The Mauritius Commercial Bank Ltd.

Presentation by:
Antony R. Withers
Chief Executive (Banking)
Jean-François Desvaux de Marigny
Head Group Finance & Company Secretary

October 2010
 Agenda
 Overview of MCB Group
a. Profile
b. Value proposition
c. Achievements

 The Operating environment

a. Background
b. Economic climate
c. Banking sector challenges

MCB Performance & Orientations

a. Financial results
b. Strategic orientations
Overview of MCB Group
 MCB: Leading the way…

The Mauritius Commercial Bank…

The leading banking and financial

services institution in Mauritius and
the Indian Ocean

Warm, welcoming, professional,

innovative, fast and quietly efficient

Mauritius – Seychelles – Madagascar – Mozambique

Maldives – South Africa – Réunion – Mayotte - France
 Leading banking institution in Mauritius
Founded 172 years ago…
Moody’s ratings
… The MCB has an unmatched domestic franchise
Foreign Currency Deposits Baa2/P-2
 Market shares of some 40% in respect of credit to the economy
and local currency deposits and above 50% of cards issued in Foreign Currency Issuer Baa1
Mauritius
Global Local Currency Deposit Baa1/P-2
 Extensive network:
Financial Strength D+
40 branches
150 ATMs incl. 10 Forex ATMs - 39% of overall ATM park NSR Senior Unsecured
Aa3.za
MTN-Domestic Currency
Above 4,300 point of sale terminals
NSR Subordinate
 2,600 employees; over 18,000 local & foreign shareholders; MTN-Domestic Currency
Aa3.za
around 750,000 individual and institutional customers

NO. 1 Stock Exchange

on the of Mauritius: 22% of total market capitalisation

Bank of the Year PricewaterhouseCoopers

Two years in a row Corporate Reporting Awards 2010
(The Banker, The Financial Times Ltd) Best SEM-7 company Overall winner Best web site
 Reference player beyond local shores
MCB: An increasingly prominent institution in sub-Saharan Africa …

 …Presence in 8 countries overseas via MCB Global Rankings

subsidiaries, associated company and (The Banker Top 1000 World Banks, July 2010)
representative offices

 743rd among the Top 1000

 Dedicated desk to tap into the potential
Banks … a drop of 47 places
of global ventures
and 25th in sub-Saharan
Africa … only local
1st bank in East Africa bank in the ranking
in terms of capital & profits
(African Business)
 134th worldwide in terms of
soundness … an honourable
Leading regional bank place
(Eco Austral)
 Business positioning
Business segments

Non-bank
International Global
Retail Corporate Cards financial
operations business
services

Including: Private Banking

Financial solutions

Financing | Payment services | Wealth management & investment | Remote banking | Investment &
securities services | International services | Trade Finance | Cards services/products | Business services
Foreign exchange services | Leasing
 Strategic model
Endorsing ambitious business development and strong risk
management…
… The MCB is basically a savings bank, doing business the classic way

Strategic Simple & rapid

orientations decision-making

Prompt
State-of-the-art Customer
Support to Increase in Expansion of decision-taking
technology care
structure
local international non-bank
business footprint financial services

(i) Business Unit

Internet (ii) Credit Risk
T24
Banking
(iii) Executive Credit
Committee
The Operating environment
 Background
Operating environment pressurised by …

• Subdued economic climate domestically and abroad

• Unfavourable money and capital market dynamics

Yet, adverse impact on MCB is restrained by…

• Solid economic base nationwide

• Ongoing reforms by the authorities to re-ignite economic activity

• Sound fundamentals and strategic orientations of the Group

 Economic difficulties prevail …

Key macroeconomic challenges Economic growth

• Slowdown in economic growth and 7

6
moderate short term prospects 5

%
Key sectors such as tourism, export 3

2
oriented and sugar impacted 1

• Sluggish private sector investment 2006 2007 2008 2009(e) 2010(f)

GDP growth GDP growth (excl. sugar)

• Pressures on external front, exchange (e) official estimates (f) MCB forecasts

rate and public finances

 … yet, foundations remain healthy
 Mauritius is withstanding the Sector contribution to GDP
Sugar 2.1%

difficult external context thanks Non-sugar agriculture 2.7%

to…
Food manufacturing (excl. sugar) 6.7%

Textile 5.4%

• A diversified economic base

Other manufacturing 6.9%

Construction 7.1%

• Pragmatic and proactive 2009 Wholesale & retail trade 11.2%

Hotels & restaurants 7.3%

policymaking Transport, storage & communications 10.7%

• An appealing business
Insurance 2.8%

Banking 7.5%

environment Other financial and business services 8.0%

Social & general public services 15.2%

Others 6.4%

Measure Global Ranking of Mauritius

World Bank Doing Business Survey 2010 17th out of 183 countries

Global Competitiveness Index 2010-2011 55th out of 139 countries

World Index of Economic Freedom 2010 12th out of 179 countries

Global Enabling Trade Index 2010 33rd out of 125 countries

 Banking sector challenges
Banking sector: credit to the economy
(quarter-on-quarter growth)

