Bahrain’s GFH is on the ball in buyout plan for Khaleeji Commercial Bank

Bahrain-based investment company GFH Financial Group gave a stellar performance for the first quarter, with earnings per share at $0.53 compared to $0.15 for 2020. The group with interests in investment banking, real estate, commercial banking, and treasury services has shown a lot of momentum over the past couple of years.

Of special mention is its international thrust, with a focus on the US and the UK. Shares have rallied by more than 18 per cent during the last year.

GFH successfully turned around the business of Khaleeji Commercial Bank from loss-making to a profit-generating enterprise. Recently, it increased its stake in the bank from 55.41 per cent to 69.05 per cent. Now, it is making its next significant corporate move.

The Bahrain-based firm has now made a voluntary takeover offer for the issued shares of Khaleeji Commercial Bank, which has a market capitalization of $133 million. If it goes through, the acquisition will have a positive impact on the group's profitability.

Well timed

The acquisition plan is quite strategic. During the first quarter, the company had a $90.39 million revenue, compared to $59.46 million. The near 30 per cent rise in business was on account of the finalization of a few transactions, profits from the sale of investment assets, and increased treasury activities.

Even then, the performance of the commercial banking business is remarkable, and Khaleeji contributed 18 per cent of the total income.

Nevertheless, it is not only about the numbers. The bank is crucial for the treasury business, which accounts for 40 per cent of GFH's numbers. The management views treasury as one of the most critical business lines within the group.

Strong on treasury

There's a powerful asset-liability management function within the bank, which has helped the treasury portfolio post a solid performance during the first quarter of 2021. The management has taken a strategic initiative to grow the treasury portfolio, and, at the same time, manage the asset-liability profile of the bank.

It is not surprising why GFH has decided to take over the bank's entire shareholding.

Other business lines of the group also are doing well, with investment banking contributing 20 per cent, mainly from product placement activities to investors and structuring fees. A significant deal was the group's $135 million acquisition of a mission-critical distribution facility in Chicago.

Handsome returns

The second quarter of the group also looks promising with its subsidiary, Roebuck Asset Management, selling UK-Based Prime Logistics Park for $123 million. The asset, which was acquired for $84 million, in May 2017 provided investors with a post-tax IRR of more than 20 per cent, much more than the targeted returns.

This kind of performance inspires a lot of confidence. The future looks promising, with the company looking for opportunities in US real estate in multi-family, student housing and logistics. In private equity, the management is focused on healthcare.

Its European subsidiary is working on over 1 billion euros of new third-party mandates.

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