MCB 2007 Annual Report

Transcription

The Mauritius
Commercial Bank Ltd.
Annual Report
30 June 2007
Table of Contents
PAGES
Group Financial Summary
5
MCB Board and Management
7
• Board of Directors
8
• Committees of the Board
9
• General Management
10
Corporate Profile and Reports
11
• Corporate Profile
12-13
• Report of the Directors
14-17
• Corporate Governance Report
19-42
• Company Secretary’s Certificate
43
• Management Discussion and Analysis
45-82
Financial Statements
83
• Statement of Management’s Responsibility for Financial Reporting
85
• Report of the Auditors
86-87
• Balance Sheets
88-89
• Income Statements
90
• Statement of Changes in Equity (Group)
91
• Statement of Changes in Equity (Bank)
92
• Cash Flow Statements
93
• General Information
94
• Index to Notes to the Financial Statements
95-99
• Notes to the Financial Statements
100-163
A Review of the Economic Environment
165-188
Administrative Information
189-191
Branch Network
192
2007 in Retrospect
193-199
T H E M A U R I T I U S C O M M E R C I A L B A N K LT D . 3
This report has been prepared to assist shareholders to assess the Board’s strategies and their potential of success. The statements contained
herein may include declarations of future expectations and other forward-looking statements that are based on management’s current views and
assumptions. These involve risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed
or implied in such statements.
Readers are advised not to place undue reliance on the forward-looking statements relating to the Group’s business strategy, plans, objectives and
financial positions as these statements rely on assumptions and hypotheses which inherently represent an accuracy risk. Actual results, performance
and events may differ from those in such statements due to general evolution of economic, political and industry conditions, interest rate levels,
currency exchange rates as well as changes in laws and regulations and the extent of competition and technological factors. In addition, the MCB
Ltd. does not undertake to update any forward-looking statement that may be made from time to time by the organisation or on its behalf.
4
ANNUAL REPORT 2007
Group Financial Summary
Income Statement (Rs m)
Operating profit
Exceptional items*
Profit after tax
Profit attributable to shareholders
Balance Sheet (Rs m)
Total assets
Total loans (net)
Total deposits
Shareholders' funds
Tier 1 Capital
Risk-weighted assets
Performance Ratios (%)
Return on average total assets
Return on average equity
Return on average Tier 1 capital
Non-interest income to operating income
Loans to deposits ratio
Cost to income ratio
Capital Adequacy Ratios (%)
Capital & reserves/Total assets
BIS risk adjusted ratio
of which Tier 1
Asset Quality
Non-performing loans (Rs m)
NPL ratio (%)
Allowance for loan impairment losses (Rs m)
Provision coverage ratio (%)
Investor Data
Earnings per share (Rs)
Earnings yield (%)
Price earnings ratio (times)
Net assets value per share (Rs)
Dividends per share (Rs)
Dividend yield (%)
Dividend cover (times)
Market Data
Market capitalisation (Rs m)
Market price per share (Rs) :High
Low
Closing (Year end)
2007
2006
2005
2004
2003
3,108
2,547
2,461
2,334
79
2,013
1,986
2,141
1,685
1,658
1,967
(96)
1,521
1,488
1,701
(670)
972
923
110,143
65,845
85,158
13,475
10,473
91,965
99,409
58,365
77,195
12,334
10,022
78,471
85,232
55,123
68,914
10,232
8,547
71,293
81,266
51,322
66,277
9,355
7,754
67,421
74,437
50,353
59,679
8,364
6,562
66,038
2.3
19.1
24.0
42.3
81.1
47.5
2.2
17.6
21.4
38.3
80.0
49.8
2.0
16.9
20.3
38.7
84.5
49.7
1.9
16.8
20.8
38.5
81.5
51.3
1.1
11.3
13.9
37.2
88.7
56.7
12.2
15.7
11.4
12.4
15.2
12.8
12.0
13.9
12.0
11.5
13.6
11.5
11.2
13.0
9.9
4,833
7.0
3,246
67.2
4,750
7.7
3,359
70.7
4,712
8.1
3,142
66.7
5,102
9.4
2,717
53.3
4,636
8.8
2,594
56.0
9.7
9.5
10.6
56.9
2.9
2.8
3.4
7.4
13.2
7.6
46.0
2.1
3.8
3.5
6.2
15.3
6.5
38.1
1.9
4.7
3.2
5.5
15.5
6.5
34.7
1.7
4.8
3.2
3.2
11.1
9.0
29.8
1.5
5.3
2.1
25,789
15,798
11,369
10,015
8,040
109.00
56.00
103.00
58.00
40.30
56.00
41.20
34.00
40.30
38.50
25.00
35.50
29.30
14.80
28.50
* The significant net exceptional loss in FY 2002/03 resulted from reimbursements of Rs 881.6 million in respect of a fraud perpetrated over a number of
years and discovered in February 2003 while a gain of Rs 211.7 million was derived from the sale by the MCB to Société Générale of a 50% stake in
BFCOI. Operating profit for that year included the full results of BFCOI.
Market Capitalisation and EPS
Sources of Group Profit (FY 2006/07)
Rs bn
Rs
30
12
25
10
20
8
15
6
10
4
5
2
0
Jun 03
Jun 04
Market capitalisation Jun 05
Jun 06
Earnings per share (right scale)
Jun 07
Local Non-Bank 11.8%
Foreign 38.6%
0
Local Bank 49.7%
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ANNUAL REPORT 2007
“ Our Vision: To be the obvious choice for
financial services in the region and beyond.”
MCB Board & Management
Board of Directors
President
J. Gérard HARDY (Independent)
Vice president
E. Jean MAMET (Independent)
Members
Herbert COUACAUD, C.M.G.
Anil CURRIMJEE
Bertrand DE CHAZAL (Independent)
Philippe A. FORGET (Executive)
Patrick GIBLOT DUCRAY
Sanjiv GOBURDHUN (Independent)
Navin HOOLOOMANN, C.S.K. (Independent)
Edgar JULLIENNE (Independent)
Thierry KOENIG
Jean Pierre MONTOCCHIO (Independent)
Pierre-Guy NOEL (Executive)
Antony R. WITHERS (Executive)
Margaret WONG PING LUN (Independent)
Secretary to the Board
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ANNUAL REPORT 2007
Jean-François DESVAUX DE MARIGNY
Committees of the Board Supervisory and Monitoring Committee
J. Gérard HARDY (Chairperson)
Members
E. Jean MAMET
Pierre-Guy NOEL
Antony R. WITHERS
Philippe A. FORGET
Secretary
Audit Committee
Bertrand DE CHAZAL (Chairperson)
Members
Anil CURRIMJEE
E. Jean MAMET
Margaret WONG PING LUN
Secretary
Risk Monitoring Committee
E. Jean MAMET (Chairperson)
Members
Pierre-Guy NOEL
Antony R. WITHERS
Sanjiv GOBURDHUN
Alternate
Philippe A. FORGET (to P.G. Noël or A.R. Withers)
Secretary
Michaël J. PIKE
Nomination and Remuneration Committee
J. Gérard HARDY (Chairperson)
Members
Navin HOOLOOMANN, C.S.K.