10
Issues for consideration
8

• Impaired client credit worthiness

%
4

and dampened availability of new 0

projects -2
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

Auctions of Government of Mauritius Treasury Bills

• Pressures on investment and 25

20
15
trading market activity 10

Rs bn
5
0

• Relatively high liquidity situation -5

-10
-15

Jul-10
Mar-10

May-10
Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Jun-10
Aug-09

Apr-10

Aug-10
Amount of bills put on tender
Value of bids received
Excess bids put on tender relative to demand
 Evolution of key interest rates

Evolution of Repo rate, Bank rate and MCB Prime Lending & savings rates
Evolution of Repo rate, Bank rate and MCB Prime Lending & Savings rate

12

10

8
%

0
Jul-08

Jul-09

Jul-10
Sep-08

Nov-08

Jan-09

Mar-09

Nov-09

Jan-10

Mar-10
May-09

Sep-09

May-10

Sep-10
Bank rate MCB Prime Lending rate Repo rate MCB Savings rate

Note: In September 2010, the benchmark Repo rate was slashed by one percentage point to reach 4.75%
Financial results
 Group financial performance
Year ended to
Income Statement Growth
30-Jun-09 30-Jun-10

USD m USD m %
Net interest income 157 161 2.2

Non-interest income 101 89 (11.5)

Non-interest expense 109 116 6.8

Operating profit before provisions 149 134 (10.4)

Allowance for credit impairment 12 9 (26.7)

Net profit 124 107 (13.9)

Reference rate : USD 1 = Rs 32.00

Balance Sheet as at: 30-Jun-09 30-Jun-10 Growth

USD m USD m %
Total assets 4,702 5,086 8.1

Net loans 3,027 3,420 13.0

Total deposits 3,789 4,140 9.3

Equity 580 635 9.4

 Summary

Results impacted by testing economic and … yet, commendable realisations by

financial market environment … the MCB have been observed

• Resilient increases in net interest income

• Decline of some USD 12 million in profit related
as well as net fee and commission
to forex dealings given adverse market
income
dynamics
• Appreciable foreign sourced income in
• Drop of USD 5 million in effective share of net
line with diversification strategies
income from associates
• Sustained balance sheet growth
• Non-recurrent impairment charge of USD 6
• Comfortable financial soundness ratios
million on a regional investment
 Key performance ratios
MCB Group - Financial Strength Indicators (%)

Jun-09 Jun-10

Asset Quality
Gross NPLs/Gross loans 4.8 3.9
Net NPLs/Net loans 2.2 1.9
Efficiency
Cost-to-income 42.1 46.5
Liquidity
Liquid assets/Total assets 24.9 22.1
Loans to deposits 82.7 84.9
Profitability
Return on average Tier 1 capital 24.6 18.8
Return on average total assets 2.8 2.2
Return on average equity 22.7 17.6
Capital Adequacy
BIS risk adjusted ratio 15.1 14.9
of which Tier 1 13.0 12.8
 Capitalisation
Underpinned by diversified … comfortable capital levels are
earnings … assigned to mitigate exposure to risk.

Share of foreign source profit Capital resources

24 18
50
20 15
40
16 12
% of Group profit

Rs bn
30

%
12 9

8 6
20
4 3
10
0 0
Jun 06 Jun 07 Jun 08 Jun 09 Jun 10
0
Jun 06 Jun 07 Jun 08 Jun 09 Jun 10
Shareholders' funds BIS ratio (right scale) Tier 1 ratio (right scale)
 Funding
Expanding deposits:
Funding strategies
 Are our primary funding source

 Serve as a stable, solid and low cost Mauritian rupee

foundation for asset financing Organically growing deposits
base, comprising mostly
140 100
retail savings which are
120 90 generally sticky
100 80

80 70 Foreign currency
Rs bn

%
60 60
Sufficient level of reserves
40 50
• Careful selection and
20 40 monitoring of exposures
0 30 • Ensuring availability of
Jun 06 Jun 07 Jun 08 Jun 09 Jun 10
ample cushion
Loans Deposits Borrowings Loans to deposits ratio
 Liquidity
The Group ensures sufficient funds
are available at reasonable cost to
Liquidity ratios
meet obligations on a timely basis.

• Effective liquidity management 50

is underpinned by: 40

30

• Sound flexibility provided by

%
20
funding sources to manage cash
flows and liquidity needs
10

0
• Focus on judicious risk/return Jun 06 Jun 07 Jun 08 Jun 09 Jun 10

profiles of investment portfolios Liquidassets

assets to total assets Liquid assets to deposits
Note: Liquid include cash and balances with central
bank, balances with banks and investment in securities
 Asset quality
Backed by enhanced risk management and prudential market penetration,
non-performing loans (NPLs) ratios continue to decline over time.

Non-performing loans Provision coverage ratio

%
8 %
80

6
75

4
70

2
65

0
Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 60
Jun 06 Jun 07 Jun 08 Jun 09 Jun 10

Net NPLs to net loans NPLs to gross loans

Collateral more than adequately caters for NPLs that are not covered by provisions
 Strategic Orientations

Even if the operating environment would remain challenging in the short

term at least, the MCB is confident that it can, over time, take benefit of:
 Recovering domestic economic growth and continuing sector diversification
 Expected rebound in trade and capital flows in sub-Saharan Africa

While reinforcing its strategic … and reinforcing capabilities

underpinnings…

Consolidating position on local  Leveraging on our systems

front
 Improving our processes
 Diversifying revenue sources
regionally  Developing our human capital

 Further expansion of activities

into non-bank financial services