indicates to keep the
probability of default in line with the clients existing in Egypt.
- The model was updated by the ratios of change in the low credit
rating of the other clients of the Bank for two years to keep the ratios of
model default in line with the clients of the Bank.
Maximum Exposure to Credit Risks - Impaired Financial Instruments
The following table includes the analysis of maximum exposure to the credit
risks of financial instruments for which the provision of expected credit
risks (ECL) is recognized
The following table represents the total carrying amount of the financial
assets and the maximum exposure to credit risk on these financial assets.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
EGP Thousands
Retail 31 December 2024
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 61,700 95 467 62,262
Personal loans 7,684,007 229,312 20,927 7,934,246
Credit cards 387,902 1,661 231 389,794
Mortgage Loans 1,784,129 13,473 6,298 1,803,900
Special monitoring
Overdraft - - 147 147
Personal loans 6,945 285 120,315 127,545
Credit cards 2,300 70 467 2,837
Mortgage Loans - - 563 563
Total carrying amount 9,926,983 244,896 149,415 10,321,294
Expected credit losses (40,232) (9,388) (148,911) (198,531)
Net carrying amount 9,886,751 235,508 504 10,122,763
Collaterals 2,911,374 26,335 1,706 2,939,415
EGP Thousands
Retail 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 227,380 1,996 261 229,637
Personal loans 5,534,145 218,152 12,711 5,765,008
Credit cards 73,907 1,653 15 75,575
Mortgage Loans 1,048,884 4,410 6,809 1,060,103
Special monitoring
Overdraft - 99 - 99
Personal loans 27,008 205,669 13,819 246,496
Credit cards 2,936 728 35 3,699
Mortgage Loans - 1,758 771 2,529
Default
Overdraft - - 867 867
Personal loans 7,836 - 123,060 130,896
Credit cards 562 121 593 1,276
Mortgage Loans - - 417 417
Total carrying amount 6,922,658 434,586 159,358 7,516,602
Expected credit losses (20,775) (14,831) (153,956) (189,562)
Net carrying amount 6,901,883 419,755 5,402 7,327,040
Collaterals 2,810,872 321,585 107,631 3,240,088
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
EGP Thousands
Corporate 31 December 2024
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 263,840 19 - 263,859
Direct loans 14,871,233 322,318 - 15,193,551
Syndicated Loans 4,816,629 304,567 - 5,121,196
Special monitoring
Overdraft - 493 - 493
Direct loans - 34,693 - 34,693
Syndicated Loans - 459,330 - 459,330
Default
Overdraft - - 2,916 2,916
Direct loans - - 913,201 913,201
Syndicated Loans - - 202,134 202,134
Total carrying amount 19,951,702 1,121,420 1,118,251 22,191,373
Expected credit losses (525,427) (468,763) (1,054,238) (2,048,428)
Net carrying amount 19,426,275 652,657 64,013 20,142,945
Collaterals 2,379,740 302,803 70,200 2,752,743
EGP Thousands
Corporate 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 457,021 1 - 457,022
Direct loans 10,096,804 271,204 2,777 10,370,785
Syndicated Loans 2,591,978 538,795 - 3,130,773
Special monitoring
Overdraft - 1,354 - 1,354
Direct loans - 170,176 - 170,176
Default
Overdraft - - 15,765 15,765
Direct loans - - 929,568 929,568
Syndicated Loans - - 202,134 202,134
Total carrying amount 13,145,803 981,530 1,150,244 15,277,577
Expected credit losses (347,350) (167,724) (917,827) (1,432,901)
Net carrying amount 12,798,453 813,806 232,417 13,844,676
Collaterals 2,439,021 101,929 117,186 2,658,136
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
EGP Thousands
Due From Banks 31 December 2024
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 11,997,888 - - 11,997,888
Total carrying amount 11,997,888 - - 11,997,888
Expected credit losses (4,012) - - (4,012)
Net carrying amount 11,993,876 - - 11,993,876
EGP Thousands
Financial Investments 31 December 2024
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 23,285,422 - - 23,285,422
Total carrying amount 23,285,422 - - 23,285,422
Expected credit losses (96,781) - - (96,781)
Net carrying amount 23,188,641 - - 23,188,641
EGP Thousands
Other Assets 31 December 2024
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 2,817,087 - - 2,817,087
Total carrying amount 2,817,087 - - 2,817,087
Expected credit losses (13,293) - - (13,293)
Net carrying amount 2,803,794 - - 2,803,794
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
EGP Thousands
Due From Banks 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 11,529,087 - - 11,529,087
Total carrying amount 11,529,087 - - 11,529,087
Expected credit losses (2,716) - - (2,716)
Net carrying amount 11,526,371 - - 11,526,371
EGP Thousands
Financial Investments 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 21,061,329 - - 21,061,329
Total carrying amount 21,061,329 - - 21,061,329
Expected credit losses (70,434) - - (70,434)
Net carrying amount 20,990,895 - - 20,990,895
EGP Thousands
Other Assets 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 2,339,586 - - 2,339,586
Total carrying amount 2,339,586 - - 2,339,586
Expected credit losses - - - -
Net carrying amount 2,339,586 - - 2,339,586
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
The following table displays changes in balances and
ECL between the beginning and end of the year:
Corporate Loans Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2024 347,350 13,148,456 167,724 981,530 917,827 1,150,244 1,432,901 15,280,230
New financial assets purchased or issued 474,823 21,945,150 - - - - 474,823 21,945,150
Financial assets matured or derecognized (77,477) (9,843,037) (2,404) (276,329) (64,509) (232,924) (144,390) (10,352,290)
Transfer to stage 1 5,086 706,154 (6,077) (740,851) - - (991) (34,697)
Transfer to stage 2 (6,486) (1,035,689) 7,643 1,034,611 (617) (4,857) 540 (5,935)
Transfer to stage 3 (493) (30,767) (6,729) (101,244) 68,585 133,334 61,363 1,323
Changes in the probability of default and loss in the event of default and the (270,312) (6,334,395) 267,003 101,550 (125,425) (72,325) (128,734) (6,305,170)
balance exposed to default
Write- off during the year - - - - (94,670) (94,670) (94,670) (94,670)
Proceeds from previously written off debts - - - - 100,154 - 100,154 -
Foreign exchange differences 52,936 1,395,830 41,603 122,153 252,893 239,449 347,432 1,757,432
Balance as of 31 December 2024 525,427 19,951,702 468,763 1,121,420 1,054,238 1,118,251 2,048,428 22,191,373
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Corporate Loans Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2023 328,657 13,163,840 142,610 938,285 742,871 1,420,556 1,214,138 15,522,681
New financial assets purchased or issued 153,495 7,181,481 - - - - 153,495 7,181,481
Financial assets matured or derecognised (74,163) (7,073,606) (22,811) (346,849) (24,564) (324,431) (121,538) (7,744,886)
Transfer to stage 1 4,354 109,809 (16,235) (151,573) (3,886) (4) (15,767) (41,768)
Transfer to stage 2 (147) (136,528) 705 125,196 - - 558 (11,332)
Transfer to stage 3 (251) (19,179) (79,354) (256,718) 252,987 293,667 173,382 17,770
Changes in the probability of default and loss in the event of default and the (77,040) (365,853) 142,808 673,105 308,386 68,140 374,154 375,392
balance exposed to default
Write- off during the year - - - - (503,260) (503,260) (503,260) (503,260)
Proceeds from previously written off debts - - - - 49,035 - 49,035 -
Foreign exchange differences 12,445 288,492 1 84 96,258 195,576 108,704 484,152
Balance as of 31 December 2023 347,350 13,148,456 167,724 981,530 917,827 1,150,244 1,432,901 15,280,230
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Retail Loans Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2024 20,775 6,922,658 14,831 434,586 153,956 159,358 189,562 7,516,602
