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Financing Trade Enabling Opportunities - June 2014

The Economic Update, Interview with FIMBank President Margrith Lutschg-Emmenegger

1. How has the entry of new institutional shareholders, which took place in 2013, affected FIMBank to date?
Earlier this year, Burgan Bank and the United Gulf Bank (both members of the KIPCO Group), jointly increased their stake in FIMBank to just over 80% as a result of a voluntary bid announced towards the end of 2013. Following a difficult 2013 characterised by some fairly significant impairment events in the main component entities of FIMBank plc and London Forfaiting Company Limited we have been concentrating  to get a better insight and understanding of  the KIPCO Group, the largest diversified holding company in the Middle East with consolidated assets exceeding USD 30 billion. As a result, we are now  working towards establishing new intra-group business relationships and securing better funding opportunities from our new shareholders.

2. How would you describe the FIMBank Group’s performance in the first half of 2014?
We are seeing good operating results in the main component entities with slightly improved revenue levels when compared with the same period last year, both in terms of interest spread and fee income. On the other hand, we have been receiving mixed signals from our associated factoring entities.  Impairments continue to impact the performance of Factorrus in Russia, while Egypt Factor’s outlook remains cautious due to the situation in the country. Meanwhile, we have persisted in our recovery efforts with regard to 2013 impairments across the Group. However, these have yet  to yield the desired results.

3. Are there any developments regarding the Bank’s international factoring joint ventures?
Our international factoring strategy is being adjusted to take into consideration the fact that we now form part of a premiere Middle Eastern conglomerate, have better access to less expensive  funding, and have the opportunity to gain control in the affiliate companies by taking  a majority shareholding which will give us  better controls over activities including risk management. Consequently, FIMBank has increased its shareholding in India Factoring to 79%, while acquiring the shareholding of our Russian partner in FactorRus, taking us to 80 % shareholding with IFC (part of the World Bank Group) holding  20%.

4. Can you tell us something about what FIMBank has in the pipeline for the near future?
We are working on a number of new projects and initiatives to grow our footprint in line with our strategic objectives. We have entered the  Greek market through our Passport rights and will shortly be announcing the official opening of our Greek branch. We hope  to start testing a new Leasing product later on this year, where pilot testing will take place in our 100 % subsidiary MENAfactors in Dubai. Late last year we signed a shareholders’ agreement with PRVI Faktor, a Slovenian factoring and finance company with operations in Central Europe. Discussions are still underway in this regard.  South America remains an important market for us, and here we are in negotiations with the owners of a family owned company in Chile, where negotiations are going well.

5. What are your plans for your new branch in Greece?
In our Athens branch we will be providing a comprehensive range of trade finance and banking solutions, targeting corporate clients, particularly traders, importers and exporters. Our presence in Greece will enable us to provide forfaiting, factoring and other alternative trade finance solutions in support of Greek companies. We are confident that the comprehensive technical know-how and business acumen of the team we are building in Greece, led by Demetris Zouzoukis, will translate into a very positive experience for FIMBank.

6. Can you provide further information regarding the Rights Issue that was announced this month?
The Annual General Meeting held on the 8th May, approved a resolution to make two rights issues over two years to raise in aggregate a minimum of USD 100 million. A first Rights Issue of USD50 million has been announced for June 2014 and another Issue of a similar size shall follow, potentially as early as 2015. These developments will allow us to grow safely and maintain strong ratios under the new Basle III rules. We are also very pleased that we remain listed on the Malta Stock Exchange despite having slightly less than 25 % of our shares in the public domain now.

7. Can you provide further information on these rights issues for the benefit of existing FIMBank shareholders?
At the beginning of the month we had announced that FIMBank’s prospectus had been approved by the Listing Authority. We also received authorization for the admissibility to the listing of an additional 77,009,494 new ordinary shares with a nominal value of USD 0.50.  FIMBank shareholders as at 21 May 2014 are entitled to subscribe to 16 new ordinary shares for every 41 shares in their possession at a subscription price of USD 0.65. The acceptance period opened on the 11th June and will end on the 25th June. If subscribed in full, the Rights Issue will raise gross proceeds of USD 50 million. Full details are available in our prospectus dated 3 June 2014 which is available for download from our website

8. What will happen with any lapsed rights from this first Rights Issue?
Any lapsed rights from this first Rights Issue will be offered to financial intermediaries during an Intermediaries Offer.  There is also an underwriting agreement undertaken by Tunis International Bank (TIB) in favour of FIMBank to subscribe to such number of new ordinary shares under the Rights Issue not subscribed to during the Intermediaries Offer. The obligation of TIB under the underwriting agreement is limited to a maximum value of USD 5,000,000.

9. Will FIMBank remain listed on the Malta Stock Exchange if the percentage of shares in public hands falls any further?
The proportion of ordinary shares that is in the hands of the public is currently circa 20%.  We have considered a possible scenario, whereas as a result of the Rights Issue, this would actually decrease to below 17%, and we therefore approached the Listing Authority. The authority confirmed that in this case the Bank’s listing on the MSE will not be prejudiced, subject to a number of conditions with which the Bank is very comfortable. Our institutional investors’ wish is for FIMBank to remain listed on the Malta Stock Exchange, thus allowing long-standing shareholders as well as new investors to continue to participate in FIMBank’s success story. 

10. How do you see the future for the FIMBank Group?
I see a very bright future for FIMBank. Our strength has always been our ability to re-invent ourselves to adapt to the new realities and challenges with which we are faced from time to time. The Group can now boast a strong reference shareholder with a good rating, which has already started facilitating access to funding and has led to a stronger equity base. Moreover, maintaining strong capital ratios and enhancing our credit rating shall be critical to the future development of the FIMBank Group. Our focus shall remain on Trade Finance, where we shall strive towards further strengthening the Group’s operating performance. Trade Finance, which is a banking business servicing the real economy, remains fundamental for the efficient functioning of global trade. And nobody can surpass our reputation in providing tailor-made Trade Finance solutions to customers from all over the world.