The 11th Asia-Europe Business Forum (AEBF 11)

Seize the trend, Time for Action and Public-Private Partnership

Intervention by

Margrith Lütschg-Emmenegger President

21st – 23rd October 2008China World HotelBeijing, P.R. China

 

CONCURRENT SESSION III:  SME DEVELOPMENT WORKING GROUP

Table of Contents

1. FIMBank’ Corporate History in Brief

2. SME – Financial Crises – Evaluation and Consequences

3. Some Potential Solutions – Trade Finance and Products

4. Which Products and Why

5. What it can mean for China

6. Way Forward – Actions Needed

100%

38.5%

40%

100%

100%100%

Rights issueUS$25m

FIMBank established in Malta by leading Middle East businessmen

Setting up of FIM Business Solutions

IFC joins as a shareholder and long

term partner

Acquisition of LFC• Global reach• Forfaiting

expertiseIncrease in

capitalUS$15m

Initial licence DIFC Dubai for

MENAFACTORSAcquisition of

GTF• Factoring• India

FIMBank is listed on the Malta Stock

ExchangeDebut in the

International Capital Market

Syndicated loan US$30m

Hired key management from WestLB (leader in

trade finance)

Opening of LFC office in Singapore

Rights issue

US$15m

Setting up EGYPTFACTORS

1994

Mar 01

Feb 03

Sep 01

Dec 04

Nov 05

Jun 05

Dec 06

Oct 03 Dec 07

Jun 05

Nov 03

Dec 05

Oct 06

Selling Equity in GTF India

March 08

FIMBank’s Corporate History

BE THE BEST TRADE FINANCE BOUTIQUE IN THE WORLD

BY PROVIDING INNOVATIVE SOLUTIONS IN ALL TRADE RELATED ACTIVITIES

GLOBALLY

Vision

FIMBank Group’s Core Mission

FIMBank Focus

Trade-related Business

Trade will never stop Trade drives economies

7

FIMBank’s Core Products

We provide TRADE FINANCE, i.e. the following products:

Support Services

International Fund Transfers

FX, Forward Contracts, Currency Options and Swaps

Issuance of Guarantees

Core Competencies

Trade Finance

Pre-demolition Ship Finance

Syndications / Risk Participations

Forfaiting

Factoring

8

Istanbul

Sao Paulo

New York

Cairo

Mumbai

Malta

Moscow

Dubai

UKGMT

MaltaGMT +1

SingaporeGMT +7

US WestGMT -9

US EastGMT -5

SydneyGMT +9

FIMBank Group – Overseas Network

LFC FIMBankJoint VenturesJoint Venture and FIMBankLFC and FIMBank

Singapore

London

Group Key Performance Ratios

Key Performance Ratios Jun-08 Dec-07 Dec-06

Operating Income/Total Assets 5.1% 4.5% 4.7%

ROAA 4.7% 2.0% 0.8%

ROAE 31.6% 13.0% 5.1%

Impaired Loans/Gross Loans 2.6% 4.0% 4.5%

Loan Loss Reserves/Impaired Loans 109.7% 102.0% 94.2%

Group Solvency Ratio 21.2% 35.4% 27.1%

Group Solvency Ratio

Basel II impacted ratios (as from March 2008), however capitalization remains well above regulatory threshold

0%

5%

10%

15%

20%

25%

30%

35%

40%

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Regulatory Minimum Solvency ratio

Group Liquidity Ratio

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

03/0

1/06

03/0

2/06

03/0

3/06

03/0

4/06

03/0

5/06

03/0

6/06

03/0

7/06

03/0

8/06

03/0

9/06

03/1

0/06

03/1

1/06

03/1

2/06

03/0

1/07

03/0

2/07

03/0

3/07

03/0

4/07

03/0

5/07

03/0

6/07

03/0

7/07

Regulatory Minimum Daily Liquidity Ratio

FIMBank’s liquidity ratio (monitored daily) consistently above the regulatory minimum, with an upward trend in the last two months (despite global liquidity crunch)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%0

3/0

1/2

00

7

03

/02

/20

07

03

/03

/20

07

03

/04

/20

07

03

/05

/20

07

03

/06

/20

07

03

/07

/20

07

03

/08

/20

07

03

/09

/20

07

03

/10

/20

07

03

/11

/20

07

03

/12

/20

07

03

/01

/20

08

03

/02

/20

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03

/03

/20

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03

/04

/20

08

03

/05

/20

08

03

/06

/20

08

03

/07

/20

08

Regulatory Minimum Daily Liquidity Ratio

SME’s are in (almost) all countries the main Drivers of the Economy;