New financial assets purchased or issued 29,605 6,585,765 - - - - 29,605 6,585,765
Financial assets matured or derecognized (11,792) (1,450,554) (678) (37,511) (29,067) (68,746) (41,537) (1,556,811)
Transfer to stage 1 5,124 1,092,435 (10,655) (1,094,444) (22,053) - (27,584) (2,009)
Transfer to stage 2 (5,056) (1,150,385) 38,795 1,155,182 (22,122) (33,827) 11,617 (29,030)
Transfer to stage 3 (5,459) (46,006) (17,417) (189,853) 188,154 226,038 165,278 (9,821)
Changes in the probability of default and loss in the event of default and the 6,925 (2,135,502) (15,488) (23,327) (87,653) (32,027) (96,216) (2,190,856)
balance exposed to default
Write- off during the year - - - - (101,425) (101,425) (101,425) (101,425)
Proceeds from previously written off debts - - - - 69,104 - 69,104 -
Foreign exchange differences 110 108,572 - 263 17 44 127 108,879
Balance as of 31 December 2024 40,232 9,926,983 9,388 244,896 148,911 149,415 198,531 10,321,294
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
EGP Thousands
Retail Loans Stage 1 Stage 2 Stage 3 Total
12 months Life time Life time
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2023 38,030 4,963,887 13,799 196,071 146,449 190,006 198,278 5,349,964
New financial assets purchased or issued 10,311 4,070,685 - - - - 10,311 4,070,685
Financial assets matured or derecognised (4,686) (1,049,410) (936) (57,348) (9,108) (30,759) (14,730) (1,137,517)
Transfer to stage 1 37 56,543 (2,219) (36,192) (1,489) (17,266) (3,671) 3,085
Transfer to stage 2 (3,184) (272,686) 9,618 221,621 (1,970) (1,939) 4,464 (53,004)
Transfer to stage 3 (3,182) (111,305) (4,689) (26,493) 92,424 136,169 84,553 (1,629)
Changes in the probability of default and loss in the event of default and the (16,551) (749,868) (742) 134,662 3,470 3,554 (13,823) (611,652)
balance exposed to default
Write- off during the year - - - - (120,418) (120,418) (120,418) (120,418)
Proceeds from previously written off debts - - - - 44,593 - 44,593 -
Foreign exchange differences - 14,812 - 2,265 5 11 5 17,088
Balance as of 31 December 2023 20,775 6,922,658 14,831 434,586 153,956 159,358 189,562 7,516,602
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Due From Banks Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2024 2,716 1,300,709 - - - - 2,716 1,300,709
New financial assets purchased or issued 23,137 7,063,442 - - - - 23,137 7,063,442
Financial assets matured or derecognized (13,995) (7,137,612) - - - - (13,995) (7,137,612)
Transfer to stage 1 - - - - - - - -
Transfer to stage 2 - - - - - - - -
Transfer to stage 3 - - - - - - - -
Changes in the probability of default and loss in the event of default and the (8,159) - - - - - (8,159) -
balance exposed to default
Write- off during the year - - - - - - - -
Proceeds from previously written off debts - - - - - - - -
Foreign exchange differences 313 783,322 - - - - 313 783,322
Balance as of 31 December 2024 4,012 2,009,861 - - - - 4,012 2,009,861
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
EGP Thousands
Due From Banks Stage 1 Stage 2 Stage 3 Total
12 months Life time Life time
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2023 1,582 798,173 - - - - 1,582 798,173
New financial assets purchased or issued 2,716 1,300,709 - - - - 2,716 1,300,709
Financial assets matured or derecognised (2,222) (975,224) - - - - (2,222) (975,224)
Transfer to stage 1 - - - - - - - -
Transfer to stage 2 - - - - - - - -
Transfer to stage 3 - - - - - - - -
Changes in the probability of default and loss in the event of default and the - - - - - - - -
balance exposed to default
Write- off during the year - - - - - - - -
Proceeds from previously written off debts - - - - - - - -
Foreign exchange differences 640 177,051 - - - - 640 177,051
Balance as of 31 December 2023 2,716 1,300,709 - - - - 2,716 1,300,709
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Financial Investments at fair value through Other Comprehensive income Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2024 30,314 3,880,036 - - - - 30,314 3,880,036
New financial assets purchased or issued 13,872 2,167,796 - - - - 13,872 2,167,796
Financial assets matured or derecognized (13,770) (1,999,649) - - - - (13,770) (1,999,649)
Transfer to stage 1 - - - - - - - -
Transfer to stage 2 - - - - - - - -
Transfer to stage 3 - - - - - - - -
Changes in the probability of default and loss in the event of default and the (410) - - - - - (410) -
balance exposed to default
Write- off during the year - - - - - - - -
Proceeds from previously written off debts - - - - - - - -
Foreign exchange differences 3,741 326,182 3,741 326,182
Balance as of 31 December 2024 33,747 4,374,365 - - - - 33,747 4,374,365
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Financial Investments at fair value through Other Comprehensive income Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2023 41,331 4,376,940 - - - - 41,331 4,376,940
New financial assets purchased or issued - 897,945 - - - - - 897,945
Financial assets matured or derecognised (13,315) (1,867,453) - - - - (13,315) (1,867,453)
Transfer to stage 1 - - - - - - - -
Transfer to stage 2 - - - - - - - -
Transfer to stage 3 - - - - - - - -
Changes in the probability of default and loss in the event of default and the 435 - - - - - 435 -
balance exposed to default
Write- off during the year - - - - - - - -
Proceeds from previously written off debts - - - - - - - -
Foreign exchange differences 1,863 472,604 - - - - 1,863 472,604
Balance as of 31 December 2023 30,314 3,880,036 - - - - 30,314 3,880,036
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Financial Investments at AC Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2024 40,120 6,313,108 - - - - 40,120 6,313,108
New financial assets purchased or issued 65,296 3,364,389 - - - - 65,296 3,364,389
Financial assets matured or derecognized (3,626) (4,609,940) - - - - (3,626) (4,609,940)
Transfer to stage 1 - - - - - - - -
Transfer to stage 2 - - - - - - - -
Transfer to stage 3 - - - - - - - -
Changes in the probability of default and loss in the event of default and the (62,459) - - - - - (62,459) -
balance exposed to default
Write- off during the year - - - - - - - -
Proceeds from previously written off debts - - - - - - - -
Foreign exchange differences 23,703 4,068,707 23,703 4,068,707
Balance as of 31 December 2024 63,034 9,136,264 - - - - 63,034 9,136,264
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Financial Investments at AC Stage 1 Stage 2 Stage 3 EGP Thousands
12 months Life time Life time Total
ECL Outstanding ECL Outstanding ECL Outstanding ECL Outstanding
Balance as of 1 January 2023 27,406 3,564,782 - - - - 27,406 3,564,782
New financial assets purchased or issued 38,353 6,029,818 - - - - 38,353 6,029,818
Financial assets matured or derecognised (31,261) (4,167,479) - - - - (31,261) (4,167,479)
Transfer to stage 1 - - - - - - - -
Transfer to stage 2 - - - - - - - -
Transfer to stage 3 - - - - - - - -
Changes in the probability of default and loss in the event of default and the 242 - - - - - 242 -
balance exposed to default
Write- off during the year - - - - - - - -
Proceeds from previously written off debts - - - - - - - -
Foreign exchange differences 5,380 885,987 - - - - 5,380 885,987
Balance as of 31 December 2023 40,120 6,313,108 - - - - 40,120 6,313,108
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Credit Guarantees
The Bank uses many policies and practices to limit the credit risks. The most
widely adopted of these is the acceptability of collateral for debt
instruments and loan commitments. The Bank has internal policies regarding
classes of collateral that can be accepted to limit or decrease the credit
risks.
