FIMBank plc - Fitch confirms ‘BB’ rating

Friday, February 24th, 2012

On 21 February the rating agency Fitch maintained the credit rating for FIMBank plc at ‘BB’ but changed the outlook from neutral to negative. Fitch stated that the revision of the outlook occurred due to concerns over the bank’s weakening capital ratios in the past two years following business expansion. The rating agency also announced that FIMBank needs to continue operating with higher capital ratios in view of the bank’s exposure to credit risk, high concentration levels by obligor and operational risk inherent in its activities. The report issued by Fitch mentioned that the Bank’s “asset quality remained adequate in 2011 with impaired loans stable at around 2% on total loans to customers and banks”. Fitch continued by stating that the reserve coverage of impaired loans remained sound, albeit slightly decreasing. Fitch confirmed that the Bank’s operating profitability improved in 2011, sustained by the positive momentum of the forfaiting market where assets were traded at higher spreads and lower loan impairment charges which, together compensated for somewhat higher costs.

Following the announcement by Fitch, FIMBank’s President Margrith Lutschg-Emmenegger expressed her satisfaction that the rating agency re-affirmed the Bank’s rating especially during such economically challenging times. The Bank’s President further explained that difficult conditions in some of the markets where FIMBank operates have caused a reduction in net commission income but this was counteracted by income from the Bank’s forfaiting business. In response to the rating agency’s concerns regarding FIMBank’s tightening capital ratios over the past two year, Ms Lutschg-Emmenegger stated that this was a result of business expansion, growth in factoring business and the launch of new factoring joint ventures in emerging markets such as India and Brazil. The President explained that such joint ventures not only diversify the Bank’s portfolio but also provide a platform for continued growth in the future. Ms Lutschg-Emmenegger concluded by stating that the Group will remain adopting a prudent and vigilant risk management approach, manage its balance sheet in a prudent manner, maintain adequate capital ratios and in the coming months seek ways to further strengthen the capital base.

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