SME’s will be the first to ‘suffer’ from the lack of liquidity;

Larger financial institutions – in crises and in normal circumstances – have found/find it difficult to service the SME sector;

Trade (domestic and international) will continue to drive the global economies for many centuries to come:;

Trade Finance is not synthetic business but real and true – hard work and honest;

There are certain products that support trade finance for SME’s particularly strong and well

Financial Crises and SME’s

13

Products: Forfaiting

Discounting of international trade receivables on a “without recourse” basis

In essence, a form of supplier credit

Negotiable documents:

Accepted Bills of Exchanges by Importer/Buyer

Promissory Notes issued by Importer/Buyer

Letters of Credit

Book receivables with separate guarantee

Tradable assets:

After discounting the debt instruments, the forfaiter can hold them to maturity or trade them in the secondary market

14

Products: Forfaiting

Offered within the FIMBank Group through our 100 % Subsidiary

Acquired in 2003

Market Leader – Best Forfaiting House Award in 2005, 2007 and 2008

15

Products: Factoring

Financing of Open Account sales/invoices on a continuous basis

Tenors: usually 30-90 days (max. 180 days)

Usually covering exports from Emerging Markets (performance risk) to Developed Markets (payment risk)

Notice of assignment is given by debtor/buyer

Factor assumes at least two of the following functions:

Credit Protection

Financing/Prepayment

Collection

Credit Management

Sales ledger administration and analysis

16

Products: Factoring

Blueprint for Factoring within FIMBank

Joint Venture with Export Import Bank of India, International Finance Corporation (World Bank) Bank of Maharashtra – FIMBank 40 % acquired in 2004;

SOLD in 2008 – NOT Strategy but good profit opportunity;

Case Study !

Followed by : in 2007 and in 2008

Global Factoring Growth Rates

Domestic Factoring

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2002 2003 2004 2005

Global Volumes (US$ billion)

CAGR: 17%

2006

International Factoring

$0

$20

$40

$60

$80

$100

$120

$140

$160

2002 2003 2004 2005 2006

Global Volumes (US$ billion)

CAGR: 32%

Source: FCI

Factoring is the fastest-growing product in global trade finance Factoring is the fastest-growing product in global trade finance

Source: FCI

Market size: US$1 trillion

Ongoing arrangement

Open Account Sale

Provides other than financing services

Used for offering short-term credit to regular buyers (up to 180 days)

Both with and without recourse

For domestic and export receivables

No minimum size

Cross-border trend = EMERGING DEVELOPED

Market size: US$80 billion (est.)

Single transaction based

L/C or Bank Acceptance Required

Primarily a Financing Service

For medium/long-term transactions which could be “one-off” (90 days to 7 years)

Without recourse

Usually for export receivables

Transactions should be minimum US$100,000

Cross border trend = DEVELOPED EMERGING

FACTORING FORFAITING

Similar but different – highly complimentary

FASTEST GROWING

TRADE FINANCE PRODUCT

MORE STABLE

MATURE PRODUCT

The Products Compared

Pre-Post shipment

Financial Risk

Security/Collateral driven

Price effective for good Balance Sheet

With recourse

FACTORING and FORFAITING: By experience – does not work at its best within a

Banking Environment but much better in a separate independent Company.

Post shipment Performance and Debtor

Payment Risk Cash flow/Portfolio/Buyer

driven Value proposition for all

clients (including SME’s) Without/Limited

(performance) recourse

Trade/Bank Finance Factoring/Forfaiting

The Products Compared vs Bank Trade Finance

These products can support SME’s to facilitate trade (domestic and international)

• Access to trade finance NOT based on balance sheet/size but performance, track record, quality of product and buyers

• Less risk – better conditions

• Less cost – better cash flow

• Concurrent Session IV: Trade and Investment Facilitation Working Group

Consequences for SME’s in CHINA

IMPORTANT

Products must be offered professionally – NOT as a pure banking product

Non-Banking-Financial-Institution proven to be the best format to offer these products most successfully and beneficial

CHINA does NOT YET have the right environment to offer these products optimal to the Chinese SME’s which need the help urgently to master

the crises !

Jointly we should be able to cooperate with the authorities to adjust to the market needs so that SME’s can get access to these products professionally and easily and accelerated.

Consequences for SME’s in CHINA

We cannot change We cannot change

the direction of the wind,the direction of the wind,

however we can adjust however we can adjust

our sails!our sails!

Thank you for your attention