The Bank accrues out an assessment of the guarantees that have been obtained
when establishing these loans. This assessment is regularly assessed. The key
types of guarantees are:
· Cash and cash equivalent
· Real estate mortgage
· Derivatives margin agreement that has been signed with the Bank
as a part of main offsetting agreements.
· Commercial mortgages
· Financial assets pledge such as debt instruments and equity
instruments.
The guarantees held as collateral against the financial assets other than
loans and facilities depend on the nature of the instrument, as debt
securities, government bonds and other qualified bills are generally not
secured, except for the asset-backed securities and similar instruments
secured by portfolios of financial instruments. The derivatives are often
secured.
The policies adopted by the Bank have not been changed significantly in terms
of obtaining guarantees during the financial year, and there has been no
change in the quality of those guarantees held by the Bank compared to the
previous financial year.
The Bank closely monitors the guarantees held against the low - credit
financial assets, as it is likely that the Bank will hold collateral to
mitigate potential credit losses.
Written-off Financial Instruments (Loans)
The Bank excludes the financial assets that are still under compulsory
collection for unpaid contractual amounts of the bad assets. The Bank seeks to
fully recover some amounts legally due that were partially or fully written
off due to the lack of a possibility of a full recovery.
Modifications of loans terms and rescheduling
The Bank sometimes modifies terms of the loans granted to the customers due to
the commercial renegotiation or non-performing to increase the chances of
recovery. The activities of restructuring include arrangements of extension of
repayment terms, grace periods, exemption from repayment or some or full
interests. Restructuring policies and practices are based on indicators or
criteria that indicate - based on the discretion of management- that repayment
is likely to continue. These policies are constantly reviewed.
Reduction and Risk Avoidance Policies
The Bank manages, limits, and controls the concentration of credit risks at
the debtor level, Groups, industries, and countries. The Bank regulates the
levels of acceptable credit risks by setting limits to the amount of risk that
will be accepted at the level of each borrower, or Group of borrowers, and at
the level of economic activities and geographical sectors.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Reduction and Risk Avoidance Policies (continued)
These risks are monitored constantly and are reviewed annually or on a
recurring basis, when necessary. Limits of the credit risks at the level of
the borrower / bank, producer, sector, and country are quarterly approved by
the Board of Directors.
Credit limits for any borrower, including banks, are divided into sub-limits
that include the amounts on- and off- balance sheet, and the daily risk limit
relating to trading items such as forward foreign exchange contracts. Actual
amounts are compared with the daily limits. Exposure to credit risks is also
managed through periodic analysis of the ability of borrowers and potential
borrowers to meet the repayment of their liabilities and by amending lending
limits, if appropriate.
Means of setting limits of to the risks are shown as following:
Guarantees
The Bank adopts many policies and controls to limit the credit risks. These
means include the guarantees obtained against borrowed funds. The Bank sets
guiding rules for specific acceptable classes of guarantees. The key types
guarantee of loans and facilities are:
· Real estate mortgages.
· Mortgage of activity assets such as machinery and merchandise
· Mortgage of financial instruments such as debt instruments and
equity.
The financing is often granted in the longer term and loans to the companies
are secured. In order to reduce the credit loss to a minimum, the Bank seeks
to get additional guarantees from the concerned parties and when indicators of
impairment are shown for a loan or facilities. The guarantees taken as
collateral for assets other than loans and facilities are determined based on
the nature of the instrument. Generally, the debt instruments and treasury
bills are not secured, except for Groups of financial instruments covered by
Asset-Backed Securities and similar instruments that are secured by a
portfolio of financial instruments.
Master Netting Arrangements
The Bank further restricts its exposure to credit losses by entering into
master netting arrangements with counterparties with which it undertakes a
significant volume of transactions. Master netting arrangements do not
generally result in an offset of assets and liabilities shown in the balance
sheet, as transactions are usually settled on a gross basis. However, the
credit risk associated with favorable contracts is reduced by a master netting
arrangement to the extent that if a default occurs, all amounts with the
counterparty are terminated and settled on a net basis. The Bank's overall
exposure to credit risk on derivative instruments subject to master netting
arrangements can change substantially within a short year, as it is affected
by each transaction subject to the arrangement.
Credit Related Commitments
The main purpose of credit-related commitments is to ensure that funds are
available to the customer on demand, and financial guarantee contracts carry a
credit risk related to loans, and documentary and commercial credits issued by
the Bank on behalf of the customer to grant a third party the right to
withdraw from the Bank within certain amounts and under specific terms and
conditions often secured against the goods being shipped and therefore carries
a lower degree of risk than a direct loan.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Credit Related Commitments (continued)
Commitments to extend credit represent unused portions of authorizations to
extend credit in the form of loans, guarantees or letters of credit. With
respect to credit risk on commitments to extend credit, the Bank is
potentially exposed to loss in an amount equal to the total unused
commitments. However, the likely amount of loss is less than the total unused
commitments, as most commitments to extend credit are contingent upon
customers maintaining specific credit standards. The Bank monitors the term to
maturity of credit commitments because longer-term commitments generally have
a greater degree of credit risk than shorter-term commitments.
Expected Credit Loss Measurement Policy
The Bank's policy requires defining three stages for classifying financial
assets that are measured at amortized cost, loan commitments and financial
guarantees, as well as debt instruments at fair value through other
comprehensive income, according to changes in credit quality since the initial
recognition, and then measuring (expected credit losses) in the value related
to these instruments as follows:
The unimpaired financial asset is classified upon initial recognition in Stage
1 and credit risk is monitored on an ongoing basis by the Bank's credit risk
department.
If there has been a significant increase in credit risk since initial
recognition, the financial asset is transferred to Stage 2 and the financial
asset is not considered impaired at this stage (lifetime expected credit loss
in the absence of credit impairment).
If there are indications of impairment in the value of the financial asset, it
is transferred to Stage 3, and the Bank relies on the following indicators to
determine whether there are objective evidence indicating.
· A significant increase in the rate of interest on the financial asset
because of the increase in credit risk.
· Negative material changes in the activity and financial or economic
conditions in which the borrower operates.
· A scheduling request because of difficulties facing the borrower.
· Negative material changes in actual or expected operating results or cash
flows.
· Early signs of cash flow/liquidity problems such as delays in servicing
creditors/business loans.
· Cancellation of a direct facility by the Bank due to the borrower's high
credit risk.
General Bank Risk Measurement Model
The management performs classifications in the form of a more detailed
subGroup to comply with the requirements of the Central Bank of Egypt, and the
assets exposed to credit risk are classified according to detailed rules and
conditions that depend largely on the information related to the customer, his
activity, his financial status, and the extent of his regularity of payment.
The Bank calculates the required provisions in accordance with the
instructions of creditworthiness, on the basis of specific ratios by the
Central Bank of Egypt, and in the event that the required provisions in
accordance with the rules of the Central Bank of Egypt exceed the expected
credit losses calculated for the purposes of preparing the financial
statements, the general bank risk reserve is set aside within.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
General Bank Risk Measurement Model (continued)
This reserve is periodically adjusted by increase or decrease so that it is
always equal to the amount of the increase between the two provisions, and
this reserve is not distributable.
