Fitch Rating Agency affirms Malta's FIMBank plc long term rating at 'BB' and short term rating at'B' with outlook "Stable"

23.01.2009

Fitch Rating Agency, has affirmed its long term rating for FIMBank plc at BB and short term rating at B with Stable Outlook in January 2009. FIMBank’s management welcomed this affirmation as a further proof of the bank’s solid performance and resilience to the current economic downturn. In 2008 Fitch downgraded a significant number of banking institutions in major financial markets due to the effects of the sub prime, credit crunch and other relevant reasons.
Fitch Rating Agency’s rating of FIMBank (FIM) is affirmed because among other criteria, it “reflect its good management, acceptable asset quality, resilient core profitability and adequate capital ratios. They also factor in FIM’s small size, its exposure to counterparties in emerging and developing countries, concentrations in the loan portfolio and the funding base.” Fitch report dated January 2009
Other selected Extracts from the Fitch report were as follows:
“FIM’s profitability has been satisfactory since 2006, with operating ROE and ROA above the 12% and 1.9% mark, respectively, reflecting favourable trade finance markets and strong business development at the bank. Although increasing in H108, credit costs remained acceptable while cost efficiency remains fairly low. FIM should continue to benefit from international trade flows in 2009, as it was in 2008. Its performance may weaken slightly, given declining commodities and goods prices but should remain at satisfactory levels..

FIM is mainly exposed to credit and counterparty risk arising from interbank lending, forfaiting and off-balance sheet exposures. Country risk, with exposure to African, Asian, Latin American and emerging European countries, mirrors the bank’s focus on developing trade finance business with a number of developing and emerging economies. However, the short-term and self-liquidating nature of trade finance transactions mitigates the country risk. Concentration in the loan book remains significant. The bank has managed to maintain impaired loans at an acceptable level, with an impaired loan ratio at 3% and a loan loss reserve coverage ratio of 107.8% at end-H108. Trade finance activity exposes the bank to significant operational risk.

Funding is based on short-term interbank funding, largely made up of correspondent banking accounts and placements from African banks. In H108 the bank also increasingly derived its funding from its client deposit base. Concentration in the funding base is also high, exposing FIM to some volatility risk. Liquidity is adequate, with some 26% of assets invested in cash and other liquid items and the large majority of the remaining assets being short term.

Further to the strengthening of its equity base in 2007 and early 2008, which almost doubled to USD118m at end-H108, FIM’s eligible capital/ weighted risks ratio stood at a sound 18.15%, down from 35.89% at end-2007, due to strong asset growth combined with the negative impact of Basel II adoption.

FIM is a niche bank specialised in short- and medium-term trade finance and correspondent banking. It develops for its clients tailor-made financing products, including forfaiting and factoring, benefiting from its relationships with banks based in about 55 countries. In addition, FIM arranges or participates in syndicated short term loans in connection with trade transactions and develops special skills in the pre-demolition ship finance business. FIM’s franchise is geared towards the corporate sector (mainly trading companies) and financial institutions, although the bank has been able to attract individuals through credit card and deposit account services, largely from existing clients in relation to the bank’s pre-demolition ship finance business. In 2008, FIM established a USD50m forfaiting SICAV in partnership with Exotic Ltd, a fully-owned subsidiary of the world largest inter-dealer broker, ICAP plc (rated ‘BBB+’/Stable), and managed by LFC. FIM plans to offer this new product to high net worth individuals and institutional clients once there is a comfortable track record.” Fitch rating report January 2009

To obtain the full report on Fitch rating of FIMBank, please contact FIMBank plc on 21322100, or email us on FinancialInstitutions@fimbank.com.

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