Edgar JULLIENNE
Secretary
Jean Pierre MONTOCCHIO
Conduct Review Committee
Margaret WONG PING LUN (Chairperson)
Members
Bertrand DE CHAZAL
Sanjiv GOBURDHUN
Secretary
General Management
Chief Executive (Group)
Pierre-Guy NOEL
Chief Executive (Banking)
Antony R. WITHERS
Deputy Chief Executive (Banking)
Philippe A. FORGET
Chief Managers
Head - Group Finance and Company Secretary
Marc LAGESSE
Head - Group Capital Markets
Alain LAW MIN
Head - Retail
Jean-Michel NG TSEUNG
Head - Corporate
Michaël J. PIKE
Head - Group Risk (until September 2007)
Patrice BESTEL
Head - Administration (retired in July 2007)
Paul CORSON
Deputy Head - Corporate
Jean-Marie D'ESPAGNAC
Head - Private Banking
Marc DESMARAIS
Head - Human Resources
Andrew HEATHCOTE-MARKS
Head - Organisation & Systems
Angelo LETIMIER
Head - Cards
Denis MOTET
Head - Credit Risk (Head – Group Risk as from
October 2007)
Jocelyn AH-YU
Managing Director - MCB Seychelles
Koomaren CUNNOOSAMY
Corporate
Jean Michel FELIX
Head - Group Audit
Raoul GUFFLET
Head - International
Hemandra Kumar HAZAREESING
Corporate
Vinoba Devi LALLAH
Banking Products
Steve LEUNG SOCK PING
Head - Marketing
Bhavish NAECK
Head - Financial Management
Cyril NICOLE
Head - Market Risk (retired in September 2007)
Cyril PERRIER
Head - Compliance
Kreshna RAMDHONY
Corporate
Jean-Marie STEPHEN
Head - Banking Products
Jocelyn THOMASSE
Head - Network
André WONG TING FOOK
Head - Accountancy
Jacques TENNANT
Property, Premises & Equipment
Cyril PROVENÇAL
Regional Development
Senior Managers
Managers
Advisers
10
ANNUAL REPORT 2007
Corporate
Profile &
Reports
“ The recently implemented culture change programme
epitomises our corporate goal of providing a world-class
service to our customers.”
Corporate Profile
The MCB Group
Established in 1838, the Mauritius Commercial Bank
wide representation in the region. The MCB brand is well
Ltd. (MCB) is a prominent banking and financial services
established in Rodrigues, Seychelles, Madagascar and
provider in the Indian Ocean whilst being the undisputed
Mozambique. Through our associate company, Banque
leader in Mauritius.
Française Commerciale Océan Indien, which is a joint
venture with Société Générale, we also have a presence in
The Bank offers a comprehensive range of high quality
France, Reunion Island and Mayotte.
financial services to individuals and corporate customers as
well as to financial institutions worldwide. Anchored on an
Reflective of its corporate philosophy, the MCB has a
extensive local network of branches, a comprehensive ATM
tradition of being a pioneer in adapting to changes through
grid, Telephone and Internet Banking services as well as a
continuous business innovations and introduction of state-
professionally-run customer Contact Centre, the MCB has
of-the-art products and services in the domestic financial
grown into a dominant local bank whose brand is continuously
sphere to enhance satisfaction of customer needs. The
sustained by quality service and dedicated staff.
recently implemented “Moving Customer Boundaries”
culture change programme epitomises our corporate goal
Besides core banking operations, the MCB Group has
of providing a world-class service to our customers in
been actively diversifying its range of services locally
an increasingly demanding and competitive commercial
and regionally, to encompass non-bank financial
environment. Through this initiative, the Bank aims to
services such as leasing, factoring and investment
consolidate its strong reputation notably built on its core
management services amongst others. The Group started
values towards achieving its vision of being “the obvious
its overseas expansion strategy in 1991 and has now a
choice for financial services in the region and beyond”.
Key facts and figures
• Largest market capitalisation on the Stock Exchange of Mauritius
at Rs 25.8 billion as at end June 2007 representing 19.4 % of the total.
In September 2007, the MCB became the first domestic company
to reach the USD 1 billion mark in terms of market capitalisation
• Over 16,000 local and foreign shareholders
• 42 strategically located branches complemented by a
broad network of 135 ATMs in Mauritius and Rodrigues
• More than 2,000 employees dedicated to the Group
• Above 3,800 Point of Sale (POS) terminals
across the island
• L eading bank domestically with over
40% market share in respect of
credit to the economy and
local currency deposits
12
ANNUAL REPORT 2007
• Moody’s ratings:
• Foreign Currency Deposits
Baa2/P-2
• Foreign Currency Issuer
Baa1
• Global Local Currency Deposit
A3/P-1
• Financial Strength
D+
• NSR Senior Unsecured
MTN-Domestic Currency
Aa3.za
• NSR Subordinate
MTN-Domestic Currency
Aa3.za
• S ole local institution ranking among top 1000
global banks and Top 18 Sub-Saharan Africa
banks according to The Banker’s Top 1000 World
Banks July 2007 issue
• H
ighest profitability among regional banks
of the Indian Ocean according to the annual
publication of Eco Austral “Spécial 100 premières
entreprises de l’Océan Indien”
2006/07 Highlights
Group Structure
Subsidiaries
•Buy-back and cancellation of Lloyds TSB Bank plc
11.25% shareholding in the MCB at a significant
33.8% discount to the market price
Local
MCB Stockbrokers Ltd.
100.00%
MCB Registry & Securities Ltd.
100.00%
MCB Equity Fund Ltd.
100.00%
•First foreign institution to issue a 10-year
subordinated bond on the Bond Exchange of
South Africa in December 2006
MCB Capital Partners Ltd.
100.00%
•Near doubling of share price over FY 2006/07
MCB Factors Ltd.
100.00%
MCB Properties Ltd.
100.00%
Blue Penny Museum
97.88%
Fincorp Investment Ltd.
57.56%
Finlease Co. Ltd.
57.56%
MCB Investment Management Co. Ltd.
Multipliant Management Co. Ltd.
62.22%
•Introduction of an Employee Share Option
Scheme for all staff
•Successful Chikungunya awareness campaign
•Consolidation of the MCB brand on the
international front with the renaming of UCB
Madagascar and UCB Moçambique to MCB
Madagascar and MCB Moçambique respectively
100.00%
Foreign
MCB Moçambique
91.28%
MCB Madagascar
75.00%
MCB Seychelles
100.00%
MCB International Services Ltd.
100.00%
Mascareignes Properties Ltd.
100.00%
•Pioneered the use of Teller Cash Recyclers (TCRs),
an innovative solution designed to improve cash
handling and queue management
•Another market first achieved with the launch of
mobile POS working on GPRS technology
•First member financial institution to offer
the MasterCard Gateway Service (MiGS), a
new service that guarantees a secure on-line
payments system for web purchases
Associates
Banque Française Commerciale
Océan Indien
49.99%
Promotion and Development Ltd.