Following is a table on the creditworthiness levels for institutions in
accordance with the internal assessment bases compared to the Central Bank of
Egypt assessment bases and the provision ratios required for the impairment of
the assets exposed to credit risk:
CBE Rating description Provision Internal rating description
Rating %
1 Low Risk 0% Good debts
2 Moderate Risk 1% Good debts
3 Satisfactory Risk 1% Good debts
4 Reasonable Risk 2% Good debts
5 Acceptable Risk 2% Good debts
6 Marginally Acceptable Risk 3% Standard monitoring
7 Watch List 5% Special monitoring
8 Substandard 20% Non-performing debts
9 Doubtful 50% Non-performing debts
10 Bad Debt 100% Non-performing debts
Maximum limits for credit risk before collateral
31 December 2024 31 December 2023
Treasury Bills and other Government Securities 13,042,703 9,849,828
Due from banks 11,993,876 11,526,371
Loans and facilities to customers
Retail Loans
Personal loans 7,890,500 5,969,104
Credit cards 375,008 76,961
Overdraft 62,322 229,280
Mortgage loans 1,794,933 1,051,695
Corporate Loans
Overdraft 263,166 458,696
Direct loans 14,945,541 10,516,787
Syndicated loans 4,934,238 2,869,193
Suspended interest (643) (643)
Unearned interest (171,488) (66,831)
Financial Investment
Debt instruments 10,179,603 11,171,381
Other assets - accrued revenue 989,741 738,563
66,299,500 54,390,385
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
General Bank Risk Measurement Model (continued)
Credit risk exposure item without taking collaterals (off-balance sheet):
31-Dec-24 31-Dec-23
Items exposed to credit risk (off-balance sheet)
Loan Commitment 14,182,263 933,981
Acceptances on supplier facilities 3,611,737 649,754
Letters of credit 1,017,394 135,397
Letters of guarantee 357,051 3,310,132
19,168,445 5,029,264
The above table represents the maximum bank exposure to credit risk 31
December 2024 and 31 December 2023, without taking in consideration any
collateral held for in-balance sheet items, the balances included are based on
net carrying amounts as reported in the balance sheet and as shown above,
45.04% of the maximum exposure arising from loans and facilities to customers
against 38.80% at 31 December 2023; While investments in debt tools represent
35.53%, compared to 38.65% on December 31, 2023.
Management is confident in its ability to continue to control and sustain
minimal exposure of credit risk to the Bank resulting from both its loan and
facility portfolio and debt Instruments based on the following:
- 96.56% of the loans and facility portfolio is categorized in the top two
grades of the internal rating system against 94.38% on 31 December 2023.
-90.52% of the loans and facility portfolio without accruals or impairment
indicators against 84.41% on 31 December 2023.
- 89.52% of the investments in debt instruments and treasury bills represent
the debt instruments on Egyptian Government against 83% on 31 December 2023
Loans and facilities
Balances of loans and facilities at 31 December 2024 are set out below:
31 December 2024 31 December 2023
Stage 1 29,878,685 20,071,114
Stage 2 1,366,316 1,416,116
Stage 3 1,267,666 1,309,602
Total 32,512,667 22,796,832
Less:
Expected credit losses (2,246,959) (1,622,463)
Reserved interests (643) (643)
Interest unearned (171,488) (66,831)
Net 30,093,577 21,106,895
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Loans and facilities according to past due periods
31 December 2024 Retail Corporate
EGP Thousand Debit current Credit cards Personal loans Real estate Debit current Direct loans Syndicated Total loans and facilities to customers
Rating Accounts loans accounts loans
Performing /No Dues 62,200 341,221 7,191,045 1,795,038 267,207 14,216,338 5,580,526 29,453,575
Past due up to 30 days - 40,297 500,736 6,736 - 962,623 - 1,510,392
Past due 30-60 days 62 5,989 146,353 1,864 9 24,480 - 178,757
Past due more than 60 to 90 days - 2,286 96,468 262 - 11,714 - 110,730
Impairment 147 2,838 127,189 563 52 926,290 202,134 1,259,213
Total 62,409 392,631 8,061,791 1,804,463 267,268 16,141,445 5,782,660 32,512,667
Expected Credit Losses (87) (17,623) (171,291) (9,530) (4,102) (1,195,904) (848,422) (2,246,959)
Suspended interest - - (5) - - (638) - (643)
Unearned interest - - (149,209) - - (22,279) - (171,488)
Total 62,322 375,008 7,741,286 1,794,933 263,166 14,922,624 4,934,238 30,093,577
31 December 2023 Retail Corporate
EGP Thousand Debit current Credit cards Personal loans Real estate Debit current Direct loans Syndicated Total loans and facilities to customers
Rating Accounts Loans accounts loans
Performing /No Dues 229,637 66,187 5,324,833 1,049,905 457,150 9,169,977 2,941,754 19,239,443
Past due up to 30 days 99 9,387 440,175 10,197 1,344 1,130,307 189,019 1,780,528
Past due 30-60 days - 1,812 156,432 2,279 - 73,671 - 234,194
Past due more than 60 to 90 days - 1,888 90,064 251 - 168,966 - 261,169
Impairment 867 1,276 130,896 417 15,647 927,608 202,134 1,278,845
Total 230,603 80,550 6,142,400 1,063,049 474,141 11,470,529 3,332,907 22,794,179
Expected Credit Losses (1,323) (3,589) (173,296) (11,354) (15,445) (953,742) (463,714) (1,622,463)
Suspended interest - - (5) - - (638) - (643)
Unearned interest - - (48,793) - - (18,038) - (66,831)
Total 229,280 76,961 5,920,306 1,051,695 458,696 10,498,111 2,869,193 21,104,242
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Restructured loans and facilities
Restructuring activities include extending payment arrangements, implementing
forced management programs, modifying, and postponing payments. Policies for
implementing restructuring depend on indicators or criteria that indicate that
there is a high probability of Continued payments, based on the personal
judgment of management. These policies are subject to continuous review. It is
usual to apply restructuring to long-term loans, especially customer financing
loans, The restructured loans at 31 December 2024 amounted 1,423,197 EGP
thousands compared to 1,933,996 EGP thousand at 31 December 2023.
Written-off loans
In accordance with the Board of Directors' decision or its specialized
committees, the written-off loans from the non-performing loans are
written-off against its related loan loss provisions and that step is made
after exhausting all the possible recovery processes.
Debt Instruments and Treasury Bills
The table below presents an analysis of debt instruments, and other treasury
bills according to the rating agencies at 31 December 2024
Treasury bills & other Governmental securities
Debt Instruments
Total
31 December 2024 - B 13,065,489 10,219,851 23,285,340
31 December 2023 - B 9,863,355 11,197,974 21,061,329
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Activity segments
The following table represent the analysis of the Bank's main credit exposure
at carrying value categorized by the activities practiced by the bank's
customers.
EGP Thousands
31 December 2024 Commercial activity Industrial Financial institutions Real estate companies Governmental sector Other Individuals Total
activity
Activities
Cash on Hand and CBE Reserve Account - - 8,693,380 - - - - 8,693,380
Due from banks - - 11,997,888 - - - - 11,997,888
Loans and facilities to customers
Retail loans
Overdraft - - - - - - 62,409 62,409
Personal loans - - - - - - 8,061,791 8,061,791
Credit Cards - - - - - - 392,631 392,631
Mortgage loans - - - - - - 1,804,463 1,804,463
Corporate loans
Overdraft 188 10,042 34 41 771 256,192 - 267,268
Direct loans 238,323 9,033,158 2,155,526 769,112 - 3,945,326 - 16,141,445
Syndicated loans - 918,895 - 2,152,667 233,819 2,477,279 - 5,782,660
Financial Investments
Debt instruments - - 23,285,340 - - - - 23,285,340
Other assets - - 989,741 - - - - 989,741
Total on 31 December 2024 238,511 9,962,095 47,121,909 2,921,820 234,590 6,678,797 10,321,294 77,479,016
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Credit risk (continued)
Activity segments (continued)
EGP Thousands
31 December 2023 Commercial activity Industrial Financial institutions Real estate companies Governmental sector Other Individuals Total
activity
Activities
Cash on Hand and CBE Reserve Account - - 4,030,033 - - - - 4,030,033
Due from banks - - 11,529,087 - - - - 11,529,087
Loans and facilities to customers
Retail loans
Overdraft - - - - - - 230,603 230,603
Personal loans - - - - - - 6,142,400 6,142,400
Credit Cards - - - - - - 80,550 80,550
Mortgage loans - - - - - - 1,063,049 1,063,049
Corporate loans
Overdraft 19 9,851 94,996 4 - 369,271 - 474,141
Direct loans 284,565 5,839,569 1,419,689 971,254 - 2,955,452 - 11,470,529
Syndicated loans - 656,706 - 1,289,894 264,653 1,121,654 - 3,332,907
Financial Investments
Debt instruments - - 19,938,906 - - - - 19,938,906
Other assets - - 767,981 - - - - 767,981
Total at 31 December 2023 284,584 6,506,126 37,780,692 2,261,152 264,653 4,446,377 7,516,602 59,060,186
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Market risk
The Bank is exposed to market risk, which is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes
in market prices. Market risks arise from open positions in interest rate,
currency and equity products, all of which are exposed to general and specific
market movements and changes in the level of sensitivity of market rates or
prices such as interest rates, foreign exchange rates and equity prices. The
Bank separates exposures to market risk into either trading or non- trading
portfolios.
