Business Times Africa Magazine 2017 /vol 9/ No2 BT2Edition2017_web | Page 53

MAURITIAN BANKS THINK BEYOND HOME COMFORTS
Meanwhile, the State Bank of Mauritius
Group (SBM), the country’s second
largest bank by total assets, saw after-
tax profits jump by 43% for year-end
2016. This was partly due to a reduction
in impairment charges. “SBM’s
performance in 2016 was good and at
par with our peer group.
The key takeaway is that there has
been growth momentum in our bottom
line parameters while our top-line
performance has exceeded national
growth,” says SBM Holdings chairman
Kee Chong Li Kwong Wing.
But it was AfrAsia Bank, which focuses
on corporate and investment banking, as
well as global business, private banking
and treasury and financial markets,
that produced the country's standout
performance according to most key
indicators. The group’s net profits grew
by 148% in the 2015/16 financial year
– a record – with net interest income
growing from MRs860m ($24.4m) to
MRs965m over the period, while the
bank’s return on average equity hit 19%.
“AfrAsia is on a journey to reach its
full potential as a business," says Sanjiv
Bhasin, chief executive of AfrAsia
Bank. "We have started this journey by
doing what we can in the best way we
can to increase our revenue and profit
streams. On a more structural basis,
we are working to improve governance
procedures, invest in our technology
and ensure our customer service is
market leading.”
Infrastructure boost
The good news for Mauritian
banks is that the domestic economic
environment looks set to improve.
Supportive government spending
under the Mauritian Public Sector
Investment Programme, which has
allocated about $4.3bn-worth of
investment between now and the fiscal
year 2020/21, is expected to provide a
boost to the country’s gross domestic
product growth.
MCB, the country’s largest lender,
expects the economy to expand by
4% in 2017 – assuming there are no
delays in project implementation – up
from 3.7% in 2016. “Looking ahead,
it is [worth taking note] of the array
of policy measures that have been
identified and are being implemented
by the authorities in order to gear up the
productivity and competitiveness of the
economy, notably via the unfolding of
large-scale infrastructure upgrades and
real estate projects,” says Raoul Gufflet,
deputy chief executive of MCB.
In the pipeline are plans to expand
the harbour in capital city Port Louis,
designed to capture a greater share of
the region’s container traffic, increase
the country's share of the Indian Ocean’s
bunkering activities, as well as to install
the necessary processing infrastructure
to position Mauritius as a seafood
hub. In addition, the development of
the Metro Express, a light rail project
that falls under the government’s road
decongestion programme, is expected
to provide a major investment boost.
“I think the new budget and the
government’s big public infrastructure
programmes will kick-start significant
demand for credit. This should help
address some of the excess liquidity in
the market,” says Mr Li Kwong Wing.
Liquidity challenge
In recent years, low demand for
credit and high capital inflows have
contributed to an excess of both
local and foreign currency liquidity
in the Mauritian banking sector. For
most lenders, this situation has been
problematic. In many cases, the bulk of
this excess liquidity has been allocated
towards Treasury bills, where the
average yield was below some banks’
savings rates, particularly during 2014
and 2015. For lenders with a growing
deposit base, these trends placed
unhelpful pressure on profitability and
margins.
But since 2015, the country’s central
bank, the Bank of Mauritius (BoM), has
taken a proactive role in sterilising this
excess liquidity. Moreover, reductions
in the base interest rate in late 2015 and
mid-2016 helped the banks to improve
their margins. These actions have partly
alleviated the challenges linked to the
country’s excess liquidity situation,
although there is still some way to go.
According to data from Swan, banks’
excess cash holdings in March 2017
were about MRs11.6bn.
Nonetheless, Mauritian banks are
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