FIMBank CEO talks to TRFNEWS about his new role and plans for the future

01.10.2015

“BACK TO BASICS”

Mr Murali Subramanian, FIMBank CEO, talks to trfnews’s Neil Fanning

NF: What are your short-term plans for the future of FIMBank?

MS: I inherited the beginnings of a turnaround – former FIMBank CEO Margrith Lutschg-Emmenegger left last year and Simon Lay, a long term senior executive of FIMBank was appointed Acting CEO – for seven months, from 1 Jan to 6 August.

My short term goal is to turn things around with the priority until the end of this year being on good governance and four key areas of the business, namely factoring, forfaiting, trade finance and Treasury. FIMBank already has a robust reputation in factoring, forfaiting and trade finance, however I have now added in the key area of Treasury.

I want to demonstrate my intention to grow the business sustainably. We are going to do this by going back to basics. It is my goal to bring good health and profitability to the balance sheet. As part of this plan we are consolidating our geographic footprint and putting on hold any new expansions in the near future. During these four months, which is admittedly a short time, we will be re-assessing our strategy. Meanwhile, our focus shall be on the bottom line and we will strive to find our way back to profitability.

NF: Why did you choose to work for FIMBank?

MS: My background is in banking, with 28 years’ experience in the industry. I spent 20 years at Citibank with 2 years at ABN Amro and 6 at ADCB in Abu Dhabi. I left Citi as MD and Global head of domestic payables. Prior to joining FIMBank, I was executive vice president at Abu Dhabi Commercial Bank for six years, where I held the position of head of transaction banking of the Group. My key responsibilities at this financial institution included the management of trade and the supply chain growth business, where I oversaw the growth and return to profitability of this USD250m revenue business.

In each of my roles, the emphasis across all assignments has been that of “turning around” situations and my reputation has been characterized by this. The dominant theme of my career has been to take a business that is underperforming or not in a position to grow and to give this business the momentum it requires for it to grow.

It has been my prerogative to then take such businesses to the next level or hand them over to someone else, and proceed to take on my next challenge. I relish the challenge of turning around a business and would rather get my hands dirty in rebuilding a business than preside over an already existing and well run business that has little potential to be enhanced. The ability to emphasise core values and bring a bank back to health is something I have always enjoyed doing.

FIMBank has a robust global trade finance platform which places us in a strong position to capture a good share of a large global trade finance market. The Bank is highly regarded and has a great reputation and I am confident that I will be able to turn things around.

NF: How do you see the trade finance/factoring/forfaiting industry developing over the coming months?

MS: The lower rate of growth in the Chinese economy has meant that the appetite for commodities is decreasing significantly. This appetite,  that till now had been powering economies is now at a low ebb. This has caused credit problems around the world. The problem is further compounded by the low price of oil – and the Middle East is hurting.

Furthermore, there are currently sanctions on Sudan, Iran, and Russia with Ukraine and Libya in turmoil. Russia and Ukraine are more recent so their impact is being felt acutely. Having said that, there are still stable islands of trade – in particular Africa as a whole and South/ South-East Asia where there are still areas for growth. FIMBank is reacting to this reality and is being driven by trading companies and SMEs to areas of stability. These companies will direct us to new markets and new transactions and FIMBank is looking to benefit from existing and potential trade flows by analysing their re-alignment and then following them.

Trade finance

With regard to trade finance, we consider there to be opportunities in West, Central and East Africa, South East Asia and Europe. We are benchmarking ourselves to trading companies, commodity traders and manufacturing companies, in both developing and emerging markets, but clustered around major trading markets throughout the world, including such big names as Dubai, Singapore, Rotterdam etc. .

Factoring

Companies are increasing their reliance on trade credit and those doing the most business in terms of quantity are the factoring companies, and we are no exception. Factoring is especially useful in a stressed environment and Greece is a good example of that.  Family businesses, and micro-employment remain a stable and fundamental institution in Greece’s economy.  Underlying the economy is a need to buy and sell and companies are looking for trade credit in the absence of capital. Although their share in output and employment is stable, their growth is hampered by limited access to financing, which we see as an opportunity.

Forfaiting

Given the growing trend towards more open account and supply chain transactions in the trade finance sector, the demand for forfaiting is on the increase. However,   this is not reflected in reality because of the high liquidity in the market. Forfaiting is therefore experiencing significant pressure from a pricing perspective.

Having said this, there are lots of opportunities. Each business has found new areas of opportunity and is busy getting credit lines approved and funding facilities secured to execute against these opportunities.

NF: Which area of business do you see as having the most potential?

MS: Factoring has been under-positioned in opportunity areas such as Greece, Egypt and India – this is an area where we can build up the books quickly with good transactions. Generally speaking, we are looking to capitalise on the opportunities that stressed environments bring.

As regards forfaiting, there are opportunities in developed markets, with trade opportunities for developed assets. In emerging markets, there are lower margins but more trading opportunities. In the trade service there are a number of customers looking at short term trade borrowing – insurance backed short- term loans and letters of credit. Our trade finance business is predominantly benchmarking itself to trading companies, where there is considerable appetite.

However, there are other markets with great opportunities for the treasury business. Each product line has a different market segment and we have positioned ourselves for growth in each of these.

NF: Do you plan to continue FIMBank’s expansion in emerging markets or do you plan to look at mature markets?

MS: Our main aim is to first consolidate before expanding. As explained before, with regard to factoring we are looking at emerging or stressed markets. On the other hand, for forfaiting we are looking at emerging as well as mature markets where there is scope for growth and scale of opportunity.

As regards trade finance – we are benchmarking ourselves to trading companies, commodity traders and manufacturing companies – in both developing and emerging markets, but primarily clustered around the major trading markets of the world. For the treasury side of the business – this is being segmented in developed markets. Opportunities in Europe fund themselves due to cheap liquidity in the market. We will look to our controlling shareholders Burgan Bank and United Gulf Bank to provide liquidity. In the interests of diversifying sources of funding, Europe is very attractive option.

We were on a massive growth path without much governance,  I have had to reevaluate that and bring governance to bear in consolidating what has already been achieved. Although we had a presence in a number of markets we did not derive enough value from this presence.  We have now evolved from simply acquiring geographic spread to one where the present geography is being consolidated.  We have stopped further expansion in favour of achieving stability. Once we get there, we can start considering expansion on individual merits and a case-by-case basis.

NF: How are FIMBank’s controlling shareholders supporting the Bank?

MS: Our controlling shareholders, Burgan Bank SAK and United Gulf Bank (members of the KIPCO group), are very strongly committed to supporting us and this is reflected in terms of equity and funding, which does provide the market with significant comfort. The fact that I am here in Malta as CEO of the Bank is another indication of their commitment.

We are fortunate to have this commitment and support. This will allow us to establish a stable platform from which FIMBank can grow and realise its true potential.

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