The management of market risks arising from trading or non-trading activities
is concentrated in the market risk management of the Bank and is monitored by
two teams separately. Periodic reports on market risks are submitted to the
Board of Directors and heads of each business unit.
Trading portfolios include those positions arising from the Bank's dealings
directly with customers and market-making transactions, where the Bank acts as
a principal with customers or with the market Non- trading portfolios
primarily arise from the interest rate management of the entity's retail and
commercial banking assets and liabilities, these portfolios include foreign
exchange and equity risks arising from investments at amortized cost and at
fair value through other comprehensive income.
The Bank uses the method of relating debit interest rate with credit interest
rate to avoid the risk of fluctuations in interest rate. The Bank also depends
on fluctuated interest rate which does not exceed 3 months except in specific
cases interest rates are specified for longer period relating resources
portfolio with application portfolio to get return that covers its costs.
In addition, the Bank should not exceed the following:
(i) The surplus amount of any foreign currency positions should not
exceed 1 % of the capital base
(ii) The total surplus of foreign currency positions should not exceed 2
% of capital base
(iii) The total shortage amount in the position of any currency should not
exceed 10 % of capital base
(iv) The total shortage of (local/foreign) currency positions should not
exceed 20 % of capital base
Market Risk Measurement Techniques
The exchange rate risk is measured and hedged by daily follow-up of foreign
exchange rates and purchase or sale operations in proportion to market prices
with the adoption of limits for foreign currency positions and daily stop-loss
limits in proportion to the risks acceptable to the Bank.
The risk of interest rate movements is measured using the standard method for
measuring the gap that affects the Bank's profits or the economic value of the
Bank.
The risks of securities rate fluctuations are measured. The Market Risk
Department follows up on the classification, sale, and purchase of financial
investments for the purpose of trading and making a daily assessment of them
with close follow-up and working to set the necessary limits for them, in
cooperation with the treasury sector, while measuring the value at risk of
those instruments if they are kept for the purpose of trading to determine the
extent of potential losses.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Market risk (continued)
Market Risk Measurement Techniques (continued)
Liquidity risk is measured by managing all assets and liabilities inside and
outside the balance sheet in line with the Bank's objectives in its
management, through the ALCO committee, which identifies the sources from
which liquidity risks arise with the management of market risks and the work
of possible scenarios for liquidity pressure and management in case of crises.
The causes of market risks are due to the risk of interest rates and exchange
rate risks that arise due to the Bank's daily activities. The Bank manages the
risks it is exposed to in the market through a comprehensive framework that
reflects the limited acceptance of those risks. All reports are presented to
the Risk Committee and the Assets and Liabilities Committee of the Bank.
market risks are measured as follows:
Measuring the interest rate risk for positions held not for the purpose of
trading, which is the risk that arises from unfavourable movements in the
prevailing interest rates in the market during a certain period of time, which
may negatively affect the Bank's profitability and the economic value of its
equity and consequently the bank's position and the Bank's profitability. The
Bank calculates the qualitative and quantitative requirements regarding the
rate of interest risks of the positions held for non-trading purposes, while
carrying out stress tests on them.
Value at risk of non-trading purpose according to risk type
31 December 2024
Average Higher Lower
EGP Thousand
EGP Thousand EGP Thousand
Foreign Currency Exchange Risk 1,597 4,035 108
31 December 2023
Average Higher Lower
EGP Thousand
EGP Thousand EGP Thousand
Foreign Currency Exchange Risk 4,479 12,267 1,136
Foreign exchange fluctuation risk
The Bank is exposed to the effects of fluctuations in the foreign currency
exchange rates on its financial position and cash flows. The Board of
Directors sets limits on the level of exposure by currency and in aggregate
for both overnight and intra-day positions, which are monitored daily. The
table below summarizes the Bank's exposure to foreign currency exchange rate
risk at the end of financial year, and Bank's financial instruments at
carrying amounts, categorized by currency.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Market risk (continued)
Foreign exchange fluctuation risk (continued)
EGP Thousands
31 December 2024 EGP USD EUR GBP Other Total
Currencies
Financial Assets
Cash and balances with Central Bank 8,829,407 82,558 14,941 2,534 4,685 8,934,125
Due from banks 6,319,999 5,169,410 372,393 126,607 5,467 11,993,876
Loans and facilities to customers 26,758,322 3,319,414 15,541 236 64 30,093,577
Financial Investments
Financial Investments at fair value 9,152,280 1,833,122 5,194 - - 10,990,596
through other comprehensive income
Financial Investments at amortized cost 3,375,762 8,994,407 117,376 - - 12,487,545
Financial Investments in associates 380,728 - - - - 380,728
Asset Held for Sale 92,596 - - - - 92,596
Other Financial Assets 792,161 192,580 4,756 244 - 989,741
Total financial assets at 31 December2024 55,701,255 19,591,491 530,201 129,621 10,216 75,962,784
Financial liabilities
Due to banks 5,129 471,762 43,598 - 21,620 542,109
Customers' deposits 47,370,305 19,199,727 500,062 129,505 8,986 67,208,585
Other loans 119,673 - - - - 119,673
Other financial liabilities 1,158,122 57,811 48 9 - 1,215,990
Total financial liabilities at 31 December 2024 48,653,229 19,729,300 543,708 129,514 30,606 69,086,357
Net financial position at 31 December 2024 7,048,026 (137,809) (13,507) 107 (20,390) 6,876,427
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Market risk (continued)
Foreign exchange fluctuation risk (continued)
31 December 2023 EGP USD EUR GBP Other Total
Currencies
Financial Assets
Cash and balances with Central Bank 4,145,948 77,013 13,709 757 3,090 4,240,517
Due from banks 6,201,523 4,696,110 393,379 229,657 5,702 11,526,371
Loans and facilities to customers 19,125,717 1,958,757 19,768 - - 21,104,242
Financial Investments
Financial Investments at fair value through other comprehensive income 8,338,787 493,308 2,778 - - 8,834,873
Financial Investments at amortized cost 4,990,053 6,169,819 73,989 - - 11,233,861
Financial Investments in Subsidiaries and Associates 434,687 - - - - 434,687
Other Financial Assets 653,137 111,504 3,083 258 - 767,982
Total financial assets at 31 December 2023 43,889,852 13,506,511 506,706 230,672 8,792 58,142,533
Financial liabilities
Due to banks 5,129 2,650,375 - - 20,589 2,676,093
Customers' deposits 39,077,243 10,812,453 508,248 230,893 5,371 50,634,208
Other loans 126,684 - - - - 126,684
Other financial liabilities 546,828 44,062 127 9 - 591,026
Total financial liabilities at 31 December 2023 39,755,884 13,506,890 508,375 230,902 25,960 54,028,011
Net Financial Position at 31 December 2023 4,133,968 (379) (1,669) (230) (17,168) 4,114,522
Interest rate risk
The Bank is exposed to the effects of fluctuations in the levels of the
prevailing interest rate in the market, i.e., the risk of cash flows of the
interest rate represented in the fluctuation of future cash flows of a
financial instrument due to changes in the interest rate of the instrument and
fair value risk of the interest rate, i.e., is the risk of fluctuations in the
value of the financial instrument as a result of a change in the interest
rates in the market. The interest margin may increase due to these changes;
however, the profits may decrease if unexpected movements occur. The Bank's
Board of Directors sets limits for the level of variation in interest
re-pricing that can be maintained by the Bank, and this is monitored daily by
the Bank's fund management.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Market risk (continued)
Interest rate risk (continued)
The tables below summaries the Bank 's exposure to the interest rate
fluctuations risk that include carrying amount of the financial instruments
categorized based on the repricing dates or the maturity date - whichever is
earlier.
