Fimbank, the Malta-based trade finance bank, on Wednesday signed a $60 million loan agreement with the International Finance Corporation of the World Bank Group to support its clients in the Middle East and North Africa (MENA) to import production materials and equipment.
IFC has been a shareholder in Fimbank since 2005, and is a partner in its Factor Rus and Egypt Factors factoring joint ventures.
It will also hold a 20 per cent stake in Brasil Factors, Fimbank’s latest joint venture with Brazil’s fifth largest private capital national bank Bic Banco, which will hold 40 per cent. Fimbank, an emerging markets specialist, will hold the remaining 40 per cent in the project that is set for launch shortly.
Under the loan agreement, IFC plans to help finance at least 60 trade transactions, 20 of which are expected to be in the poorest MENA countries. The deal consists of a $15m IFC senior loan, and $45m from the Saudi Fund for Development, which will be administered through an IFC trust fund.
“The $60m loan agreement will help Fimbank increase its business volumes, particularly in relation to emerging markets,” Fimbank president Margrith Lütschg-Emmenegger told The Sunday Times.
“It comes at a time when global volumes of trade finance are increasing but which is also characterised by substantial liquidity pressures, and an increase in pricing in view of the perceived risks in developing countries.
“Fimbank will help firms that drive trade growth in the Middle East and Africa. Strengthening funding resources is a priority area for the group, and this consideration will continue to be an important driver of business and of revenue growth.
“The ongoing support from IFC, as well as the substantial participation of the Saudi Fund for Development, signals an important vote of confidence in the Fimbank Group and its activities.”
Ms Lütschg-Emmenegger explained that Fimbank will be the technical partner providing factoring expertise, infrastructure and back office services to the new Brasil business.
She said Brazil was recognised as among the countries with the greatest potential for economic growth. Its business community has been encouraged by the virtuous cycle to seek and establish partnerships to accelerate the growth potential.
Ms Lütschg-Emmenegger said Brasil Factors was expected “to develop rapidly and become a significant player in a market which offers excellent opportunities” thanks to Bic Banco’s 70-year experience in corporate finance and a culture that embraced innovation, IFC’s performance standards, and Fimbank’s expertise.
Asked about the status of Fimbank’s plans for joint ventures in Vietnam and Kenya, Ms Lütschg-Emmenegger said: “We always seek the first or early mover advantage when entering countries with our products.
“In these markets, Fimbank will seek to win business from the strongest factorable sectors which have low value repeat business, including manufacturers of furniture, tools, and car spare parts, and industries like pharmaceuticals and textiles, as well as commodities such as coffee, tea and spices.
“These two projects are long-term in nature and will therefore require time, patience and hard work to develop. They have huge potential for future growth and to generate value for the Fimbank group in the longer term.”
Just weeks ago, Fimbank’s board of directors resolved to begin the process to establish a new Maltese group holding public company, FIM Holdings plc, as the new parent of Fimbank Group.
Subject to approval, there will be an exchange of Fimbank plc shares for shares in FIM Holdings plc as the former’s ordinary shares are de-listed from the Malta Stock Exchange and the ordinary shares of the latter are listed. The process is expected to be completed by June.
She explained that the project aimed to put individual, corporate and institutional shareholders, resident and non-resident, in a better position overall and which would benefit them and the group in the medium to long term.
Fimbank will continue to exist and operate as a bank despite the interposition of the holding company on top of it and the shareholders switching their holdings.
The process until June involves various authorities and appro-vals in a strictly regulated and thoroughly supervised procedure.
Fimbank Group holds its annual general meeting on May 5 when the board will be recommending the payment of a scrip dividend of $3,371,955 (2.48 US cents per ordinary share).
The group registered a significant increase in its after-tax profit to reach $6.74 million last year. The group’s balance sheet saw considerable growth with total consolidated assets as at December 31, 2010, standing at $861 million, 24 per cent up from end-2009 figures. Ms Lütschg-Emmenegger explained the significant decrease in impairments was mainly due to a $2.6m write-off which was recognised in 2009, relating to the disposal of a swapped financial instrument originally designated at fair value through profit and loss.
“Our management and business models have been tested relentlessly over the past two years and have proven to be resilient within the context of a persistently challenging environment,” she added.
“I would attribute this increase in profit to our robust business model, which is based on a strong focus on trade finance, while maintaining healthy diversification not only with regard to risks but also, and equally important, with regard to income streams and trade flows. These positive results reflect our successful efforts in adopting this model.”
Transactions related to Libya are all short term and guaranteed by financial institutions which will cover their international obligations to maintain their reputation in the global financial markets, she added.
Fimbank’s assets are predominantly short-term and its concentration of revenue stems from diversified trade finance products, clients and regions. Its Libya exposure “is therefore very manageable and well under control”, Ms Lütschg-Emmenegger stressed.
Fimbank, she added, saw positive opportunities for its specialist and diverse trade finance activities this year, despite rising oil prices and the earthquake and tsunami in Japan casting a shadow over prospects for growth in global trade.
A challenging year lay ahead with increasing pressure on profitability and growth.
Fimbank will focus on following its well-tested strategies and devote the time and effort necessary to develop lasting relationships with customers. The bank’s capital and liquidity ratios remain healthy, and a robust risk management policy kept it firmly on course, Ms Lütschg-Emmenegger said.
“We face the challenging future with optimism, knowing that the group is well positioned to success in the new financial landscape,” the president pointed out.