26.72%
•Attained a satisfactory state of readiness
regarding Basel II Standardised Approach well
before the regulatory deadline
Our Vision
To be the obvious
choice for financial
services in the region
and beyond
Integrity
Customer Care
Teamwork
Our Core
Values
Innovation
Our Mission
Knowledge
Pursuing the
voyage towards
excellence
Excellence
Report of the Directors
The Directors of the Mauritius Commercial
Bank Ltd. (MCB) are pleased to submit to
the shareholders the Annual Report of the
Group and of the Bank for the year ended
30 June 2007.
resources while at the same time raising the profile of
the MCB on international capital markets.
•The MCB became in April 2007 the first local bank to
have attained the state of readiness for Basel II under
the Standardised Approach to risk.
•In December 2006, the Bank became the first listed
Overview
company to implement a fully comprehensive Employee
The MCB Group reached a number of impressive landmarks
Share Option Scheme for all its employees.
in a most successful year which sets, in many respects, new
benchmarks for the future.
A detailed review of this year’s achievements and
realisations is given in the “Management Discussion and
•Group profits attributable to the shareholders of the
Analysis” on pages 45 to 82.
MCB increased by 23.9% to reach Rs 2.46 billion while
earnings per share were up 31.6% to Rs 9.74.
•The share price increased by 83.9% during the year
to reach Rs 103 as at 30 June 2007 with market
Activities and Results
The financial year ended 30 June 2007 has proved to be
outstanding in terms of activities and results.
capitalisation as at that date reaching Rs 25.8 billion.
This positive trend has been maintained since, with the
Group net interest income rose by 16.8% to Rs 3,613 million
share price and market capitalisation breaking through
whereas the Bank’s increased by 13.9% to just above
the levels of Rs 120 and Rs 30 billion respectively.
Rs 3 billion. Other income went up by 38.2% at Group level,
This is, at the current rate of exchange, approximately
reaching Rs 2,653 million and by 25.9% for the Bank to
USD 1 billion, marking a key milestone for the Group.
Rs 1,929 million. In particular, treasury transactions, which
•All lines of business have contributed positively to the
had registered a particularly low level of profitability in
growth in profits, despite the increasingly competitive
2005/06, were back on a much more normal trend, with
environment. Non-bank revenues, which contributed
Rs 987 million realised on dealings in foreign currencies,
some 12% to Group profits, and income from foreign
a progression of 47.1% on the previous year. As a result,
sources and banking subsidiaries, which grew further
operating income of the Group amounted to Rs 6.3 billion,
to 38.6% of consolidated results, have for the first time
an increase of 25.0%, while that of the Bank rose by 18.3%,
exceeded 50% of our income stream.
nearly reaching the Rs 5 billion mark.
•The buy-back of Lloyds TSB Bank plc’s 11.25% stake in
14
the MCB for Rs 1.4 billion generated substantial value
Group operating expenses increased by 18.0% to Rs 2,782
for the remaining shareholders of the MCB. Concurrently,
million, while those of the Bank grew by 13.9%. This was
subordinated debt with a ten-year maturity was raised
essentially due to a rise of more than 20% in systems
in foreign currency for the equivalent of Rs 1.4 billion
and infrastructure costs, a result of the MCB’s continuous
on the Bond Exchange of South Africa. This qualified
drive to improve efficiency, delivery and quality of service.
for Tier 2 Capital, hence diversifying the Bank’s capital
Allowances for credit impairment rose by around 18% for
ANNUAL REPORT 2007
both the Group and the Bank to reach Rs 376 million and
to manage such risks, as required by Basel II. The Board
Rs 371 million respectively. Income tax charges for the
whilst approving risk strategy, appetite and policies, has
Group increased by 40.3% to Rs 561 million, including
delegated the formulation thereof and the monitoring of
the newly imposed levy on banks’ results, which this year
their implementation to the Risk Monitoring Committee.
amounted to Rs 19 million for the MCB.
The MCB recognises the importance for all its businesses
Attributable profits to the shareholders of the MCB grew by
to comply with the highest standards of good corporate
23.9% to Rs 2,461 million, while net results of the Bank,
governance, international best practices and risk
at Rs 1,921 million, rose by 19.6% on the previous year,
management processes. In April 2007, the MCB announced
a remarkable performance in view of a most competitive
that it had achieved a satisfactory state of readiness
banking environment. This underlines the success of
regarding the Basel II Standardised Approach and the
the stated strategy of the MCB Group, based on a strong
implementation of revised policies in the main areas of
regional presence, diversification into non-bank financial
banking activity of credit risk, operational risk and market
services and the development of our delivery channels.
risk. Through this Basel II project, enhanced risk awareness
and improved corporate governance have been achieved
Boosted by the reduced number of shares in issue following
across the Bank.
the share buy-back, Group earnings per share reached
Rs 9.74, an increase of 31.6% over last year. Total assets
Code of Conduct
crossed the Rs 100 billion mark, at Rs 110 billion, a 10.8%
The MCB Group is committed to the highest standards
increase over the situation at 30 June 2006.
of integrity and ethical conduct in dealings with all its
stakeholders. The MCB’s Code of Conduct is based on the
Dividends and Capital Resources
model code of the Joint Economic Council as adapted to
An interim dividend of Rs 1.15 per share was paid in
meet the specific needs of the MCB Group.
December 2006 while the Board has declared a final
dividend of Rs 1.75 per share, paid in June 2007. Total
Prospects
dividends for the year amounted to Rs 723 million, while
During the financial year to 30 June 2008, the MCB Group
undistributed profits of Rs 1,738 million were carried to
will pursue its efforts towards developing and diversifying
reserves. Group shareholders’ funds stood at Rs 13,475
its activities at local, regional and international levels.
million at 30 June 2007, an increase of Rs 1.1 billion over
Concurrently, in line with its wish to provide the best quality
the year, after taking into consideration the Rs 1.4 billion
of service to its customers, it will continue to improve its
cost of the share buy-back.
equipment, systems and processes while building an even
more experienced, qualified and motivated workforce. The
Risk Management
MCB will endeavour to maintain the highest standards of
The Board of the MCB, recognising that the MCB Group, as
Corporate Governance and contribute actively to the well-
a financial organisation, encounters risk in every aspect of
being of the community while its ultimate objective will remain
its business, has put in place the necessary committees
that of providing ever-increasing value to its shareholders.
