Fimbank is on target for the “turnaround” to profitability promised by its chairman John Grech.
He said yesterday that he had promised shareholders at last year’s annual general meeting that the turnaround would take 18 months and that this was looking quite achievable, thanks to “significant improvements”.
His comments to the media came days after the bank reported losses of $7.2 million for the year ended December 31, 2015, a considerable change from the $45 million a year earlier. He added that the bank had turned profitable in the last quarter of 2015, and had remained so in the first two months of the year.
The investment is needed, either for regulatory reasons or because we wish to take control
The bank has been struggling to clear up legacy issues, which resulted in impairments of almost $51 million in 2014. Following the departure of CEO Margrith Lutsch Emmenegger, acting CEO Simon Lay had managed to trim the losses to $8.6 million by the interim results.
The new CEO, Murali Subramanian, who joined last summer, subsequently managed to reduce the impairments to $10 million – saying that this level was getting very close to the $6 million one would expect for a bank of its risk profile, with assets of $1.4 billion.
A large part of the 2014 and 2015 impairments came from its venture in Russia, which has since been “exited” but the group has chosen to invest a further $25 million in its other subsidiaries and joint ventures – including some of the loss-making ones.
“The investment is needed, either for regulatory reasons or because we wish to take control. We have a mixture of joint ventures and subsidiaries overseas. The truth is that joint ventures are a bad idea. There is nothing ‘joint’ about the priorities and the terms are favourable to both sides,” the CEO said.
Mr Subramanian also confirmed that the cost-to-income ratio was improving, noting that this had been running at an unsustainable 90c for every $1 earned. Costs – including wages and salaries – increased significantly, from $39.8 million to $47 million, but this figure would be comparable had it not been for one-off expenses, he reassured.
The bank has also made significant recoveries over the past year, a priority set by Mr Lay, although the amount was not revealed.
The board did not recommend a cash dividend, but rather a one-for-25 bonus issue of ordinary shares by way of capitalisation of the share premium account.
Key figures
Loss: $7.1 million (2014: $45m)
Operating loss: $11 million (2014: $50m)
Net income: $34.9 million (2014: $4.7m)
Operating income: $35.7 million (2014: $1.6m)
Net impairments: $10.3 million (2014: $50.7m)
Operating expenses: $47 million (2014: $40m)
Assets: $1.44 billion (2014: $1.41bn)