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FIMBank is a trade finance bank that has been operating in Malta for a little over ten years now. Since then the bank has built a strong reputation for dealing in trade finance products and for locating and developing niche emerging markets.
Justin Tonna caught up with FIMBank’s new head of banking, Dr Armin Eckermann, to see what he will be bringing to the organisation and how the global financial situation has changed FIMBank’s procedures.
Trade finance is a complex subject, but essentially it involves providing various forms of financial assistance to importers and exporters of goods. For example, an importer may have to pre-pay for goods that he is importing and the bank can provide funds to do so. Additionally, exporters may request loans on the basis of their export sales contracts and this again falls under trade finance.
The advantage of this field of banking is that trade is the engine that drives the world economy. Even in these difficult times, products must still be shipped around the world as our today’s society simply cannot function without trade.
“FIMBank is primarily a niche market trade finance and services operation and my task is to grow these existing markets in order to expand our operations,” Dr Eckermann explains. Given that he has over 15 years experience in corporate and investment banking and has worked in London, Buenos Aires, Sao Paulo and Dusseldorf, Dr Eckermann is confident of achieving this goal.
FIMBank has developed steadily over the last ten years of operations and has focused on emerging markets around the globe.
“Now that we have attained a certain size we must strive to seek out specific customer groups, as well as looking at our portfolio in order to see how we can provide additional assistance to our existing customers. We also need to decide within the trade business cycles what type of business we want to avoid,” Dr Eckermann explains.
How would they achieve this within the trade finance field?
“Although we have created excellent relationships with numerous banks around the world, we need to take a good look at our import and export clients within specific markets and industry sectors, becoming even more customer focused than we already are,” he replies.
Traditionally, FIMBank has focused very much on emerging markets and developing nations. Why have these been so important in FIMBank’s business model, and what has the bank achieved by doing this?
“Our key markets have always been in North Africa and East Africa, as well as in the Gulf Corporation Countries. South America is another excellent market that is affluent in trade and commodities. These regions are extremely trade rich and we are able to offer a wide range of products to support this trade.
“Because the banking services in these developing nations may not have the same specialised trade finance knowledge that we possess, we are able to offer far greater assistance to our clients. It also means that as our clients subsequently grow, we are able to grow with them,” Dr Eckermann adds.
Currently the world’s financial situation has moved into something of an upheaval. How has this affected FIMBank’s business?
“With a few exceptions, we have seen an excellent financial situation for the last ten years. The US-Americans tried to enable home ownership by facilitating the purchase of homes for the less affluent members of society. However, the risk of these loans not being repaid had certainly increased over time. But due to the healthy financial climate the banks took on those loans, seeing that the value of property was continuing to rise.
“When the property market bubble burst, the banks that suffered the greatest were those that held these mortgage related assets – today often coined “toxic assets. When these assets lost valued it greatly impacted the value of their capital and the crisis began. FIMBank never bought those toxic assets because it simply was, and is not, our business model,” Dr Eckermann says candidly.
Perhaps the financial crisis may not have impacted FIMBank’s assets, but has it impacted their client base?
“A recession does not hit everyone equally and certain industries are always hit harder than other. However, liquidity – keeping cash available – still remains the key for trade. Although the prices of commodities, goods and services may change as a result of the current situation, our world will always need trade,” Dr Eckermann answers.
“There are hardly any risk free transactions around and most trade finance deals involve taking credit risk. That credit risk is perceived to be higher in emerging market. However, in general emerging markets have a higher growth rate with a very vibrant economic behaviour. Because of this potential for increased growth rate, the opportunities are similarly bigger and therefore emerging markets can add value to your operations. We at FIMBank always aim to structure the trade transaction in a way to satisfy the clients’ needs and our risk appetite at the same time. We should also consider that, in the current environment, there is a growing demand from manufacturers/exporters of machinery to hedge credit risk originated by exports to emerging economies. Because of its wide international presence, the FIMBank Group is well positioned to assist these companies to place these risks in the secondary market in the most cost-efficient way via LFC,” he adds.
In 2003, FIMBank purchased LFC - London Forfaiting Company - a company that has since grown to be an industry leader within this specialised field of buying and selling trade related financial instruments.
Another way in which FIMBank seeks to facilitate liquidity for its clients is through the factoring business. Factoring involves one company selling its invoices to the bank at a discount. The bank then collects the money due on these invoices, while the company that sold them receives a rapid injection of cash, allowing it to use that money to expand its operations.
So, having weathered the crisis and found excellent niche markets within developing countries, what does the future hold for FIMBank?
“We understand that trade finance products are fairly uniform amongst the industry, so we realise that the key is to deliver a product quickly, well and with a very friendly and best practice service. This is what will enable us to continually expand and enjoy the development we have achieved over the last ten years,”
In recent months we have seen many financial institutions encounter problems, but FIMBank are not only coping, but thriving. Their operations have expanded, they are seeking out new markets as well as new clients, and they are also finding opportunities within their own existing customer base. Although the financial future might not be rosy, the trade engine is still running and FIMBank are providing the fuel.
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