FIMBank plc - Full-Year Results
On 8 April 2021, FIMBank plc published the Annual Report and Financial Statements for the year ended 31 December 2020.
Performance Overview
During 2020, net interest income contracted by 11.4% to USD28.6 million (2019: USD32.3 million) as the 25.5% drop in interest expense to USD13.6 million (2019: USD18.2 million) was not enough to offset the 16.5% reduction in gross interest income to USD42.2 million (2019: USD50.5 million). In this respect, FIMBank explained that the lower interest rate environment coupled with subdued volumes of business led to a contraction of interest margins as the Bank retracted from certain business activities in order to safeguard its capital and liquidity positions amid the uncertainties brought about by COVID-19.
FIMBank also reported a substantial drop in non-interest income as this amounted to USD10.3 million compared to USD25 million in 2019. The main driver behind the marked decline was the loss of USD0.12 million in trading activities compared to a profit of USD5.84 million in 2019 as the Bank recorded losses from trading assets as well as derivatives held for risk management. Moreover, foreign exchange income contracted by 15.5% to USD1.81 million compared to USD2.14 million in 2019. Meanwhile, FIMBank also experienced significant declines in net fee and commission income (-USD3.51 million) and dividend income (-USD3.35 million) reflecting the adverse operating environment due to the pandemic as well as de-risking actions, whilst it generated a gain of only USD0.28 million from financial instruments compared to a gain of €2.19 million in 2019.
On the expenditure side, total operating costs increased by 5.4% to USD39 million (2019: USD37 million) as the Bank stepped up its investments in HR and technology particularly in the regulatory space. In addition, the financial performance of the Bank was severely dented by a net impairment charge of USD35.7 million (2019: USD13.1 million) as the uncertain economic environment had a significant bearing on credit quality. Moreover, FIMBank recognised an impairment of goodwill of USD2.69 million on its investment in India Factoring and Finance Solutions Limited reflecting the expected long-term effects of the pandemic on the subsidiary’s prospects and business volumes.
Overall, FIMBank reported a pre-tax loss of USD35.8 million compared to a profit of USD7.26 million in 2019. After accounting for a tax charge of USD11.2 million and minority losses of USD0.13 million, the net loss for the year amounted to USD46.9 million compared to a profit of USD4.42 million in 2019.
The Statement of Financial Position as at 31 December 2020 shows a contraction of 3.1% in total assets to USD1.83 billion as the decline in customer loans (-USD57.9 million), investments (-USD30.9 million) and trading assets (-USD7.91 million) offset the increase in liquid assets (+USD58.1 million). Total liabilities dropped by 0.7% to USD1.6 billion as the reduction in amounts owed to banks (-USD22.8 million) and debt securities (-USD28.7 million) offset the growth in customer deposits (+USD43.7 million). Meanwhile, shareholders’ funds contracted by 17.6% to USD232.8 million which, in turn, translates into a net asset value per share of USD0.446 (31 December 2019: USD0.541). Despite the reduction in equity, FIMBank’s capital ratios strengthened as the CET1 ratio and total capital ratio stood at 18.5% compared to 16.9% as at the end of 2019.
Outlook
In their commentary, the Directors of FIMBank explained that despite the significant loss and the adverse market and operating conditions in 2020, the Bank’s business fundamentals remained strong whilst the underlying operational performance proved resilient. Nonetheless, the outcome for 2021 will very much depend on further pandemic disruption. Indeed, FIMBank will continue pursuing business opportunities on the principles of risk adjusted returns. A moderate growth in diversified product offering will be scaled in the business lines and geographies that provide superior returns and pose less risk. Moreover, as the Bank’s balance sheet is now more resilient after the full implementation of the de-risking process, FIMBank will continue to review its exposure to complex structures and business lines. Coverage for non-performing assets have been significantly improved, whilst a function fully dedicated to the recovery of non-performing assets has been set-up to pursue and safeguard the Banks interests. These initiatives are expected to not only improve the overall portfolio quality but also help FIMBank generate additional revenue whilst maintaining the sustainability of its actions at the core of its operations.