On 25 March 2019, FIMBank plc published the preliminary statement of annual results for the year ended 31 December 2018.
During 2018, FIMBank generated a record of USD31.2 million in net interest income, representing an increase of 25.2% over the previous comparable period. This took place as FIMBank increased its gross interest income by 9.7% to an all-time high of USD56.1 million whilst it also managed to reduce its funding costs by 4.9% to USD24.9 million. In this respect, the bank explained that the higher gross interest income reflects increased business across its broad suite of products and services, namely commodity trade finance, factoring, local real estate financing and shipping business. Furthermore, the growth in gross interest income was coupled by a reduction in interest expense reflecting proactive treasury and cash management functions which, in turn, led a more optimised level of funding resources and liquidity needs. As a result, the bank’s net interest margin also increased to a three-year high of 55.6%.
Non-interest income also grew significantly, registering an increase of just over 15% to USD27.5 million compared to USD23.9 million in 2017, largely reflecting higher dividend income (+27.7% to USD7.66 million) as well as a positive contribution of USD1.29 million from foreign currency operations compared to a loss of USD1.75 million in the previous comparable period. On the other hand, FIMBank registered declines in net fees and commission income (-4.7% to USD17.6 million) and other operating income (-19.7% to USD0.91 million).
The financial performance of FIMBank was also positively impacted by a marked reduction in operating costs as these contracted by 11.1% to USD37.6 million. In this respect, the bank explained that the decline in costs reflects the savings resulting from the sale of Latam Factors (Chile) in the second half of 2018 as well as the non-recurrence of certain regulatory costs which were incurred in 2017. On the other hand, FIMBank continued to invest in human resources in line with its growing business needs.
Overall, the net operating results of FIMBank showed a profit of USD21.1 million compared to USD6.54 million in the 2017 financial year. Moreover, the cost-to-income ratio (excluding impairments and all volatile items) improved to 64% from 86.6% in 2017.
The financial performance of FIMBank in 2018 was dented by an impairment charge of USD13.3 million compared to a net impairment gain of USD2.3 million in 2017, reflecting a number of non-performing exposures in the commodity trade finance portfolio for which resolution and recovery efforts are already underway. Furthermore, FIMBank posted a loss of USD2.06 million in relation to the sale of Latam Factors (Chile) and also registered a much lower positive fair value movement in respect of investment property. On the other hand, net results from trading assets and other financial instruments were much higher in 2018 and amounted to USD5.98 million compared to just USD0.05 million in 2017, resulting from the full recovery of a significant legacy non-performing asset in the Group’s trading portfolio on which credit losses were already taken in previous years.
In total, FIMBank reported a pre-tax profit of almost USD13 million which is 11.2% higher than the previous comparable figure of USD11.7 million. After accounting for a tax charge of USD2.79 million and minority interests of USD0.01 million, the bank’s net profit for the year amounted to USD10.2 million compared to USD7.52 million in 2017. This translates into a return on average equity of 4.48% (2017: 4.57%) and a return on average assets of 0.9% (2017: 0.52%).
The Statement of Financial Position shows a 13.7% increase (or +USD225.2 million) in total assets to USD1.87 billion largely driven by higher balances of trading assets (+USD94.8 million) and customer loans (+USD89.2 million). Total liabilities also increased, albeit by a smaller amount to USD1.59 billion (31 December 2017: USD1.47 billion), as the increase of almost 21% (or +USD176.8 million) in customer deposits to USD1.02 billion was partially offset by the conversion of USD50 million in subordinated liabilities into equity as part of FIMBank’s capital raising exercise which took place during 2018. Accordingly, shareholders’ funds climbed by 60.5% to USD280.3 million (31 December 2017: USD174.6 million), largely reflecting the USD105 million in new capital injected in 2018 through a rights issue. As a result, the bank’s capital ratios strengthened markedly in 2018 as the CET1 ratio stood at 17.6% as at the end of 2018 compared to 11.3% in 2017 whilst the total capital ratio improved to 18% from 15.5% as at the end of 2017. The net asset value per share remained virtually unchanged at USD0.5546.
Bonus Share Issue
Similar to the previous five years, the Directors of FIMBank are not recommending the payment of a dividend. On the other hand, the Directors are recommending a 1 for 30 bonus share issue by way of capitalisation of the Share Premium Account.
In their commentary to the 2018 financial results, the Directors of FIMBank explained that during the year the bank continued to strength its core fundamentals, namely by realising success in key business areas and realigning its business model to the longer-term strategy as set out in previous years. The first half of the year was characterised by the USD105 million new equity injected via a Rights Issue, allowing the strengthening of the bank’s capital base and unlocking potential for growth. As such, the operating performance of FIMBank in 2018 reflects this strategic development as well as the outcome of actions and initiatives taken in previous years in areas such as business origination, asset and liability management, risk management and cost control. Furthermore, a more efficient management of the balance sheet generated higher yields and lowered the bank’s costing of funding, with the increase in asset levels contributing to an improvement in core operating revenues when compared to last year. In the latter part of the year, FIMBank also managed a number of non-performing exposures that necessitated an increase in impairment allowances, whilst registering continuing successes in recovering legacy delinquent loans across various portfolios within the Group. The overall organisational complexity of the Group was streamlined and certain divestitures of strategic investments took place.
For 2019, FIMBank is expected to continue evolving within rigorous parameters and frameworks aimed to solidify its origination and risk processes whilst achieving further sustainable growth. The Group has the ability to exploit its expertise and geographical presences to continue offering a bespoke service to its clients across the different stages of the supply chain. Supported by the new capital and business fundamentals developed over the years, FIMBank will move to the next phase of its strategy focusing on returning a solid and stable performance based on maximising scale, product capability enhancement, solid funding engines and strong risk architecture. FIMBank will also continue to invest in its human capital and technological capabilities in order to remain innovative and to increase efficiencies across its various business areas. The Group is resolute in focusing on its core competencies and principal key markets to deliver reliable and superior returns for its stakeholders.