(The following statement was released by the rating agency)
Feb 12 - Fitch Ratings has affirmed Malta-based Fimbank's (FIM) Long-term
Issuer Default Rating (IDR) at 'BB', Short-term IDR at 'B', Viability Rating
(VR) at 'bb' and revised the Outlook on the IDR to Stable from Negative. The
Support Rating is affirmed at '5' and the Support Rating Floor at 'No Floor'.
RATING DRIVERS AND SENSITIVITIES - IDRs and VR
The bank's IDRs are driven by its intrinsic strength as reflected in its VR.
The ratings affirmation reflects the bank's niche focus on trade finance,
resilient profitability and relatively healthy asset quality, whose risk is
mitigated by the secured, short-term nature of much of its business. However,
the bank is relatively small in absolute terms and as a result, both funding and
assets are highly concentrated. Furthermore, Fitch's view is that its widespread
business, including a large number of minority stakes in various affiliates,
increases its operational risk and puts additional pressure on the value of its
franchise. Fitch considers its core capital ratio of 14.8% at end-June 2012 to
be just adequate for its rating level.
The revision of the Outlook to Stable reflects the actions FIM has taken to
improve its funding profile, to find new sources of capital and to bring in new
shareholders. These should enable it to compete more effectively in its chosen
markets. Nonetheless, the ratings remain sensitive to continued losses at its
affiliates and low profitability in its traditional trade finance business.
Furthermore, the ratings could be under negative pressure again if a change in
shareholding does not result in an improvement in capital ratios and a more
focussed strategy. Upward rating movement is limited given the bank's small
size, limited franchise and low profitability.
RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR
Although the bank would first look for support from its shareholders, the
availability of such support cannot be ascertained by Fitch and therefore it is
not factored into the ratings. The Support Rating and Support Rating Floor
reflect Fitch's view that support from the Maltese authorities may be possible
but is not certain and, again is not factored into the ratings. For the above
reasons, the lowest Support Rating of '5' and the Support Rating Floor of 'No
Floor' have been affirmed.
The Support Rating is sensitive to the rating and propensity of Malta to support
FIM. However, a strengthening of the shareholder base may result in an upward
revision of the Support Rating (and withdrawal of the Support Rating Floor),
depending on Fitch's view of the ability and propensity of any new shareholder
to provide support on a timely basis as and when required.
FIM is a bank based in Malta that specialises in international trade finance,
forfaiting and factoring. It fully owns a forfaiting subsidiary, London
Forfaiting Company, and has interests in factoring ventures with local operators
in emerging countries. It is currently in discussion with the KIPCO group of
Kuwait regarding their acquisition of a majority stake in FIM. The deal is still
subject to regulatory approvals.
The rating actions are as follows:
Long-term IDR: affirmed at 'BB'; Outlook revised to Stable from Negative
Short-term IDR: affirmed at 'B'
Viability Rating: affirmed at 'bb'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
(Caryn Trokie, New York Ratings Unit)