31 December 2024 Up to 1 month More than 1 month to 3 months More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without interest Total
Financial Assets
Cash and balances with Central Bank - - - - - 8,934,125 8,934,125
Due from banks 9,887,262 1,955,616 54,245 - - 96,753 11,993,876
Loans and facilities to customers 3,024,777 14,260,978 3,112,684 9,514,310 2,599,918 (2,419,090) 30,093,577
Financial Investments
Financial Investments at fair value through other comprehensive income 298,274 7,599,419 2,317,897 519,171 - 255,835 10,990,596
Financial Investments at amortized cost 129,403 5,658,271 686,513 6,076,392 - (63,034) 12,487,545
Financial Investments in associates - - - - - 380,728 380,728
Assets held for sale - - - - - 92,596 92,596
Other Financial Assets - - - - - 989,741 989,741
Total financial assets at 31 December 2024 13,339,716 29,474,284 6,171,339 16,109,873 2,599,918 8,267,654 75,962,784
Financial liabilities
Due to banks 10,577 - - - - 531,532 542,109
Customers' deposits 20,225,042 12,071,031 10,872,502 18,009,556 7,841 6,022,614 67,208,586
Other Loans - - - - 119,673 - 119,673
Other financial liabilities - - - - - 1,215,990 1,215,990
Total financial liabilities at 31 December 2024 20,235,619 12,071,031 10,872,502 18,009,556 127,514 7,770,136 69,086,358
31 December 2024 (6,895,903) 17,403,253 (4,701,163) (1,899,683) 2,472,404 497,518 6,876,426
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Market risk (continued)
Interest rate risk (continued)
31 December 2023 Up to 1 month More than 1 month to 3 months More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without interest Total
Financial Assets
Cash and balances with Central Bank - - - - - 4,240,517 4,240,517
Due from banks 6,782,038 4,728,513 18,536 - - (2,716) 11,526,371
Loans and facilities to customers 1,726,427 10,359,962 1,256,937 7,169,237 2,281,616 (1,689,937) 21,104,242
Financial Investments
Financial Investments at fair value through other comprehensive income 2,670,452 3,800,142 1,618,038 521,227 55,065 169,949 8,834,873
Financial Investments at amortized cost 285,936 3,917,998 2,463,559 4,323,498 282,990 (40,120) 11,233,861
Financial Investments in Subsidiaries and Associates - - - - - 434,687 434,687
Other Financial Assets - - - - - 767,982 767,982
Total financial assets at 31 December 2023 11,464,853 22,806,615 5,357,070 12,013,962 2,619,671 3,880,362 58,142,533
Financial liabilities
Due to banks 2,378,769 - - - - 297,324 2,676,093
Customers' deposits 13,898,659 9,562,144 12,239,988 14,153,191 47,032 733,194 50,634,208
Other loans - - - - 126,684 - 126,684
Other financial liabilities - - - - - 591,026 591,026
Total financial liabilities at 31 December 2023 16,277,428 9,562,144 12,239,988 14,153,191 173,716 1,621,544 54,028,011
Net Financial Position at 31 December 2023 (4,812,575) 13,244,471 (6,882,918) (2,139,229) 2,445,955 2,258,818 4,114,522
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Market risk (continued)
Interest rate risk (continued)
Sensitivity analysis of interest rate
Changes in interest rates affect equity by the following ways:
(i) Retained Earnings: Increase or decrease in the net interest income and
fair value of the financial derivatives included in profits and losses.
(ii) Fair value reserve: Increase or decrease in the fair value of the
financial assets at fair value through other comprehensive income recognized
directly in the statement of other comprehensive income.
Liquidity risk
Risk management framework in Bank NXT
Liquidity risk is the risk that the Bank is unable to meet its obligations
associated with its financial liabilities when they fall due and to replace
funds when they are withdrawn. The consequence may be the failure to meet
obligation to repay depositors and fulfil commitments to lending.
Liquidity Risk Management
The Bank's liquidity management process, as carried out within the Bank and
monitored by Assets & Liabilities Committee, includes:
(i) Day-to-day funding managed by monitoring future cash flows to ensure
that requirements can be met. This includes replenishment of funds as they
mature or borrowed by customers. The Bank maintains an active presence in
global money markets to enable this to happen.
(ii) Maintaining a portfolio of highly marketable assets that can easily
be liquidated as protection against any unforeseen interruption to cash flow.
(iii) Monitoring the liquidity ratios against internal and regulatory
requirements by the Central Bank of Egypt.
(iv) Managing the concentration and profile of debt maturities.
For monitoring and reporting purpose, the cash flow is measured and projected
for the next day, week and month respectively, which are key periods for
liquidity management. The starting point for those projections represented in
the contractual maturity analysis of the financial liabilities and the
expected collection date of the financial assets.
Asset and liability management also monitors unmatched medium-term assets, the
level and type of undrawn loan commitments, the usage of debit current account
facilities and the impact of contingent liabilities such as letters of
guarantees and credits.
The following table represent the analysis of the Bank's liquidity coverage
ratio:
31-Dec-24 31-Dec-23
Total value of high-quality liquid assets (1) 22,539,597 16,081,143
Total cash outflow 18,080,788 10,601,212
Total cash inflow within the set limit (the value less than: total cash (7,950,909)
inflows ،75% from total cash outflows)
(11,420,652)
Net cash outflows (2) 6,660,136 2,650,303
Liquidity coverage ratio (1/2) 338.43% 606.77%
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Cash Flows Risk Hedge
Assets available to satisfy all liabilities and cover loan-associated
commitments include cash balances with the Central Bank, Due from banks,
treasury bills and other governmental securities, loans and facilities to
banks and customers. A percentage of loans to customers that are due to be
repaid within a year are extended during the normal activity of Bank NXT in
addition to that, there is a mortgage of some debt instruments, treasury bills
and other government securities to guarantee obligations and Bank NXT has the
ability to satisfy the unexpected net cash flows by selling securities and
finding other financing sources.
* Assets shown in the table represent the undiscounted cash flows in
accordance with the contractual maturity date.
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Capital risk
The Bank's objectives on managing capital, which include other elements in
addition to the equity shown in the balance sheet, are as follows:
Compliance with the legal requirements of capital in the Arab Republic of
Egypt.
Protecting the Bank's ability to continue as a going concern and enabling it
to continue generating income for shareholders and other parties dealing with
the Bank.
Maintaining a strong capital base that supports the growth of activity.
The capital adequacy and capital uses are daily reviewed according to the
requirements of the Central Bank of Egypt by the Bank's management, through
forms based on the guidelines of the Basel Committee on Banking Supervision.
The required data are submitted and provided to the Central Bank of Egypt on a
quarterly basis.
The Central Bank of Egypt requires the Bank to do the following:
- Maintain one billion Egyptian pounds as a minimum for issued and paid-up
capital.
