BT Explains: What is BFC Bank and why is iFast buying it?

WEALTH management platform iFast Corporation on Friday (Jan 7) said it was looking to acquire an 85 per cent stake in BFC Bank.

The total investment amount of £40 million (S$73.4 million) comprises £22.6 million to fund the acquisition, £15 million as a capital injection into BFC Bank and £2.4 million to offset transaction costs.

The acquisition comes as iFast looks to build a global business model as part of its 5-year plan.

What is BFC Bank and who owns it?

BFC Bank is incorporated in the UK, and operates as a bank under the Financial Services Compensation Scheme. It traces its origins to the Bahrain Financing Company (BFC), a trader of gold bullion and foreign currency that was set up in Bahrain in 1917.

BFC Bank was previously known as BFC Exchange, which has since become a trading name within the bank that provides personal remittance services.

The bank is a wholly-owned subsidiary of BFC Group Holdings, whose parent company is Islamic financial services group Bank Alkhair. The latter had, in 2008, acquired controlling stakes in BFC in Bahrain, Bahrain Exchange Company in Kuwait and BFC Exchange in the UK.

The group specialises in global money transfer, foreign exchange and wholesale currency services. It operates a network of international exchange and remittance companies across Bahrain, Kuwait, India and Malaysia.

What does BFC Bank do?

BFC Bank is an online bank focused on international payments and cash management services for small to medium-sized enterprises (SMEs). It also provides support to payment service providers that may face difficulty accessing UK bank accounts and payments.

Instead of being a replacement for an SME's day-to-day business bank, BFC Bank said it "supplements the day-to-day provider" by providing basic corporate banking products related to international payments, multi-currency cash management and UK domestic payments.

Its annual report for 2020 showed that its business model includes money transfer and foreign exchange services; wholesale banknote services for central banks, commercial banks and top-tier non-bank retailers; and transactional banking services.

The bank does not operate a retail bank for individual customers, nor does it offer long-term loans for property or other purposes. It only provides accounts for corporate organisations, and only operates online for business clients.

Is BFC Bank profitable?

For the full year ended Dec 31, 2020, BFC Bank recorded a loss of £4 million. This was, however, an improvement from a loss of £5.1 million in FY2019.

Its net interest expense was £687,000, narrowing from £1 million in the same period a year ago.

For the 9 months ended Sep 30, 2021, iFast noted that BFC Bank posted a net loss of £2.2 million.

Why is iFast buying BFC Bank?

In a call with reporters and analysts on Friday, iFast's chief executive Lim Chung Chun said the acquisition - which will add a digital bank to the company's fintech ecosystem - will help the group meet its target of assets under administration of S$100 billion earlier than the targeted 2028.

BFC Bank also has a UK licence, which Lim reckons iFast could lean on to expand into other countries over the long term.

Lim had hinted that iFast would look to Europe to acquire a digital banking capability or licence as part of its 5-year plan.

The company had previously unsuccessfully applied for digital banking licences in Singapore and Hong Kong. Last year, it also submitted an application to Malaysia for such a licence.

READ MORE

• iFast to acquire 85% stake in UK-incorporated BFC Bank for £40m
• iFast's Q3 net profit up 23.3% to S$7.6m, group unveils 5-year plan to further propel growth
• Brokers' take: iFast remains mostly attractive to analysts after its latest results