FIMBank plc - Interim Results

On 13 August 2020, FIMBank plc published its condensed interim financial statements covering the six-month period ended 30 June 2020.

Performance Overview

Net interest income increased by 3.5% to USD16.6 million (H1 2019: USD16 million) as the 11.8% drop in net interest income to USD23.1 million (H1 2019: USD26.2 million) was outweighed by the sharp decline in interest expense to just USD6.52 million compared to USD11.2 million incurred in the first half of 2019. In this respect, FIMBank explained that the continued improvement in its cost of funding structure offset the reduction in interest income from lower commercial asset levels and higher liquidity levels.

Non-interest income dropped by almost half to USD6.05 million (H1 2019: USD11.8 million). The drop was mostly due to the significant contraction in dividend income (-USD3.62 million to USD4.95 million) as FIMBank reduced its exposure to a trade-asset fund which had contributed most of the dividend income recorded in the previous comparable period. Meanwhile, FIMBank also recorded lower revenues from its two other main sources of non-interest income. Net fee and commission income declined by 22.1% to USD4.95 million (H1 2019: USD6.35 million) as the reduction in business offset the drop in fees payable on credit mitigation and related costs. Similarly, FIMBank only generated USD0.5 million from its foreign currency operations compared to USD1.16 million in H1 2019 reflecting the much lower volume of client-driven foreign exchange busines.

On the expenditure side, total operating costs eased by 1.2% to USD18.5 million. Despite the additional investments in the recruitment of senior officers in key functions, the bank managed to achieve savings in other aspects of its administration as well as lower depreciation and amortisation charges.

FMBank’s financial performance was considerably dented by the much higher losses related to credit impairments as well as movements in investments. In fact, the bank recorded an expected credit loss of USD15.9 million compared to just €0.58 million in H1 2019 reflecting both the general impact from COVID-19 as well as new significant delinquent exposures. With respect to the net results from trading assets and other financial instruments, FIMBank recorded a net loss of USD3.45 million (compared to a gain of USD1.11 in H1 2019) on the back of unrealised value losses of USD2.4 million in the forfaiting portfolio and USD1 million on investments.

In aggregate, FIMBank reported a pre-tax loss of USD15.2 million compared to a pre-tax profit of USD9.65 million in the first six months of 2019. After taking into account a tax charge of USD4.2 million and a minimal loss of USD0.25 million from non-controlling interests, the net loss attributable to shareholders amounted to USD19.1 million.

The Statement of Financial Position as at 30 June 2020, when compared to the corresponding figures as at 31 December 2019, shows that net assets contracted by 8.4% to USD258.8 million which, in turn, translates into a net asset value per share of USD0.4954. Total assets dropped by almost 8% to USD1.74 billion mostly due to the lower amounts of customer loans (-USD135.5 million to USD514.4 million) and trading assets (-USD30.6 million to USD429.6 million). On the other hand, FIMBank channelled more of its funds into investments (+USD50.1 million to USD183.4 million) and short-term liquid assets (+USD43.2 million to USD497.6 million).

Total liabilities also dropped by 8% to USD1.48 billion reflecting the near 29% decline (or -USD130.1 million) in amounts owed to banks to USD322.2 million. FIMBank also repaid debt securities of USD28.7 million which amount was however outweighed by the USD31.1 million increase in customer deposits to USD1.09 billion. Given the sharp drop in customer loans and the increase in customer deposits, the loan-to-deposit ratio deteriorated sharply to 47.2% from 61.4% as at the end of 2019. In contrast, FIMBank’s capital buffers strengthened to 18% (31 December 2019: 16.9%) mostly due to the reduction in risk-weighted assets.

Outlook

In their commentary, the Directors of FIMBank explained that the results achieved by the bank were marked by the disruption brought about by the COVID-19 pandemic. Throughout the past months, the bank increased its available liquidity whilst credit monitoring and early-warning indicator tools were enhanced to pre-empt client economic difficulties.

Looking ahead, FIMBank noted that it is maintaining a cautious outlook amid today’s prevailing economic uncertainties. The bank also warned that earnings pressures will continue to persist in the second half of the year as commodity-price volatility and the very low interest rate scenario might derail the start of the recovery. FIMBank also stated that it will maintain its prudent approach to new business as it continues to strengthen its control risk areas. As a result, the outcome for the year will very much depend on further pandemic disruption with FIMBank poised to consolidate its business fundamentals to remain successful in today’s new norm.

Download

FIMBank plc – Condensed Interim Financial Statements for the six-month period ended 30 June 2020.