FIMBank plc - Interim Results Review

On 22 August, FIMBank plc published its interim results to 30 June 2008. The Directors declared a special net dividend of US$0.0329 per share following the extraordinary gain made from the disposal of its shareholding in Global Trade Finance Limited. Shareholders have the option of receiving the dividend either in cash or through the issue of new shares at a discounted price of US$1.60 per share. Those shareholders as at close of trading on Tuesday 2 September will be eligible to receive this dividend which is expected to be paid on 29 September.

The key highlights are:
• Net interest income climbs 41.7% to US$7 million;
• Net fee and commission income of US$10 (+63.6%);
• Profit on sale of GTF of US$29.2 million;
• Pre-tax profit for the period of US$34 million;
• Extraordinary scrip dividend of US$0.03290924 per share.

During the first six months of 2008, the FIMBank Group registered a 41.7% increase in net interest income to US$7 million. Gross interest income rose by 19.6% to US$16.3 million while interest expense only increased by 6.9% to US$9.2 million resulting in a 6.8 percentage point increase in the net interest margin to 43.3%.

Moreover, net fee and commission income climbed 63.6% to US$10.05 million on improved performances at the Group’s fully-owned forfaiting subsidiary and especially from increased trade finance activities at the Bank. Net trading income and gains from financial instruments carried at fair value increased to US$2.06 million from US$1.43 million in the first half of last year.  The FIMBank Group generated a profit of US$29.2 million from the sale of its 38.5% stake in Global Trade Finance to the State Bank of India, which was concluded at the end of March 2008. This substantial one-time gain boosted the Group’s operating income which surged to US$48.4 million during the period under review from US$12.7 million in the same period last year.

Excluding the gain made from the disposal of the factoring joint-venture in India, the Group still managed to register a 50% gain in total operating income compared to the same period last year.

Administrative expenses rose by 48.2% to US$13.2 million during the period under review attributable to additional costs with respect to the start-up of new associated ventures, further recruitment, increases in performance based compensation as well as a one-time bonus to staff paid from the extraordinary profit of the GTF sale. Depreciation and amortisation edged 1% higher to US$0.4 million while impairment allowances rose to US$1.1 million from the 2007 interim figure of US$0.4 million on increased allowances in line with the strong growth in loans and advances. Meanwhile, the Directors reported in the Half-Year Report that following a judgement against the Bank delivered by a court of first instance for the payment of US$1.7 million (inclusive of interest and court fees), the Group recognised a provision for this amount in the income statement. The Directors stated that the Bank is in the process of formalising its appeal submissions with proceedings expected to commence before the end of 2008.

The Group accounted for its share of profits of associate undertakings amounting to US$2 million in the first half of 2008 compared to US$1.4 million in the comparative period. This relates to a 6-month contribution from the 40% shareholding in EgyptFactors while it only accounts for a 3-month contribution from GTF and Menafactors. While FIMBank disposed of its shareholding in GTF at the end of Q1, on the other hand, it acquired the remaining 50% shareholding in Menafactors in Q2 and as a result, from the second quarter of the year it began consolidating this investment in the Group accounts. The Directors explained that the purchase of the other 50% of Menafactors is only temporary following the merger between Emirates Bank and National Bank of Dubai. This factoring joint-venture was initially set up between FIMBank and National Bank of Dubai but as a result of the merger, FIMBank opted to seek an alternative partner as the Emirates Bank already offered factoring activities. FIMBank is thus seeking to dispose of a substantial part of this equity holding within the next 12 months.

The FIMBank Group registered a pre-tax profit of US$34 million, substantially higher than the profitability generated in the first six months of 2007 of US$3.8 million mainly as a result of the significant profit from the sale of GTF. Excluding this gain, the Group still registered a 39.5% increase in pre-tax profits. After accounting for a tax charge of US$10 million, Group profit after tax during the first half of 2008 amounted to US$23.8 million.

Total assets as at 30 June 2008 amounted to US$756.2 million, an increase of 32% over the level as at the start of the year as loans and advances to banks and customers grew by US$168 million. Shareholders’ funds increased by 20% to US$118 million.

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