Report of the Directors
continued
Statement of Directors’
Responsibilities
results of its operations and cash flow for that period and
Company law requires the Directors to prepare Financial
International Financial Reporting Standards as well as the
Statements for each financial year, which give a true
requirements of the Banking Act 2004 and the guidelines
and fair view of the state of affairs of the Bank and of
issued thereunder. Directors are also responsible for
the Group. In preparing those Financial Statements, the
safeguarding the assets of the Group and of the Bank
Directors are required to: ensure that adequate accounting
and hence for taking reasonable steps for the prevention
records and an effective system of internal controls and
and detection of fraud and other irregularities. Other main
risk management have been maintained; select suitable
responsibilities of the Directors include assessment of the
accounting policies and then apply them consistently;
General Management’s performance relative to corporate
make judgements and estimates that are reasonable and
objectives, overseeing the implementation and upholding
prudent; state whether applicable accounting standards
of the Code of Corporate Governance and ensuring timely
have been followed, subject to any material departures
and comprehensive communication to all stakeholders on
disclosed and explained in the Financial Statements; and
events significant to the Group.
have been prepared in accordance with and comply with
prepare the Financial Statements on the going concern
basis unless it is inappropriate to presume that the Bank
Auditors
will continue in business. The Directors confirm that they
The Auditors, BDO De Chazal Du Mée, have expressed their
have complied with these requirements in preparing the
willingness to continue in office and a resolution proposing
Financial Statements. The external auditors are responsible
their re-appointment will be submitted to the Annual
for reporting on whether the Financial Statements are
Meeting.
fairly presented. The Directors are responsible for keeping
proper accounting records which disclose with reasonable
Acknowledgements
accuracy, at any time, the financial position of the Group
The Board wishes to thank Patrice Bestel and Cyril Nicole,
and of the Bank and for ensuring that the Financial
members of Management who have retired during the
Statements fairly present the state of affairs of the Group
year, for their important contribution over the years to the
and of the Bank, as at the financial year end, and the
development of the MCB Group.
16
ANNUAL REPORT 2007
Cyril Provençal, who has reached retirement age during the
The Board finally wishes to express its appreciation to the
year, has been asked by the Board to stay with the Group
Group’s Management and staff for their continued hard
under a short term contract to oversee the completion of
work during the past year and to congratulate everyone for
some specific projects within the International Strategic
the exceptional financial results achieved.
Business Unit.
We would also like to place on record our thanks to our
Michaël Pike, who joined the Bank in 2005 as Head of Group
fellow members of the Board for their support throughout
Risk, is reaching the end of his contract on 30 September
the year.
2007. The Board would like to thank him for his contribution
to the consolidation of the Risk Management framework of
the MCB Group.
APPROVED BY THE BOARD OF DIRECTORS AND SIGNED ON ITS BEHALF
J. Gérard HARDY
President
Bertrand DE CHAZAL
Chairman Audit Committee
18
ANNUAL REPORT 2007
Corporate
Governance
Report
“ The Employee Share Option Scheme provides
an opportunity for employees to share in the growth
and prosperity of the MCB.”
Corporate Governance Report
Statement on Corporate
Governance
Board approval is specifically required for, amongst other
Corporate governance involves a set of relationships
issuing fresh capital or buying back shares, declaring
between a company’s management, board, shareholders and
dividends, acquiring or divesting sizeable stakes in
other stakeholders. Effective corporate governance practices
subsidiaries or associated companies, and establishing the
are essential to achieving and maintaining high levels of
remuneration of directors and managers.
important matters, modifying the Bank’s constitution,
public trust and confidence in the banking system.
The Board comprises 15 directors, 3 of whom are executives.
The Board of the MCB is fully committed to attaining and
Of the non-executive directors, 8 are independent. The
maintaining the highest standards of corporate governance.
President and Vice President of the Board are non-executive
This is ensured through bank-wide awareness of its
independent directors.
operating ethics and the stewardship and close supervision
of the management of the Bank by the Board of Directors.
Board structure and composition
Others 27% (4)
In accordance with the Company’s constitution, the Board
has all the powers necessary for managing, directing and
supervising the management of the business and affairs
Independent 53% (8)
of the Company. The Board is ultimately responsible
for the affairs of the Company. The methods through
which the Board exercises its powers and discharges its
Executive 20% (3)
responsibilities are set out in the MCB Board Charter which
provides among others for the following:
The Board has created five Board Committees to help it in
carrying out its duties and responsibilities: the Supervisory
• the composition of the Board with preferably a majority
of independent non-executive directors;
• the Chairperson of the Board must be an independent
non-executive director;
and Monitoring Committee (SMC), the Audit Committee,
the Conduct Review Committee, the Nomination and
Remuneration Committee, and the Risk Monitoring
Committee. Each committee has its own charter which has
• the creation of Board Committees;
been approved by the Board. Through the deliberations and
• a corporate code of conduct addressing inter alia issues
reporting of its various committees, the Board ensures that
relating to conflicts of interests;
• the establishment of strategic objectives;
Management’s daily actions are in line with the Board’s
objectives and regulatory requirements.
• appointments to the General Management;
• the existence of clear lines of responsibility and
accountability throughout the organisation; and
The Board and Senior Management of the MCB are
required by the Bank of Mauritius, the Financial Services
• the provision to the shareholders of timely and
Commission and corporate governance best practices to
transparent information relating to material events.
inter alia demonstrate, to the satisfaction of the regulatory
20
ANNUAL REPORT 2007
authorities, a clear structure of policy and systems of
Besides optimising shareholder value, the Bank, being
control emanating directly from the Board, which manifestly
particularly conscious of its responsibilities as a dominant
identify and manage the risks inherent in the businesses
player in the local market, has always supported the generally
of the MCB. To this end, the Board has approved the Group
higher risk businesses associated with new economic
Risk Policy as well as Group policies in respect of credit risk,
initiatives and start-ups whilst contributing to the well being
operational risk and market risk.
of the community through a large involvement in social actions
(humanitarian, education, environmental, and cultural).
In line with such requirements, there is a clear separation
of the executive role of day-to-day decisions relating to
The Bank is committed to the highest standards of business
credit from the Board’s role of setting out the credit policy
integrity, transparency and professionalism and ensures that
and ensuring that, through the organisational structure
all its activities are managed responsibly and ethically whilst
(executive credit committees with set limits) and the control
seeking to enhance business value for all stakeholders. In
and reporting systems, the business is effectively run in
line with this objective, the Bank issued a Code of Conduct
accordance with such policy.
in February 2002, based on the model code of the Joint
Economic Council, as appropriately adapted to meet its own
Regarding risk management, the Bank has achieved a
specific needs. In addition, the Bank complies with the Code
satisfactory state of readiness for the Basel II Standardised
of Banking Practice issued by the Bank of Mauritius in 1998
Approach in April 2007. The Bank is adopting the best
and subscribes to the Code of Corporate Governance for
practice Internal Capital Adequacy Assessment Process
Mauritius, which was issued in October 2003.
(ICAAP) which uses evolving risk assessment methodologies
for capital adequacy to support the different portfolios of
The directors continuously review the implications of
risk represented by the Bank’s financial business. The Bank
corporate governance best practices and are of the opinion
has also adopted a formal disclosure policy as defined in
that the Bank complies with the requirements of the Code of
the Basel II Framework.
Corporate Governance in all material aspects.
THE MAURITIUS COMMERCIAL BANK LTD.
21
continued
Directorate and Management
Board of Directors
Directors’ Profiles
The Board is composed of 15 members, 12 non-executive directors, of whom 8 are independent and 3 executive directors.
The average age of the Board is 54 years.
