Confirming the trend towards profitability
Half-way through the current financial year, FIMBank confirms the trend towards profitability which the Group established in 2016 and confirmed throughout all of 2017. As a matter of fact, the Group’s Consolidated Financial Statements show that for the sixmonth period ending 30 June, the Group registered a profit after tax of $6.1m, compared to a profit of $4.1m for the same six-month period in 2017, and a profit of $7.7m posted for the whole of 2017.
These results, coming as they do on the back of the Group’s performance in 2017, sustain our confidence in knowing that we are on the right track, and that we are capable of carrying forward this momentum into the near future, said Dr John C. Grech, FIMBank chairman at a presentation for professional stakeholders at the bank’s premises this week.
FIMBank’s performance over the past two years has a very specific provenance. It is the direct consequence of a strategic shift in focus successfully tuned to changing market conditions. This drive also aimed at establishing the FIMBank Group as a more robust banking institution, based on business discipline, centrally-aligned operations and effective management of enterprise risks. These efforts have been manifestly recognised and endorsed by major international institutions such as Fitch and Sigma Ratings. Consequently, today we see a Group operating with greater efficiency and profit, and with a promise of greater things ahead.
The Rights Issue announced in March was a significant milestone in the bank’s development, Dr Grech said. This specifically brought to the fore the underwritten agreement by bank majority shareholder United Gulf Holding, and saw an injection of $105m, allowing FIMBank to strengthen its capital base and extinguish a $50m subordinated loan agreement. The backing, which we continue to receive from our majority shareholders, both United Gulf Bank and Burgan Bank of the KIPCO Group, remains an important pillar for the sustainability of our success, Dr Grech said. The support of our institutional shareholders was fundamental in enabling us to turn the situation around at a critical time for the bank, ultimately enabling us to deliver the positive results which we are enjoying today. This relationship remains key to the future of FIMBank.
CEO Murali Subramanian said: At a strategic level, during 2018 we have continued to build on where we left off in 2017. Continuing from our second profitable year (and 10th consecutive profitable quarter), we have continued refining measures to secure further efficiency enhancements and improve our portfolio quality. The strong origination momentum garnered in 2017 allowed us to make a robust entry to business generation this year, giving us an early start to build towards growth. Performance across the Group was strong throughout, as all available asset headroom was dedicated towards securing remunerative credit transactions.
These measures should continue to contribute strongly to a stable performance and positive financial situation. The management team has continued to lead the process towards upgrading asset origination and product differentiation. We also sustained the implementation of client-centric coverage models, cross-selling across the various Group segments and exploiting our presence in key markets. New initiatives such as Real Estate Financing, Cash Management and Corporate Risk Distribution have all shown progression to higher volumes, performance and revenues.
The funding side of the equation has witnessed further positive developments following the launch of FIMBank Direct as our fullyfledged digital banking platform in 2017. The success of FIMBank Direct has led to a revitalisation of asset-liability management processes, leading to more efficiency in terms of liquidity and funding, and improving net margins both on revenue generation and cost of funding.
The importance of adopting robust governance and the implementation of an effective risk framework across the Group must be emphasised, due to the role these had in FIMBank’s achievements over the past three years. These measures have embedded a strong compliance culture which has allowed us to maintain a healthy relationship with our regulators, correspondent banks and other stakeholders. As well, this resulted in a positive assessment of our Financial Crimes Prevention and Compliance practices from the NYC-based Sigma Ratings, the main ratings agency for non-credit banking and financial practices.
There is ongoing effort in our risk management infrastructure, people and framework. Such recognition has encouraged us to continue investing additional time and resources to seek further improvements in these and other areas. Cost-management initiatives introduced in 2017 include the establishment of an efficiencyimprovement committee, which is yielding desirable results. Meanwhile, a newly formed Business Performance and Analysis team has been producing unit and customer-level profitability reports, leading to better business focus and revenue optimisation.
Services related to trade finance, factoring and forfaiting remain key to the Group’s mission and we intend to continue developing these going forward. Future success rests on our ability to adapt to the needs of our customers, while enhancing our service offering. Progress in these areas will guarantee the further expansion of shareholder value.
Meanwhile, the competitiveness of our banking services has been spurred by our membership of the Target2 payment system, operated by the European Central Bank. FIMBank is now a direct counterparty for thousands of banks worldwide that were otherwise paying into the correspondent bank on our behalf.
Among others, they are now also able to deliver payments electronically to the bank via our client portal FIMBank Direct.
This digital banking platform was a landmark development in our progression to better adapt to the needs of today’s online consumers. It has also proved effective in improving internal operational efficiencies, reducing transaction costs, while enabling us to introduce new products to our customers. Also, during this year, our property management company, FIM Property Investment (FPI), registered profitable results due to better cost management and higher rental revenues.
In April of this year, we saw the realisation of a milestone development for FIMBank, a Rights Issue that saw our majority shareholders, namely United Gulf Holding of the KIPCO Group contributing almost the entire $105m generated. Apart from allowing us to address regulatory obligations, this capital injection has given room for the business to grow. In the short- to medium-term, this development will allow us to maintain strong capital ratios and enhance our credit rating.
Current success will serve as a springboard for further measures which will sustain these positive trends and allow our investors to reap greater benefits in the longterm. These measures will revolve around our pursuit for excellence across the different businesses, products and markets.
Priority will continue to be given to the crafting of superior client delivery channels and product evolution, while the focus on risk and governance stability, and the efficiency of in funding and cost structures, will be sustained. The ability of the Group to meet new challenges will be enhanced by greater flexibility derived from an improved scalability of the business. With the support of our majority shareholders, we will also be aiming to complete the repositioning of the business and transform it into a guiding light in the global trade space.