FCM Bank, the newest Maltese bank to join the local circuit, is to launch its first products in June, chief executive officer Michael Warrington told The Times Business.
We are not aiming to compete on interest rates as we fear that is self-defeating
A range of products and services will then be introduced gradually over the next two years, by when, Mr Warrington added, FCM Bank hopes to have made its first foray on the continent.
The chief executive explained the bank will be positioned in the deposit-taking market and will gear its lending business towards private and corporate clients. It is already involved in international lending syndicates in a variety of sectors.
Headquartered at the Aragon Business Centre on St Julian’s’ Dragonara Road, FCM Bank is owned by Fortelus Capital Management, the investment management firm of Pall Mall, London, founded in 2007 by Tim Babich.
Mr Babich, who was named among the Rising Stars of Hedge Funds at the Annual Hedge Fund Industry Awards in New York City in 2010, sits on the board with Mr Warrington and three other veteran bankers – two Maltese and one British.
Mr Warrington explained that when Fortelus was in discussions with the Malta Financial Services Authority at the time of establishing its fund on the island, it became obvious that there was scope for obtaining a local banking licence.
“The nature of the fund’s activities has certain aspects that fit a banking model rather than a fund model, and a banking licence was obtained in 2010,” Mr Warrington said. “FCM Bank currently has a team of four, and we are seeking to recruit a compliance officer and a person to join the operations unit. The intention is to recruit several more people before the end of this year as the business evolves.
“Our business plan looks beyond Malta and the intention is to establish ourselves outside the island to provide our services in other European countries in the next two to three years.”
FCM Bank will initially operate an online model, but other means of distributing products and services will be adopted when “the time is right”. Mr Warrington added the bank was studying the potential to passport its services to jurisdictions where the conditions were right for it to take its next step.
Locally, the bank plans to target the retail market and will seek to attract a customer base from the local saving and investing community through a collection of tailored products. Other products will be aimed at business customers. FCM Bank’s lending business will target both private and business customers.
A comprehensive advertising and marketing campaign will be launched soon over traditional media; online channels, including social media, will come into play in the near future.
Mr Warrington explained FCM Bank aimed to be customers’ second bank, particularly as the Maltese acknowledged the opportunities of banking with more than one local institution.
In recent years, Malta’s banking market has developed to accommodate several new players each offering customers new ways to diversify their portfolios.
“Our business model is conservative and low risk. We are not aiming to be rate leaders and compete on interest rates as we fear that is self-defeating,” Mr Warrington stressed. “The banking business operates on margins: the higher the interest paid, the higher the risk to the assets on the balance sheet. That is directly in conflict with our business model.”
Mr Warrington pointed out FCM Bank’s differentiator will be the innovation it will bring to the market. The Maltese are sophisticated investors, perfectly able to discern and determine risk, he said.
“People have been very clever whenever they have ventured onto the stock exchange, which is not surprising considering that local investors have a unique advantage – most of the companies who have come to the stock exchange are household names in a small country. Whenever people were shown complex products, they have seen through them and have generally opted for the more straightforward ones. This is a relationship market, and it is on those relationships that we intend to build our business.”
The chief executive described FCM Bank’s governance model to be “very conservative”. The board – which is to operate independently from Fortelus Capital Management – is made up of mostly local reputable names.
“We would, of course, tap the knowledge and expertise that is available within the capital management owner. That is where you maximise synergies. We will work at arm’s length from the fund – in the sense that it will not dictate to the bank – and we will work according to our licence,” Mr Warrington explained. FCM Bank has been set up with €7 million seed capital, higher than the minimum statutory requirement, and there are firm commitments from the shareholders to inject more capital to sustain the business’s growth as the asset base increases.
In the medium-term, FCM Bank hopes to have established a name for itself in Malta and in other parts of Europe.
On a personal level, Mr Warrington, who occupies a number of directorships on locally listed companies, said he could not turn down the exciting prospect of being involved in a banking start-up.
“I am an old-time banker – banking is in the family blood,” he said. “I returned to the industry after an absence of 20 years. It is an industry which I love – it is challenging and dynamic. It is, of course, very challenging to set up a new bank in times like these. The euro crisis is not over, there still is unease in Europe, and the interbank market has ground to a halt. But I am confident that with the right elements and the right parameters we can slowly establish a foothold in the local market and we can take this venture abroad.”
FCM Bank could also seek to venture into bond issuance but “certainly not in the short term”, Mr Warrington said.