On 24 August 2007, FIMBank plc published its financial statements for the six months ended 30 June 2007. Similar to last year, no interim dividend was declared.
During the first half of 2007 the FIMBank Group generated total operating income of US$12.7 million, an increase of 15.1% over the first six months of 2006. Net interest income grew by 22.3% to US$5 million with non-interest income amounting to US$7.7 million (+10.9%). Net fee and commission income increased by 24.2% to US$6.1 million on improvement performances at the Bank and its fully-owned subsidiary London Forfaiting Company. Net trading income was identical to last year at US$1.4 million whereas in the first half of 2006 the Group benefited from a one-time dividend income of US$0.5 million from the sale of its equity in Eastern Prospect BV.
Non-interest expenses, comprising administrative expenses and depreciation, climbed 23% to US$9.3 million. The Directors attribute the bulk of this increase to start-up costs of new joint-venture associates, recruitment of further staff and increases in performance-based compensation. The share of profits from the factoring associate companies (38.5% shareholding in Global Trade Finance Ltd. in India and 40% equity of the recent start-up EgyptFactors) amounted to US$1.4 million, representing a 25% growth over the contribution received in the first half of 2006. The Directors noted in the Half-Year Review that the share of profits from Global Trade Finance in India of US$1.6 million (+46%) was partly offset by the share of expenses in the first few months of operation at EgyptFactors.
The Group’s cost to income ratio after taking into account the share of profits from the factoring associate companies at 66.4% does not compare well with the improvements registered in 2006 of 61.5%.
On the other hand, net impairment losses during the first half of 2007 decreased to US$0.4 million from US$1 million in the comparative period last year. The provisions taken during the period under review mainly relate to an increase in collective impairment allowances. On the other hand, in the first half of 2006, the Group had taken a specific charge on an impaired forfaiting asset within LFC’s portfolio. Meanwhile, in the first six months of the year LFC recognised a further deferred tax asset amounting to US$0.5 million (June 2006: US$0.1 million) which helped reduce the carrying amount of goodwill at LFC to US$0.65 million from US$1.1 million in December 2006. Once the goodwill is depleted, the Group would start benefiting from the unutilised tax credits at LFC, which are expected to positively impact the income statement in future reporting periods.
Group pre-tax profits during the first half of the year amounted to US$3.8 million, 10.5% higher than the profitability in the same period of 2006. After accounting for taxation of US$0.3 million, the profit for the period amounted to US$3.5 million (June 2006: US$3.1 million).
Group total assets as at 30 June 2007 amounted to US$473.7 million. Since the start of the year, loans and advances to banks and customers decreased while financial assets at fair value through profit or loss relating to LFC’s forfaiting portfolio increased to US$200 million. On the liabilities side, deposits from both banks and customers increased during the first six months of the year with LFC continuing to develop its own funding resources through the issue of promissory notes. Shareholders’ funds increased by 4% since the start of the year to US$65.2 million resulting in a net asset value per share of US$0.76. Commitments outstanding for the Group as at 30 June 2007, mainly in the form of documentary credits and confirmed letters of credit, amounted to US$176 million.
The Group’s pre-tax return on equity (profit before tax divided by average shareholders’ funds) decreased from 12.8% in June 2006 to 12.4%. Likewise Group return on assets (pre-tax profit divided by average assets) is 1.4% compared to 1.7% in June 2006.
The Directors reported that a major challenge of the FIMBank Group during the second half of 2007 “is to enlarge its equity base with a view to support its international expansion plans as well as to strengthen its risk-based solvency, particularly in view of Basle II considerations”. In this respect the Directors noted the Group’s continued efforts to secure the interest of reputable and strategic institutional investors after it had declined the offer in April 2007 made by Burgan Bank of Kuwait to acquire a majority equity stake. Moreover, the Directors stated that, as previously announced, FIMBank will be undertaking a rights issue to shareholders by the end of 2007.
In line with FIMBank Group’s strategy of establishing a network of global joint-venture factoring companies, the Board of Directors confirmed in the Half-Year Report that together with the National Bank of Dubai, a joint-venture factoring company in Dubai (MENAFACTORS) was established on 10 May 2007 in the Dubai International Financial Centre and is currently awaiting authorisation by the Dubai Financial Services Authority. After the interim balance sheet date on 30 June 2007, FIMBank injected its first US$5 million in this new joint-venture. Moreover, the Directors announced that it approved an investment of up to US$8 million in a new factoring joint-venture company in the Maghreb region (Tunisia, Algeria and Morocco). Also, it was recently reported that FIMBank signed a Memorandum of Understanding with Bladex (Banco Latinoamericano de Exportaciones SA) to establish another joint venture company which would offer full factoring services to institutions in Latin America. Bladex is a supranational bank originally established by the Central Banks of Latin American and Caribbean countries to promote trade finance in the region.