Fimbank will be able to move first to bring Islamic banking to Malta, tap new markets, and target larger clients if Middle Eastern institutional investors take a controlling interest in the next few months, bank president Margrith Lütschg-Emmenegger has told The Times Business.
With a commitment for additional equity of $160 million – which doubles Fimbank’s equity over the next 18 months – the Malta-headquartered trade finance bank has the potential to triple, even quadruple, its balance sheet over the next five years, she said.
Ms Lütschg-Emmenegger underlined how Fimbank is headed towards a major strategic turning point if the joint offer by Kuwait-licensed Burgan Bank SAK and Bahrain-licensed United Gulf Bank BSC is given the green light by shareholders at the extraordinary general meeting on January 31. The development is also subject to regulatory approval.
Both are part of the Kuwait Projects Company Group, which has significant investments in the Middle East and North Africa. Initially, Burgan and UGB will acquire 37.04 per cent of the bank’s capital through a combination of debt-to-asset swap and an outright acquisition, both with Massaleh Investments KSCC.
Massaleh is a wholly owned subsidiary of Kuwaiti Interests for Development Holding KSC, whose shareholders are members of the Musaad Al Saleh family. It holds a 38.52 per cent shareholding in the Fimbank Group.
UGB will provide a convertible loan of $60 million to the bank which may be converted into newly issued listed shares to the bank. UGB is expected to launch a bid for shares held by other shareholders. Fimbank will launch a $100 million rights issue.
“This is a positive development all round, Ms Lütschg-Emmenegger said. “Fimbank brings trade finance expertise to the table. In turn, the investors bring a rating well above investment grade, so critical in today’s operating environment. Fimbank will finally be able to potentially achieve investment grade status too, and will be able to obtain funding lines with other banks by being part of this group.”
Becoming an investment grade bank will open several doors to Fimbank: in Malta it will be able to do business with local and foreign insurance companies and Maltese-registered funds whose statutes often restrict them to partnering investment grade institutions. It will allow the bank to pursue its long-held ambition to establish a presence in Switzerland, which it has so far been unable to do fully.
Backed by increased access to Islamic finance expertise in Kuwait, Fimbank could enjoy first mover advantage by bringing a Shariah-compliant banking proposition to Malta. With growing demand for Islamic banking facilities in the region, Burgan Bank is keen to support the development of a ‘window’ for this sector in Malta, particularly as Kuwaiti regulation only allows the establishment of fully-fledged banks offering Islamic finance.
Burgan Bank and UGB, which gain European passporting rights in the transaction, put a larger, more diversified network at Fimbank’s disposal and will allow it to continue to build its emerging markets portfolio by pursuing business in new regions.
“The only country which we have in common in our networks is Turkey,” Ms Lütschg-Emmenegger added. “The investors’ have majority shareholding in banks in Iraq, Tunisia, Jordan, Algeria and Turkey. These are all markets we are keen to tap. Now Fimbank can also do some business in China – we were too small before.”
Fimbank will continue to operate under its current name and will maintain its independence similarly to all other banks in the Kuwaiti group’s portfolio. All acquired banks within the group have their own brands, management and boards.
The wider remit of Fimbank’s business will see staff numbers grow by approximately 50 in Malta in the shorter-term – Fimbank has increased space after moving to The Exchange in St Julian’s last summer – and teams across its forfaiting and factoring joint venture network will be strengthened.
Ms Lütschg-Emmenegger underlined how all stakeholders were set to benefit from the advantages of these developments at Fimbank. Malta’s financial services offering will be enhanced as a result and will contribute to cementing the island jurisdiction’s proposition.
Fimbank’s 900 minority shareholders could see the values the bank has aspired to, and be repaid for their 10-year support of the bank while it sought growth.
“Fimbank will have to think bigger now,” the president added. “Many of the larger corporates will become accessible customers to us. We hope to be able to grow the small customers alongside us. We will be able to be involved in larger deals with our present customers who are continuing to request larger limits.
“Fimbank will be more competitive on the banking circuit – we can handle better volumes and improve the risk profile, become involved in more syndicated loans and have additional lines.”
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