FIMBank plc - Full-Year Results

On 11 March, FIMBank plc published its full-year financial results for the year ended 31 December 2013.

Performance Overview

During the year under review, the FIMBank Group registered a 22.9% increase in net interest income to USD15.9 million reflecting higher business volumes and an improved net interest margin of 44.6% (2012: 43%). The Group also reported a 10.6% increase in net fee and commission to USD22.9 million which also reflected improved business activity across all Group companies.

However, the improved operational performance was outweighed by a few but significant impairment events. In fact, FIMBank registered a net loss from trading assets and other financial instruments of USD8.13 million on the back of a net loss of USD8.03 million on the Group’s forfaiting book (only partially offset by the USD0.5 million in trading profits) related to unrealised adjustments on specific distressed assets as well as a net loss of USD0.6 million on the Group’s credit linked notes. Additionally, FIMBank incurred net impairment losses of USD6.55 million which are significantly higher than the USD1.3 million impairments taken in 2012. The Directors explained that the increased impairments reflect both specific charges on assets showing traits of possible non-recoverability or loans which remain non-performing as well as an increase in collective impairment charges reflecting the growing banking book with longer maturities.

Furthermore, the FIMBank Group reported a 75.5% drop in net gains from other instruments carried at fair value to USD2.75 million.

As a result, net operating income dropped by 30.5% to USD26.9 million.

The income statement was further impacted by a 4.2% increase in administrative expenses (including depreciation) to USD29.67 million largely reflecting the new depreciation charge associated with the new head office which was inaugurated in September 2013. Additionally, the FIMBank Group incurred USD0.68 million in other provisions.

The factoring entities also proved to be a drag on the financial performance of the Group with a share of loss of USD2.98 million (2012: loss of USD1.39 million). The increased losses largely reflect specific impairments taken in Russia and Lebanon in view of the particular difficulties in recovery across both markets. Meanwhile, the operations in India and Egypt returned a positive result which were countered by operational losses of the Brazil investment which is still in its start-up phase.

Overall, the FIMBank Group registered a pre-tax loss of USD6.4 million in contrast to the USD8.8 million pre-tax profit registered in the previous financial year.

After accounting for a tax credit of USD2.2 million, the Group’s net profit amounted to USD4.2 million in contrast to the net profit of USD8.8 million in 2012. This translates into a negative earnings per share of USD0.0266 (2012: USD0.06717)

The Statement of financial position shows a 9.3% increase in assets to USD1,235.8 million largely reflecting the growth in loans and advances to customers and available for sale investments. Total liabilities also increase by 8.7% to USD1,087 million mainly due to the increase in wholesale deposits. Shareholders’ funds also grew by 13.9% to USD148.8 million reflecting the USD30 million equity injection by the two new institutional shareholders (United Gulf Bank and Burgan Bank) which was partly offset by the dividend paid in May 2013 (with respect to the 2012 financial year), the loss incurred during the year under review and currency translation losses.

Dividend & Bonus Issue

Given the loss registered during the period under review, the Directors did not recommend a dividend to shareholders in contrast to the gross dividend per share of USD0.0568 paid out in respect of the 2012 financial year.

The Directors will be recommending a 1 for 10 bonus issue to all shareholders as at the close of trading on 3 April subject to shareholder approval at the upcoming Annual General Meeting scheduled to be held on 8 May 2014.

Outlook

The Directors noted that the increased shareholding of Burgan Bank and United Gulf Bank to 80% significantly improves the prospects of the Group to take on new and large business whilst also benefitting from better funding opportunities to ultimately further strengthen the operating performance.

Specifically, the Directors explained that FIMBank should continue focusing on trade finance by taking on business selectively whilst addressing the ever increasing demands of regulation. The Group’s fully-owned forfaiting subsidiary, London Forfaiting Company (LFC), should also continue to further improve its operating performance through a larger portfolio and diversification of funding lines which should also lead to improved margins. Menafactors is expected to maintain its strong operating fundamentals and benefit from the overall improvement in the region. In the meantime, the Group will step up recovery actions on all impairments while monitoring of joint venture activities is being strengthened by enhancing oversight structures at Bank level as well as through obtaining shareholder control in key ventures.

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FIMBank plc – Preliminary Statement of Results for the financial year ended 31 December 2013.