FIMBank CEO Murali Subramanian discusses the bank’s progression and Malta’s economic outlook.


Q: What were the challenges and opportunities for FIMBank in 2017, and how were they dealt with?

Subramanian: After our first profitable year in 2016, the priority was to continue the legacy clean-up while building business disciplines and introduce growth opportunities, even as we focussed on recapitalising the bank. This has come along well and FIMBank has demonstrated nine straight continuous quarters of profitable results at the end of September, positioning us well for a good 2017 close. The main challenge faced was one of managing stricter regulatory requirements and containing growth, while awaiting recapitalisation while improving the operating performance. This was accomplished by a move towards better quality business that was remunerative, and with the introduction of cash management services and other client fee products that complemented the risk taking operations.


Q: While FIMBank is traditionally an international bank, the past 12 months has seen it go into real estate finance specifically for Malta, principally providing financing solutions to established developers for the acquisition and development of property. Why was this decision taken and what have the effects been? What does FIMBank hope to achieve through this in 2018?

Subramanian: FIMBank has traditionally been a trade finance bank focused on international operations, and that has not changed. It is entirely in keeping with FIMBank’s location and commitment to Malta that we launched a real estate developer financing business and focused on trade finance for Maltese corporates. There were several other reasons to do so besides a demonstration of commitment to our domicile. FIMBank’s main operating deposits are in EUR, consistent with our operations in Europe, and the earlier strategy did not have any EUR asset classes since world trade is almost totally USD denominated. With a slow but sure economic growth ahead in Europe, it is the right time to invest in relationships with Malta’s largest corporates, as well as several mid-market corporates in continental Europe that have successful business models. In 2018, FIMBank looks forward to growing its Malta and Europe focused book significantly, without diluting its risk or client focus as presently set.


Q: FIMBank has signed up to the Target2 payment system, operated by the European Central Bank System. Why and what affect will it have on customer relations, the bank’s operations, policies or procedures?

Subramanian: Target2 is the high value EUR clearing system that complements SEPA, and banks located in Europe access both systems, either directly or indirectly. FIMBank has been accessing both systems using correspondent banks in Europe, and while there is not much of a cost differential, this leads to a restricted service offering FIMBank could offer its client base. Taking into account the refinement in our business strategy of focusing on core clients with European and EUR-based operations, and providing them superior service levels, it became necessary for us to access the high value clearing system directly. A benefit from doing this was seen immediately, as FIMBank became a direct counterparty for thousands of banks worldwide that were otherwise paying into the correspondent bank on our behalf. Clients have benefited by being able to make payments later without affecting the value dating, and are able to deliver payments electronically to FIMBank via FIMBank Direct, our new client portal. FIMBank’s own operations are largely unchanged, though the correspondent banking business stands to benefit by introductions to hitherto indirect contacts with banks servicing our clients’ supply chains.


Q: What are your priorities for 2018 and which key areas are you looking to expand in primarily?

Subramanian: In 2018 we expect FIMBank to achieve scale and stability in its business model, and position to return double digit returns on equity. Leading drivers for this will be a stable origination model accompanied by lower cost of funds and a reducing NPA book. Our business model is global and is selective to ensure attractive returns for risk being taken; we are confident of a good 2018. We expect to do more with corporates and developers in Malta, as also build our emerging markets business out of Dubai and the European business out of Malta and London. Our strongest competition is ourselves, such is the opportunity in the space we are active in.


Q: In view of Malta’s consistent economic growth, what are you envisioning within your bank and the banking system at large in 2018?

Subramanian: Our prospects for 2018 are of course guided by the optimism and growth in Malta where we have a growing local business, but overall this is likely to be just a continuation of the execution in 2017, with additional capital allowing us to convert the rich pipeline of client business we have prospected. Economic growth is of course important for all businesses, but more so for a large and pan-continental bank than FIMBank which has done well in all economic cycles, and has the breadth and diversity to find opportunities, no matter how the world and European economy is doing. We expect to build our business to a higher level of sustainable profitability with better quality diversified business.


Q: How did the banking sector in Europe fare in 2017?

Subramanian: There has been a move towards health in the sector throughout Europe, with the weakest and most unsustainable banks either challenged by the regulator or dealt with. Examples come to mind in Malta and Spain in this regard. New ECB regulations and structures to deal with bank health and recovery plans took shape and resolution plans were tested, in some cases successfully. Globally, there has been a realisation that regulation had gone too far and was questioning the long term viability of banking, though actions are yet to follow. Otherwise, the economy globally and in Europe has benefited from growth and banks have only their own internal restrictions preventing them from participating. The one issue that continues to loom is that of non-performing loans which hasn’t been resolved, though there was some talk of a Europe-wide ‘bad bank’. This will define the ability of the banking sector to support the incipient economic growth, even as the ECB drops early hints of tapering the QE.


Q: Malta is becoming an investment hub for businesses and expats alike – how can this benefit the banking sector to enhance profits and encourage further economic growth? On the other hand, are banks doing enough and taking sufficient measures to allow businesses room to grow?

Subramanian: There are several sectors that benefit from the economic growth and they are all well banked at the moment. The influx of investors and professionals to Malta has of course provided banks with retail operations an opportunity to pursue their onshore business needs. Banks in Malta are generally well capitalised and have ample liquidity, though they will rely on their prudent judgement to conduct any business expansion based on the new opportunities presented. Banks in general are paying more attention than ever before to regulatory requirements; that will influence how they respond to the opportunities mentioned.


Q: What are your internal projections for the Maltese economy for 2018 and the general business sentiment for different industries? Which businesses will do better than others and why?

Subramanian: The European Commission spring 2017 report and the Central Bank report inform FIMBank’s own projections and understanding of the Maltese economic performance and outlook. Our understanding is that Malta is poised for another strong year of growth, accompanied by low inflation and unemployment, as well as low deficit and public debt and high current account balance. In short, the economic story for Malta in 2018 is the best in Europe, considering that Malta doesn’t benefit from any of the advantages of the wealthier European economies. Focus in 2018 is to be expected on infrastructure and public health as can also be seen from the recently announced budget. We expect several PPPs as well as large projects to be announced in this space. Another industry we expect to undergo significant change is real estate, where commercial development will lead to significant investment interest from global sources while offering higher takeout opportunities for existing investors. Malta is investing in digital technologies to transform its businesses, and this will make an impact in productivity and connectivity terms. Overall, a great year is expected for construction and real estate, infrastructure, and services.