J. Gérard HARDY - Age 63
After spending 4 years in London having qualified as
He was appointed to the Board at the shareholders’ meeting
Certified Accountant, he moved to Paris in 1969 where he
of October 2002 and was elected Vice President of the Board.
qualified as an “Expert Comptable”. He has worked for 8
In July 2003, at the request of the Board, he chaired the
years with KPMG before spending 17 years with the IP Group,
Bank’s Management Committee until its dissolution at the
which he left as Deputy Managing Director to set up his own
beginning of 2005. He is currently President of the Board and
consultancy firm. In 2001, he returned to Mauritius.
Chairperson of the Supervisory and Monitoring Committee
and of the Nomination and Remuneration Committee.
E. Jean MAMET - Age 64
Certified Accountant since 1975. He has worked for 40 years
Board, Vice Chairperson of the Supervisory and Monitoring
in the field of auditing, having retired in 2003 as Senior
Committee, Chairperson of the Risk Monitoring Committee
Partner of Ernst & Young in Mauritius.
and member of the Audit Committee.
Directorship in other listed companies
of December 2003. He is currently Vice President of the
United Basalt Products Ltd.
22
ANNUAL REPORT 2007
Anil CURRIMJEE - Age 45
Bertrand DE CHAZAL - Age 66
Holds a BA in Liberal Arts from Williams College USA (1983)
Fellow member of the Institute of Chartered Accountants
and an MBA from London Business School (1988). He is
in England and Wales and a “Commissaire aux Comptes”.
a director of a number of companies within the Currimjee
After a career with the accounting firm Touche Ross in
Group, a well diversified conglomerate with interests in
Paris and then in West Africa, he joined the World Bank
manufacturing, commerce, telecommunications, financial
in Washington in 1986 from which he retired as Senior
and travel services. He is a former Chairperson of the
Financial Analyst in 2003.
Mauritius Chamber of Commerce and Industry.
He was first appointed to the Board in 2002 and was
of October 2004. He is Chairperson of the Audit Committee
re-elected at the shareholders’ meeting of December 2005.
and member of the Conduct Review Committee.
He is a member of the Audit Committee.
Caudan Development Ltd.
Mauritius Development Investment Trust Ltd.
Herbert COUACAUD, C.M.G. - Age 59
Holder of a BSc in Economics and Mathematics
2005. He is a member of the Nomination and Remuneration
from the University of Cape Town (1971), he has
Committee.
actively contributed to the development of the
tourism industry in Mauritius and is the Chief
Executive Officer of the New Mauritius Hotels Group.
New Mauritius Hotels Ltd.
Rogers & Co. Ltd.
re-appointed at the shareholders’ meeting of December
23
continued
Philippe A. FORGET – Age 57
Holder of a BSc (First Class Honours) from the University of
1996. He has been the Chairperson of MCB Moçambique
Liverpool and an MSc (with distinction) in Management &
until March 2006 and is a director of MCB Investment
Operational Science from the Imperial College of Science
Management Co. Ltd.
and Technology, London. After working as an economist for
2 years for the Food & Allied Group, he joined the Bank
of December 2005. He is a member of the Supervisory and
in 1978 and was appointed Assistant General Manager in
Monitoring Committee and Risk Monitoring Committee.
Patrick GIBLOT DUCRAY - Age 56
Obtained a BSc in Information Technology in the UK in 1976.
He was first appointed to the Board of the MCB in 1995.
He is the Executive Director of the Union Sugar Estates
He was re-appointed to the Board at the shareholders’
Company Ltd. and has been involved in the activities,
meeting of October 2004 and is a member of the Risk
development and diversification of the sugar industry for
Monitoring Committee.
a number of years. He is also Chairperson of a leading
private medical clinic and, in this capacity, has actively
Mauritius Development Investment Trust Ltd.
contributed to the furtherance of health care in Mauritius.
24
ANNUAL REPORT 2007
Sanjiv GOBURDHUN - Age 42
Edgar JULLIENNE - Age 64
After a spell in market research in the UK, he joined Rose Hill
A Honours graduate in Civil Engineering from Loughborough
Transport in 1990 and was appointed Managing Director in
College obtained in 1965, he is a member of the UK Institute
1995. He is a member of the Institute of Directors, UK, and
of Civil Engineers and practised since 1973 as an engineer
of the National Committee on Corporate Governance.
in the UK, South Africa and finally Mauritius. He ended his
active professional career as Executive Director of General
re-appointed at the shareholders’ meeting of October
Construction Co. Ltd.
2004. He is a member of the Risk Monitoring Committee
He was first appointed to the Board at the shareholders’
and of the Conduct Review Committee.
meeting of December 2003. He is a member of the Nomination
and Remuneration Committee.
Navin HOOLOOMANN, C.S.K. - Age 48
Holds a First Class Honours degree in Surveying from
project management and cost management consultancy
the University of West of England and is a Fellow of the
firm in Mauritius with subsidiary offices in the Seychelles
Royal Institution of Chartered Surveyors, UK, since 1992.
and India.
He has some 20 years of experience in the construction
industry in Mauritius. He is the founder and Managing
of October 2002. He is a member of the Nomination and
Director of Hooloomann & Associates Ltd., a construction
Remuneration Committee.
25
continued
Antony R. WITHERS - Age 53
Heads the banking operations of the MCB as the Chief
Commerzbank A.G and, lately Lloyds TSB Bank plc where
Executive (Banking) since April 2006 and is the holder of an
he was Director and Global Head of Financial Institutions &
MA, Economics from Christ’s College, Cambridge and was
International Trade Finance.
also awarded an MBA by IMD, in Lausanne, Switzerland. He
He was appointed to the Board at the shareholders’
has accumulated wide-ranging experience in the banking
meeting of December 2006. He is a member of the
sector shouldering a varied array of high level responsibilities
Supervisory and Monitoring Committee and of the Risk
in a number of institutions. These include Citibank, Bank
of Montreal, S.G Warburg & Co. Ltd., UBS Securities Ltd.,
Margaret WONG PING LUN - Age 53
Holds a BA (Honours) in Business Studies (UK) and is a
She was appointed to the Board at the shareholders’
fellow member of the Institute of Chartered Accountants
meeting of October 2004. She is currently Chairperson
in England and Wales. After working in the consultancy
of the Conduct Review Committee and member of the
department of a local firm of accountants, she joined the
Audit Committee.
University of Mauritius in 1991 where she is a lecturer in
Accounting and Finance. She is a member of the Listing
Committee of the Stock Exchange of Mauritius.
26
ANNUAL REPORT 2007
Pierre-Guy NOEL – Age 51
Holds a BSc (Honours) in Economics from the London School
Pierre-Guy Noël is a board member in several companies
of Economics and Political Science and is an Associate of the
of the MCB Group acting either as Chairperson or Director
Institute of Chartered Accountants in England and Wales.
namely in Banque Française Commerciale Océan Indien,
He was a partner in financial consultancy at De Chazal Du
MCB Moçambique and MCB Seychelles.
Mée & Co. between 1981 and 1992, when he joined the
Bank as Planning and Development Consultant. He was
of December 2005. He is a member of the Supervisory
appointed General Manager of the Bank in 1996 and has
and Monitoring Committee and of the Risk Monitoring
been, since July 2005, appointed Chief Executive (Group).
