EFG Hermes, the Middle East and Africa’s financial services heavyweight, has announced that it has completed the merger of its equity brokerage subsidiary with Intermarket Securities, a local firm. The handover, effective November 25, 2024, marks the a new phase in the firm’s seven-year tenure in Pakistan’s financial ecosystem.
The Egyptian investment bank first stepped into Pakistan in 2017 with ambitions to tap into the country’s long-term growth potential. Its entry was heralded as a milestone, being the first foreign investment bank to establish a direct presence in Pakistan since 2008.
The merger marks a new chapter of a seven-year run in Pakistan, which began with the disappointment of the almost immediate disproving of its investment thesis: that Pakistan being upgraded to Emerging Market status by MSCI, the global equity markets index provider, would result in an immediate surge in trading volumes on the Pakistani market and therefore in revenues for brokerage firms in Pakistan.
While Pakistan did re-enter the MSCI Emerging Markets Index in June 2017, just a few days after EFG Hermes closed on the transaction to buy Invest and Finance Securities Ltd. (IFSL) in May 2017, that change in status did not have any material impact on trading volumes on the Pakistan Stock Exchange.
This acquisition positioned the bank as a key player offering securities brokerage, research services, and investment banking advisory to local and international investors.
The move aligned with the firm’s broader expansion strategy—aimed at diversifying its revenue streams and replicating its growth trajectory from Egypt to other frontier markets. At the time, Pakistan’s anticipated upgrade to “emerging market” status and promising GDP growth, buoyed by the China-Pakistan Economic Corridor (CPEC), made it a natural choice for EFG Hermes’ regional ambitions.
The financial performance of EFG Hermes Pakistan over the past seven years reveals a challenging trajectory. Revenues fluctuated, peaking at Rs289 million in 2023 but accompanied by consistently high operating and financial expenses. The company posted persistent after-tax losses from 2019 to 2023, with the largest loss of Rs108 million in 2023. Assets declined over time, reflecting a shrinking balance sheet, while the return on capital employed hit a low of -87.5% in 2023.
EFG Hermes’ interest in Pakistan dates back to 2010, when it unsuccessfully bid for the Pakistani operations of the Royal Bank of Scotland. Though outmatched by Faysal Bank in that effort, the company remained committed to entering the market.
Since its eventual establishment, EFG Hermes Pakistan gained recognition as a prominent brokerage. In 2022, the firm was named Best International Brokerage Firm in Pakistan by the Asiamoney Brokers Poll, a testament to its local influence.
Intermarket Securities, one of Pakistan’s leading brokerage houses, will inherit the operations of EFG Hermes Pakistan. For EFG Hermes, the merger allows the firm to gain a larger foothold in the market, albeit with a local partner to share the profits with.
The move is a poignant reminder of the complexities facing foreign investors in Pakistan, where economic turbulence and regulatory hurdles often temper the appeal of a growing, albeit unpredictable, economy.