- Maintain a ratio equal to or more than 10% between the elements of capital
and the elements of assets and contingent liabilities weighted by risk
weights.
The numerator of the capital adequacy ratio consists of the following two
tiers:
Tier I after disposals includes the following:
Some of the items that will be deducted/ will not be considered and mentioned
in the "supervisory instructions on the minimum ratio of capital adequacy",
Chapter II on the capital base will be dealt with later as stated in the
instructions.
- Continuing core capital after disposals (CET1-Common Equity).
- Additional core capital
There are some items that will be deducted/ not considered and mentioned in
the "supervisory instructions on the minimum ratio of capital adequacy",
Chapter II on the capital base. These items are deducted from the continuous
core capital if the balance is negative, while they are not considered if it
is positive.
Tier II after disposals
It includes 45% of the special reserve, loans and subordinated deposits within
the limits of the prescribed percentage, as well as the considerable
provisions required against the debt instruments, loans, credit facilities and
contingent liabilities included in the first stage (Stage 1).
The capital adequacy ratio model includes some important notes and points
which are as follows:
1. Reserves: include legal, general, statutory, supportive and capital
reserves only.
2. The "general risk reserve" is formed on the beginning date of the
application of International Financial Reporting Standard (IFRS 9), in
accordance with the supervisory instructions issued to banks on 26 January
2019. It includes the special reserve - credit, the general bank risk reserve
- credit and the reserve risk of standard (9), considering that in the
subsequent periods of application, the Bank shall abide by what is stated
within the instructions on minimum capital adequacy ratio "which is not to
consider the bank risk reserve when calculating the ratio."
35 Financial risk management (continued)
35.2 Risk management framework in Bank NXT (continued)
Capital risk (continued)
The numerator of the capital adequacy ratio consists of the following two
tiers (continued):
Tier II after disposals (continued)
3. The values of accumulated other comprehensive income items, whether they
are positive or negative, are considered.
4. Interim profits/ (losses): It is allowed to record the net interim
profits within the capital base after the limited inspection report prepared
by the auditor on the Bank's financial statements on a quarterly basis. As for
the interim losses, they are presented without any conditions.
5. It does not include the part related to credit, and the explanatory
instructions of the rules on the preparation and presentation of the financial
statements issued by the Central Bank in April 2009, page 7, item (9) must be
perused.
6. It should not exceed 1.25% of total assets and contingent liabilities
weighted for credit risk, provided that the required provisions against debt
instruments, loans, credit facilities and contingent liabilities included in
the Stage 2 and Stage 3 are sufficient to meet the obligations for which the
provision is formed.
7. "The value of exceeding the limits set for investments in countries,
weighted by risk weights."
8. This value must be included in accordance with Form No. 720 related to
investments in countries abroad, taking into account that the value of the
capital base listed in the aforementioned statement must be adjusted according
to the calculated value.
· The continuing core capital after the regulatory adjustments is Clause
1.1 before excluding contributions to financial companies (shares or
investment funds) represented in Clause 1.3.1.1.
· Continuing core capital before regulatory adjustments means paid-up
capital, reserves, retained earnings, general risk reserve, and accumulated
other comprehensive income items net of goodwill and treasury shares.
· Subordinated loans (deposits): provided that they do not exceed 50% of
Tier I after disposals and that 20% of its value is consumed in each of the
last five years.
Financial leverage ratio
The Board of Directors of the Central Bank of Egypt, in its session held on 7
July, issued a decision approving the supervisory instructions related to the
financial leverage, besides the banks' compliance with the stipulated minimum
percentage (3%) on a quarterly basis, as follows:
This is in preparation for the consideration of it within the first pillar of
Basel decisions (the minimum capital adequacy ratio) for maintaining the
strength and integrity of the banking sector and keeping pace with the best
international control practices in this regard.
The financial leverage reflects the relationship between Tier I of capital
used in capital adequacy ratio (after disposals) and the Bank's assets (inside
and outside the balance sheet) unweighted with risk weights.
36 Fair values and classifications of financial assets and liabilities
Financial instruments measured at fair value
Bank balances
The fair value of one-day variable-rate placements and deposits represent
their present value, and the expected fair value of variable-rate deposits is
estimated based on the discounted cash flows using the interest rate
prevailing in the capital markets for debts that have similar credit risk and
maturity date.
Loans and facilities to banks
Loans and facilities to banks represent loans other than bank deposits. The
expected fair value of loans and facilities is the discounted value of future
cash flows expected to be collected and the cash flows are discounted using
the current market interest rate for determining the fair value to determine
the fair value to meet all the requirements. This includes replacement of
funds on maturity or upon being lent to customers. The Bank is present in
global money markets to achieve this objective.
Funded facilities to customers
They are recognized at net value after deduction of provision for impairment
loss. The expected fair value for these loans and facilities represents the
discounted value of estimated future cash flows expected to be collected. Cash
flows are deducted using the current interest rate in the market to specify
the fair value.
Investments in securities
Assets through other comprehensive income or profit or loss are carried at
fair value. The fair value is determined based on market prices. If such data
is not available, fair value is estimated using prices of capital markets for
traded securities with similar credit characteristics, dates of maturity and
rates.
Due to other banks and customers
The estimated fair value of deposits with undefined maturity date including
interest bearing deposits is the amount to be paid upon request. The fair
value of fixed interest deposits and non-current other loans are determined in
an active market based on discounted cash flows using the interest rate on new
debts with similar maturity dates.
Issued debt Instruments
Total fair value is calculated based on prices ruling in the capital markets.
For securities with no active markets, discounted cash flow model is used
based on the current rate appropriate with the remaining period to date of
maturity.
Financial instruments not measured at fair value
Financial investments at amortized cost
They include held-to-maturity financial investments that are listed in the
market and are measured at amortized cost in case of bonds, and with respect
to investment funds, the evaluation is done at the recoverable amount (fair
value).
Management believes that the fair value is not materially different from the
carrying amount of these assets.
Due from banks
The fair value of one-day variable-rate placements and deposits represent
their present value, and the expected fair value of variable-rate deposits is
estimated based on the discounted cash flows using the interest rate
prevailing in the capital markets for debts that have similar credit risk and
maturity date.
36 Fair values and classifications of financial assets and liabilities
(continued)
Loans and facilities to banks
Loans and facilities to banks represent loans other than bank deposits. The
expected fair value of loans and facilities is the discounted value of future
cash flows expected to be collected and the cash flows are discounted using
the current market interest rate for determining the fair value. Loans and
facilities are presented net of provision for impairment losses.
Fair value measurement - fair value hierarchy:
The fair values of financial assets and financial liabilities that are traded
in active markets are based on quoted market prices or dealer price
quotations. For all other financial instruments, the Group determines fair
values using other valuation techniques.
For financial instruments that trade infrequently and have little price
transparency fair value is less objective, and requires varying degrees of
judgment depending on liquidity, concentration, uncertainty of market factors,
pricing assumptions another risks affecting the specific instrument.
Fair values of financial instruments
a) Valuation models
The Group measures fair values using the following fair value hierarchy, which
reflects the significance of the inputs used in making the measurements. Th
Group has an established control framework with respect to the measurement of
fair values.
This includes a valuation team that has overall responsibility for overseeing
a significant fair value measurements, including level 3 fair values, and
report to the management.
The valuation team regularly reviews significant unobservable inputs an
valuation adjustments.
If third party information, such as broker quotes or pricing services, is used
to measure fair values, then the valuation team assesses the evidence obtained
from the third parties to support the conclusion that such valuations meet the
requirements of IFRS, including the level in the fair value hierarchy in which
such valuations should be classified.
Significant valuation issues are reported to the Group Audit Committee. When
measuring the fair value of an asset or liability, the Group uses mark
observable data as far as possible. Fair values are categorized into different
levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows.