Committee.
Thierry KOENIG - Age 49
Jean Pierre MONTOCCHIO - Age 44
Holder of a “Maîtrise en Droit” from the University of Réunion
Notary Public since 1990, he drew up the new constitution
obtained in 1983, he is a practising Attorney since 1986 with
of the Bank. He is a member of the Nomination and
the local law firm De Comarmond & Koenig. He is the President
Remuneration Committee and has participated on the
of the Association of Business Lawyers and is the Mauritian
National Committee on Corporate Governance.
representative of the International Litigation Committee of
He was first appointed to the Board in 2001.
the International Bar Association.
He was first appointed to the Board in 2002.
Caudan Development Ltd. (Chairperson)
Fincorp Investment Ltd. (Chairperson)
Promotion and Development Ltd. (Chairperson)
Rogers & Co. Ltd.
27
Committees of the Board of Directors
The composition of the committees of the Board of Directors
appears on page 9 of the Annual Report.
continued
• reviewing the yearly budget, the quarterly and yearly
financial statements to be submitted to the Board;
• proposing the dividend policy;
• monitoring strategic alliances and major litigation
Supervisory and Monitoring Committee (SMC)
The SMC is, subject to any decision which the Board may take
from time to time, competent to exercise all or any powers,
issues; and
• ensuring that the Board is permanently informed of the
running of the affairs of the Group.
authorities and discretions vested in or exercisable by the
Board other than those set out in the Seventh Schedule of
Audit Committee
the Companies Act 2001 and those of appointment of senior
The Audit Committee of the Bank consists of four non-
officers who, when appointed, shall form part of the General
executive directors, three of whom are independent,
Management of the Bank.
including the Chairperson. It meets at least four times a year
corresponding to the Bank’s reporting cycle and its principal
The committee is chaired by the President of the Board
function is to oversee the financial reporting process. In
of Directors. The other members are: the Board Vice
particular, it reviews annual financial statements before
President, the Chief Executive (Group), the Chief Executive
these are approved by the Board.
(Banking) and the Deputy Chief Executive (Banking).
The Company Secretary is the secretary of the SMC. The
The activities of the Audit Committee include regular
committee meets weekly.
reviews and monitoring of the following:
• the effectiveness of the Bank’s internal financial control
The committee’s role and responsibilities include:
• submitting to the Board the development strategy of
the Group;
• setting out the corporate values and principal policies,
including the credit policy, in respect of the conduct of
the business;
and risk management systems;
• the effectiveness of the internal audit function;
• the independence of the external auditors and the
assessment of the external auditors’ performance;
• the remuneration of the external auditors and their
supply of non-audit services;
• ensuring that the organisation structure is best suited
• the Bank’s procedures for ensuring compliance with
to the implementation and realisation of such policies
laws and regulations relevant to financial reporting and
and strategy and provides for clear lines of responsibility
with its internal code of business conduct; and
and accountability;
• delegating authority to the Chief Executives and
• specific issues where the committee considers action or
improvement is needed.
supervising the delegation of authority by the Chief
Executives to the members of the General Management;
In carrying out its responsibilities, the committee meets
• ensuring that adequate succession planning exists at
regularly with the Executive Management of the Bank and
senior executive level;
• liaising with all the Board Committees;
28
ANNUAL REPORT 2007
receives regular reports from both internal and external
auditors. Separate sessions are held with both sets of auditors
at least once a year, without Management being present. The
(balance between independent/non-executive/executive);
Chairperson of the committee also has regular contact with
and, reviewing the composition of the Board Committees,
the First Deputy Governor of the Bank of Mauritius to inform the
including those of wholly-owned subsidiaries.
latter of developments within the Bank and to receive guidance
and advice. The committee has satisfied its responsibilities for
The committee is also responsible for making
the year in compliance with its terms of reference.
recommendations on the level of the directors’ fees,
including the remuneration of the Board committee
Risk Monitoring Committee
members, to be submitted at the shareholders’ meeting as
The Board of Directors at their meeting held on 20 June
well as the remuneration policy for senior executives and
2007 approved a new charter for the Risk Monitoring
members of Management.
Committee (RMC); the name of the committee having been
changed by a decision of the committee on 4 October 2006.
The Nomination and Remuneration Committee meets twice
The committee, which meets quarterly, consists of the Chief
a year and on an ad hoc basis when required. To fulfil its
Executive (Group), the Chief Executive (Banking), and a
responsibilities during the financial year ended 30 June
minimum of two and a maximum of three non-executive
2007, the committee met six times with respect to:
directors appointed by the Board. The committee is chaired
• making recommendations for an Employee Share Option
by an independent non-executive director. The Head of
Scheme as part of the remuneration policy of the Bank,
Group Risk acts as secretary and the Deputy Chief Executive
supervising the construction thereof and submitting
(Banking) acts as an alternate to the Chief Executive (Group)
the scheme to Board approval;
• reviewing and making recommendations to the Board for
and to the Chief Executive (Banking), in their absence.
the top executives and Management’s remunerations;
The principal responsibility of the RMC is to monitor the risk
portfolios of the Bank, set against the agreed risk appetite
• reviewing the overall and individual performance of the
Board and of the directors;
in compliance with the Basel II Accord. The Chairman of
• undertaking the selection and making recommendations
RMC reports to the Board, in a timely manner, on all risk
in respect of new Board members and the composition
issues that could have an impact on the operations or
of the Board Committees;
• reviewing the directors’ fees and their remuneration in
reputation of the Bank.
line with the study initiated during the prior year; and
Nomination and Remuneration Committee
• reviewing the proposals received for the subsidiaries’
The committee, consisting of five non-executive directors,
Boards and making recommendations thereon/ratifying
is responsible for making recommendations to the Board
them.
on the appointment of directors and senior executives. This
responsibility includes: ascertaining whether candidates
Conduct Review Committee
are fit and proper persons, have the required skills and
The committee, chaired by a non-executive director,
expertise and are free from material conflicts of interest;
also comprises three other non-executive directors. The
reviewing the Board structure, size and composition
Company Secretary acts as secretary to the committee. The
29
continued
committee meets four times a year and is responsible for
• implementing the materiality criteria falling under the
monitoring and reviewing related party transactions, their
definition of related party transactions and reviewing
terms and conditions, and ensuring the effectiveness of
all transactions that are not immaterial; and
established procedures and compliance with the Bank of
• periodically reviewing the existing procedures to
ensure their continuing adequacy. In particular,
Mauritius Guidelines.
ascertaining that they are sufficient to identify any
The mandate of the committee includes:
transactions with related parties that may have
• ensuring that procedures have been established by
a material effect on the stability and solvency of
Management to comply with the requirements of the
the Bank and ensuring that such transactions are
Guidelines;
properly dealt with.
Board and Committee Attendance
The following table gives the record of attendance at meetings of the MCB Board and its committees for FY 2006/07.
