Interview with Margrith Lütschg-Emmenegger - Malta Business Weekly

15.09.2009

1. How would you describe business at the moment and how is the trade finance sector doing in these troubled times?

Weakening economic cycles, financial market dislocation and lack of confidence continue to hamper liquidity and cause trade to slow down. The bottom line is that volume of goods being shipped across countries has experienced dramatic decreases. The IMF has forecast global trade to fall by at least 2% in 2009 but there are also indications that this could actually shrink by a double digit percentage. There is no denying that the lifeblood of the international trading system is trade finance, and the global shortfall has soared to US$100bn.

Although difficult market conditions will persist for some more time, trade finance in general has performed well and banks which have a strong focus on trade finance have generally outperformed commercial banks FIMBank will be maintaining its competitive advantage as a specialist trade niche market player and will concentrate on short-term financing of basic commodities which are considered immune to this crisis.

2. In view of the good results achieved by FIMBank over the first six months of the year, how do you view the next half of the year?

We are proud of the fact that despite negative economic trends in our major and emerging markets, the Bank was able to maintain its performance. Throughout this period, FIMBank reinforced its niche market position and further established its brand image as a trade finance specialist.

We have positioned ourselves well and subject to similar market conditions, we expect the second half of 2009 to be at a similar level if not slightly better.

Our factoring operation in Dubai has already started to contribute and we expect the same to happen with our joint venture company in Egypt, towards the end of 2009.

Additionally we have some very exciting projects in the pipeline and will continue to invest in order to support our customers and trade flows globally.

3. Do you forecast a turnaround by the end of the year?

It is difficult to estimate how long the recovery or “healing process” will take. I am confident that the earliest signs of improvement will probably occur by the end of 2009. Oil and commodity prices have rebounded ahead of recovery and financial market dislocation is diminishing. Bank lending remains tight. Following the spectacular bankruptcies and seeing their cost of capital soaring Banks have naturally become more risk-conscious than they have ever been. Projects and transactions need robust underlying fundamentals if they are to obtain the required financing.

4. Could you elaborate on the private banking venture in the Swiss market and what you hope to achieve by this step?

The FIMBank Group intends to start offering private banking products by setting up a Joint Venture Asset Management company in Switzerland in conjunction with a Swiss partner, a top Swiss Bank with over $20 billion in assets.

We see private banking as a highly synergic product to our existing customer base . With this move into private banking we will be expanding our product suite and enhancing our diversification with regard to income streams as well as risk profiles.

5. Does the group forecast further expansion in its core markets?

Certainly, especially in the area of factoring, where our joint ventures are at the core of Bank’s strategy. Factoring is the fastest growing trade finance product, and by attracting a strong partner in each of the targeted jurisdictions and having the International Finance Corporation (IFC) as a minority shareholder, FIMBank can benefit hugely from the business potential for this product in the targeted markets

We consider this to be the right time to enter the Russian market and we have a new factoring joint venture that will be established in Russia very soon. We have signed a mandate letter with IFC and Transcapitalbank (TCB).

We consider TCB to be an ideal strategic partner. It has a very strong client base and a network comprising a total of 69 offices located in 17 different regions in Russia. Shareholders in TCB include the European Bank for Reconstruction and Development and DEG, one of Germany's largest government-sponsored development institutions. The new joint venture company is expected to commence operations before the end of the year.

We have attracted India’s third largest bank to partner with us in this country. Punjab National Bank has already announced their partnership with FIMBank. We anticipate that the company will be operational by the first quarter of 2010. The factoring market is well-developed in India, however business potential remains very strong and we are confident that with the experience gained through GTF, we will be able to accelerate the development of this project and replicate this success story.

Discussions are also at an advanced stage as regards the possibility of partnering with a Pan-African Bank and acquiring a small company in Kenya to kick-start the factoring business in this continent. . During 2010 FIMBank will also be looking at establishing a joint venture in Brazil.

6. A final comment on the group’s plans for the near to medium term future

Although indicators of a quick return to full scale activities in the global markets remain limited, the fact that we have established a strong and tested foundation for sustained growth and profitability gives us plenty of reasons to be optimistic. The resilient performance of the Bank can be attributed to its strategic focus - our strategy entails continued growth in our existing established businesses.

FIMBank plans to maintain high capitalization and ratings in order to continue to attract institutional funding. We will also be looking at further expansion in our product range with a strong focus on high-value offerings. We will continue to build the FIMBank niche market brand name and the momentum acquired through our growing international presence as a result of our factoring joint ventures will support this drive.

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