Level 1: inputs that are quoted market prices (unadjusted) in active markets
of identical instruments.
Level 2: inputs other than quoted prices included within Level 1 that are
observable either directly (i.e. as prices) or indirectly (i.e. derive from
prices). This category includes instruments valued using: quoted market prices
in active markets for similar instruments; quoted price for identical or
similar instruments in markets that are considered less than active; or other
valuation techniques in which all significant inputs are directly or
indirectly observable from market data.
Level 3: inputs that are unobservable. This category includes all instruments
for which the valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based on quoted
prices for similar instruments for which significant unobservable adjustments
or assumptions are required to reflect differences between the instruments.
36 Fair values and classifications of financial assets and liabilities
(continued)
Fair values of financial instruments (continued)
b) Financial instruments measured at fair value
The following tables analyses financial instruments measured at fair value at
the reporting date, the amounts are based on the values recognized in the
statement of financial position:
Carrying amounts Fair value level
31 December 2024 Designated Amortized Designated Total Level 1 Level 2 Level 3 Total
at FVTPL
cost
at FVOCI
Financial assets measured at Fair Value:
Mutual fund certificates (notes 6 and 9) 12,031,837 - 301,572 12,333,409 171,436 253,240 11,908,733 12,333,409
Equity securities (notes 6 and 9) 179,333 - 301,995 481,328 154,670 0 326,658 481,328
Structured notes (notes 6 and 9) 7,901,466 - - 7,901,466 - 7,901,466 - 7,901,466
Treasury bills (notes 6 and 9) - - 7,566,076 7,566,076 - 7,566,076 - 7,566,076
Debt instruments (notes 6 and 9) 3,376,038 - 4,204,575 7,580,613 7,580,613 0 0 7580613
23,488,674 0 12,374,218 35,862,892 7,906,719 15,720,782 12,235,391 35,862,892
Financial assets not measured at fair value: - - - -
Cash and cash equivalents (note 5) - 51,540,737 - 51,540,737 - - - -
Funded facilities to customers (note 8) - 27,835,026 - 27,835,026 - - - -
Banking loans and facilities (Bank NXT) (note8.1) - 30,093,577 - 30,093,577 - - - -
Accounts receivable (note 7) - 15,773,382 - 15,773,382 - - - -
Investments at amortized cost (note 12) - 12,487,545 - 12,487,545 - - - -
Other assets (note 16) - 6,583,336 - 6,583,336 - - - -
- 144,313,603 - 144,313,603 - - - -
Financial liabilities measured at fair value:
Accounts payable-Customers credit balances at FVTPL (note 19) 7,901,466 - - 7,901,466 - 7,901,466 - 7,901,466
Financial Liabilities not measured at fair value:
Due to banks and financial institutions - 22,762,916 - 22,762,916 - - - -
Customer deposits - 67,208,585 - 67,208,585 - - - -
Loans and borrowings - 11,489,567 - 11,489,567 - - - -
Creditors and other credit balances - 11,130,638 - 11,130,638 - - - -
Account payable-customer credit balances - 20,566,943 - 20,566,943 - - - -
Short term bonds - 1,432,665 - 1,432,665 - - - -
- 134,591,314 - 134,591,314 - - - -
36 Fair values and classifications of financial assets and liabilities
(continued)
Fair values of financial instruments (continued)
b) Financial instruments measured at fair value (continued)
Carrying amounts Fair value level
31 December 2023 Designated Amortized Designated Total Level 1 Level 2 Level 3 Total
in EGP
at FVTPL
cost
at FVOCI
Financial assets measured at Fair Value:
Mutual fund certificates (notes 6 and 9) 7,355,442 - 138,264 7,493,706 43,528 129548 7,320,630 7,493,706
Equity securities (notes 6 and 9) 108,293 - 187,146 295,439 104,225 - 191,214 295,439
Structured notes (notes 6 and 9) 680,319 - - 680,319 - 680,319 - 680,319
Treasury bills (notes 6 and 9) 219,222 - 7,065,958 7,285,180 - 7,285,180 - 7,285,180
Debt instruments (notes 6 and 9) 832,915 - 4,256,243 5,089,158 5,089,158 - - 5,089,158
9,196,191 - 11,647,611 20,843,802 5,236,911 8,095,047 7,511,844 20,843,802
Financial assets not measured at fair value:
Cash and cash equivalents (note 5) - 32,252,243 - 32,252,243 - - - -
Funded facilities to customers (note 8) - 19,117,655 - 19,117,655 - - - -
Banking loans and facilities (A) (note 8.1) - 21,104,242 - 21,104,242 - - - -
Accounts receivable (note 7) - 6,770,962 - 6,770,962 - - - -
Investments at amortized cost (note 12) - 11,233,860 - 11,233,860 - - - -
Other assets (note 16) - 5,021,903 - 5021903 - - - -
- 95,500,865 - 95,500,865 - - - -
Financial liabilities measured at fair value:
Accounts payable-Customers credit balances at FVTPL (note 19) 680,319 - - 680,319 - 680,319 - 680,319
Financial Liabilities not measured at fair value:
Due to banks and financial institutions - 14,055,729 - 14,055,729 - - - -
Customer deposits - 50,634,207 - 50,634,207 - - - -
Loans and borrowings - 8,130,903 - 8,130,903 - - - -
Creditors and other credit balances - 6,216,904 - 6,216,904 - - - -
Account payable-customer credit balances - 11,319,690 - 11,319,690 - - - -
Short term bonds - 749,003 - 749,003 - - - -
- 91,106,436 - 91,106,436 - - - -
37 Change in estimate and reclassifications of comparative figures
On 30, September 2023 U Consumer Finance (Previously ValU) (Subsidiary)
acquired 94.96% of Paynas BV shares with an acquisition cost amounting to EGP
Thousands 397,894.
In 2024 the group has performed the Purchase Price Allocation (PPA) study to
determine the fair value of the identifiable asset and liabilities according
to the International Financial Reporting Standards.
The Group has reclassified a number of the comparative information to match
the current year's presentation.
The table below summarises the restatement and reclassifications of
comparative
figures:
Consolidated statement of financial position As of 31 December 2023 as previously stated Adjustments Reclassifications As of 31 December 2023
Assets held for sale 330,652 - (330,652) -
Banking loans and facilities (Bank NXT) 21,079,316 - 24,926 21,104,242
Goodwill and other intangible assets 2,315,613 3,110 - 2,318,723
Other assets 4,716,177 - 305,726 5,021,903
Other liabilities 6,148,445 - 68,459 6,216,904
Provisions 1,167,730 - (68,459) 1,099,271
Due to banks and financial institutions 14,182,413 - (126,684) 14,055,729
Loans and borrowings 8,004,219 - 126,684 8,130,903
Retained earnings 8,538,917 (4,461) - 8,534,456
Non - controlling interests 4,074,904 7,571 - 4,082,475
Consolidated statement of profit or loss For the year ended 31 December Adjustments Reclassifications For the year ended 31 December 2023
2023 as previously stated
Interest expense (8,863,833) - (3,266) (8,867,099)
Other revenues 297,999 - 9,797 307,796
Gains on selling assets held for sale 9,797 - (9,797) -
General and administrative expenses (8,943,885) - (6,973) (8,950,858)
Provisions (235,053) - 10,239 (224,814)
Depreciation and amortisation (476,686) (4,698) - (481,384)
Profit for the year 2,838,940 (4,698) - 2,834,242
Attributable to:
Shareholders of the Holding Company 2,216,683 (4,461) - 2,212,222
Non-controlling interests 622,257 (237) - 622,020
The Group did not present a third statement of financial position as at the
beginning of the preceding period as the restatement did not impact the
information in the statement of financial position at the beginning of the
preceding period.
(#_ftnref1)
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