Board of
Directors
Number of meetings held
11
Board Committees
Supervisory and
Monitoring
Audit
Risk Monitoring
Nomination and
Remuneration
Conduct
Review
44
4
4
6
3
Meetings attended
J. Gérard HARDY
10
41
E. Jean MAMET
10
32
9
Anil CURRIMJEE
8
Arnaud DALAIS
3
Bertrand DE CHAZAL
10
Philippe A. FORGET
10
(until December 2006)
4
4
4
2
4
39
3
4
9
3
Sanjiv GOBURDHUN
9
3
3
7
4
Edgar JULLIENNE
10
6
Thierry KOENIG
10
7
Pierre-Guy NOEL
11
Luc PILOT
2
Antony R. WITHERS
6
10
(until December 2006)
(as from December 2006)
30
6
ANNUAL REPORT 2007
5
33
4
37
3
4
1
3
Directors’ Interests and Dealings in Shares
Number of shares
With regard to directors’ dealings in the shares of their own
company, the directors confirm that they have followed the
Interests as at 30 June 2007
absolute prohibition principles and notification requirements
J. Gérard HARDY
of the model code on securities transactions by directors as
E. Jean MAMET
Direct
Indirect
2,500
-
149,000
120,700
11,683
363,384
5,025
6,669
500
11,000
Philippe A. FORGET
26,375
10,910
35,000
-
the close periods prescribed by the Stock Exchange
Sanjiv GOBURDHUN
45,500
3,256,490
Regulations, require the written authorisation of the Board
55,910
747,029
Edgar JULLIENNE
27,200
357,561
Thierry KOENIG
7,124
5,610
All new directors are required to notify in writing to the
1,000
26,017
Company Secretary their holdings in MCB shares as well
Pierre-Guy NOEL
864,862
28,302
15,000
-
500
11,400
detailed in Appendix 6 of the Stock Exchange of Mauritius
Listing Rules.
Anil CURRIMJEE
The Company Secretary maintains a Register of Interests
which is updated with every transaction entered into
by directors and their closely related parties. Such
transactions, which have to take place exclusively outside
of Directors, through the delegation given to the Supervisory
Bertrand DE CHAZAL
and Monitoring Committee.
as those in related corporations. This is entered in the
Register of Interests, which is subsequently updated with
all relevant movements. The minimum holding of MCB
Antony R. WITHERS
shares required from the directors by the constitution of
the Bank is 500.
Transactions during
the year
Number of shares Number of
purchased
shares sold
The interests of the directors in the share capital of the Bank
Philippe A. FORGET
25,375
-
and the transactions in MCB shares by directors who have
Sanjiv GOBURDHUN
15,000
-
-
330,861
1,000
-
Pierre-Guy NOEL
13,790
-
Luc PILOT
18,200
-
Antony R. WITHERS
15,000
-
served during the year are given in the following tables:
Edgar JULLIENNE
The above figures include purchases of 12,575 shares, 13,790 shares and
2,994 shares by Philippe A. Forget, Pierre-Guy Noël and Antony R. Withers
respectively and represent options granted under the Employee Share Option
Scheme and exercised at the price of Rs 83.50 per share in January 2007.
31
continued
The interests of the directors in the share capital of Fincorp
Additionally, directors of subsidiaries, who did not sit
Investment Ltd. as at 30 June 2007 were as follows. None
on MCB’s Board during the year, received the following
of the directors had any interest in the equity of other
remuneration and benefits:
subsidiaries of the Bank.
Number of shares
Directors
Direct
Indirect
E. Jean MAMET
27,000
63,400
41,587
187,390
Anil CURRIMJEE
-
6,500
-
362,200
-
37,480
750,166
32,250
Pierre-Guy NOEL
2007
Rs ‘000
2006
Rs ‘000
Executive:
Full-time
13,158
11,606
490
60
13,648
11,666
Non-executive
Directors’ Remuneration
Directors’ Service Contracts
Remuneration and benefits received by directors during the
There were no service contracts between the Bank and its
financial year were as follows:
directors during the year.
Directors
From the
Holding Company
From Subsidiaries
Total
Rs ‘000
Rs’ 000
Rs’ 000
J. Gérard HARDY
2,062
E. Jean MAMET
1,663
80
1,743
408
35
443
Anil CURRIMJEE
441
441
Arnaud DALAIS (until December 2006)
108
108
45
709
Bertrand DE CHAZAL
664
424
424
Sanjiv GOBURDHUN
568
568
408
408
Edgar JULLIENNE
408
408
Thierry KOENIG
258
258
492
Luc PILOT (until December 2006)
168
100
592
168
607
607
Total Non-executive
8,679
260
8,939
Philippe A. FORGET
11,620
-
11,620
Pierre-Guy NOEL
12,392
-
12,392
Antony R. WITHERS
9,930
-
9,930
Total Executive
33,942
Total (Non-executive and Executive)
42,621
Net fees from companies where executive directors serve as representatives of MCB Ltd. are paid to the Bank.
32
2,062
ANNUAL REPORT 2007
33,942
260
42,881
Senior Management Profile
University. Alain is responsible for the Retail SBU which
The profiles of Pierre-Guy NOEL, Antony R. WITHERS and
includes the branch network, the Private Banking BU and the
Philippe A. FORGET appear in the Directors’ Profiles section.
Contact Centre BU that manages the Bank’s remote delivery
channels. Prior to his current position, Alain launched leasing,
Jean-François DESVAUX DE MARIGNY – Age 53
factoring and private banking services and acted as Project
Fellow member of the Institute of Chartered Accountants in
Director for the Business Process Re-engineering exercise
England and Wales. Following several years of experience
initiated with Accenture. Before joining the MCB, Alain was
as an auditor in Europe, he joined the MCB in 1986. He was
Senior Manager at De Chazal Du Mée’s consulting division.
involved in the launching of the Stock Exchange of Mauritius
in 1989. He has strongly participated in the development of
Jean-Michel NG TSEUNG – Age 39
the MCB’s regional network and is a director of a number of
Graduated with a First Class Honours in Mathematics at
subsidiaries and associates of the Group. He is presently
the Imperial College of Science and Technology, London. He
responsible for the Group’s finances and also acts as
qualified as a Chartered Accountant out of the London office
secretary to the Board of Directors, the Audit Committee,
of Arthur Andersen in 1990 and was made a partner thereof
the Conduct Review Committee and the Supervisory and
in Mauritius in 1997, acting during his last 4 years with
the firm as Head of Audit and Business Advisory division.
Jean-Michel joined the MCB in July 2003, coming from Ernst
Marc LAGESSE - Age 44
& Young and is currently Head of Corporate.
Holds a BSc (Honours) in Statistics and Economics from
the University College London (UCL) and an MBA from the
Michaël J. PIKE - Age 58
London Business School. After graduating from UCL, Marc
Is an Associate of the Chartered Institute of Bankers, UK
spent twelve years on the London International Financial
and joined the MCB as Head of Risk Management in October
Futures Exchange, the last eight of those as an own account
2005 on a 2-year contract. He has extensive financial and
trader in interest rate derivatives. He returned to Mauritius
risk management experience obtained in different senior
in 1996 to manage the Mauritius Fund Ltd., a London listed
management positions in eight different countries over 34
closed-end country fund. From 1998 to 2006, Marc was
years within the HSBC Group.
Managing Director of MCB Investment Management Co.
Ltd. He is currently responsible for the MCB Capital Markets
Related Party Transactions
which comprises the MCB Investment Management Co. Ltd.,
For the purposes of these Financial Statements, parties
MCB Stockbrokers Ltd., MCB Registry & Securities Ltd., MCB
are considered to be related to the Group if they have the
Capital Partners Ltd. and Multipliant Management Co. Ltd.
ability, directly or indirectly, to control the Group or exercise
significant influence over the Group in making financial
Alain LAW MIN – Age 48
and operating decisions, or vice versa, or if they and the
Graduated in Economics with a BA (Honours) and is an
Group are subject to common control. Related parties
Associate member of the Institute of Chartered Accountants
may be individuals or other entities. On 4 January 2002,
in England and Wales. He also holds an MBA from Cranfield
the Guideline on Related Party Transactions was issued
33
continued
by the Bank of Mauritius. This Guideline encompasses 3
The Bank’s procedures require that where transactions with
main elements:
related parties exceed the materiality criteria established by
• transactions subject to the related party rules and
the Board and approved by the Bank of Mauritius, approval
requirements;
• limits on transactions with related parties and their
interests; and
by the Conduct Review Committee is sought. In instances
where the above regulatory limits are exceeded, prior
approval from the Bank of Mauritius is sought.
• the role of the Board of Directors of a financial institution
and its Conduct Review Committee in establishing
Note 36 to the Financial Statements gives on and off
and implementing appropriate policies on related
balance sheet credit facilities to related parties as at 30
party transactions and administering the process for
June 2007.
handling the transactions.
At the MCB, all powers of the Board of Directors are
In fact, the Guideline is more stringent than the applicable
delegated to the Supervisory and Monitoring Committee.
International Accounting Standard (IAS 24) in that a person
It is the Bank’s view that entities where directors – except
holding directly or indirectly 10% or more of the capital or of
members of the Supervisory and Monitoring Committee
the voting rights of the Bank also falls within the definition
or the Chairperson of the Audit Committee – can exercise
of Related Party. As a general rule, all transactions with a
significant influence, do not fall within the scope of the
related party must be carried out on terms and conditions
definition of related parties. Related parties reported in the
that are at least as favourable to the Bank as market terms
Financial Statements include:
and conditions.
• directors and key management personnel;
• close family members of all the above;
Related Party Transactions include:
• loans, finance leases and service agreements;
• giving a guarantee on behalf of a related party; and
• making an investment in any securities of a related
party.
• subsidiaries, associated companies and entities in
which the Bank holds more than a 10% interest; and
• entities in which key directors and key management
personnel and close family members have significant
interest or influence.
The Guideline imposes limits on exposure to individual
Exposure of the Bank’s top six related parties as at 30 June
related party and to all related parties in aggregate. Also,
2007 were Rs 1,482 million, Rs 418 million, Rs 357 million,
the Bank shall not without the prior written approval of the
Rs 169 million, Rs 132 million and Rs 127 million. These
Bank of Mauritius:
balances represented 18.0%, 5.1%, 4.3%, 2.1%, 1.6%
• engage in transactions with a related party if the
and 1.5% respectively of the Bank’s Tier 1 Capital.
total value of the transactions with the Bank and its
subsidiaries exceeds 2% of its Tier 1 Capital; and
• permit the sum total of all transactions to all related
parties to exceed 25% of its Tier 1 Capital.
34
ANNUAL REPORT 2007
None of the loans granted to related parties was nonperforming as at 30 June 2007.
Shareholders Agreement Affecting the
MCB International Services Ltd.
Governance of the Company by the Board
Jocelyn AH-YU
There is currently no such agreement.
Third Party Management Agreement
Mascareignes Properties Ltd.
No such agreement presently exists.
Jocelyn AH-YU
Pierre-Guy NOEL
Directors of MCB Subsidiaries
Cyril PROVENÇAL (resigned in December 2006)
The directors of the Bank’s subsidiaries during FY 2006/07
Jacques TENNANT
were as follows:
MCB Madagascar
Richard CARRS
Jean-François DESVAUX DE MARIGNY (Chairperson)
Michaël COLLYER
Marc DE BOLLIVIER
Jocelyn DE CHASTEAUNEUF
Philippe A. FORGET
E. Jean MAMET
Marc LAGESSE
Marcel RAMANANDRAIBE (resigned in July 2007)
Patrick RAZAFINDRAFITO
Jean Raymond REY (resigned in July 2006)
F. Jacques HAREL (Chairperson)
MCB Moçambique
Pierre-Guy NOEL (Chairperson)
Gilbert GNANY (resigned in April 2007)
Jorge FERRAZ (appointed in March 2007)
Philippe A. FORGET
F. Jacques HAREL (Chairperson)
Raoul GUFFLET (appointed in March 2007)
MCB Seychelles
Jocelyn AH-YU
Bertrand DE CHAZAL (Chairperson)
F. Jacques HAREL
Raoul GUFFLET (appointed in April 2007)
E. Jean MAMET
E. Jean MAMET
Pierre-Guy NOEL
35
continued
Finlease Co. Ltd.
Ziyad BUNDHUN (appointed in January 2007)
Raoul GUFFLET
Hervé DUVAL (Jr) (resigned in March 2007)
Thierry KOENIG
Jean Michel FELIX
Marc LAGESSE
Philippe A. FORGET
Bernard YEN
Alain LAW MIN
E. Jean MAMET
Bruno MARGEOT
Bernard D’HOTMAN DE VILLIERS
Bashirali Abdulla CURRIMJEE, G.O.S.K.
Blue Penny Museum
Thierry Maurice JAUFFRET
Jean Paul ADAM (resigned in October 2006)
Bernard YEN
Philippe A. FORGET
MCB Factors Ltd.
J. Gérard HARDY
Jean-Michel NG TSEUNG (Chairperson)
Jean-Raymond HAREL
Alain LAW MIN
Pierre-Guy NOEL
E. Jean MAMET
MCB Properties Ltd.
Philippe A. FORGET
Pierre-Guy NOEL
Bashirali Abdulla CURRIMJEE, G.O.S.K.
Michel DOGER DE SPEVILLE, C.B.E.
Bruno MARGEOT
Jean-Pierre MONTOCCHIO
36
ANNUAL REPORT 2007
Shareholder Relations
and Communication
The Board aims to properly understand the information
Number of
%
shares owned Holding
Largest shareholders
needs of all shareholders and places great importance
on an open and meaningful dialogue with all those
involved with the Company. It ensures that shareholders
are kept informed on matters affecting the MCB. Besides
official press communiqués and occasional letters to
shareholders where appropriate, the Bank’s website
is used to provide relevant information. Open lines of
communication are maintained to ensure transparency
State Street Bank and Trust Co.
(A/C The Africa Emerging
Markets Fund)
9,909,807
3.96
The Mauritius Union Assurance
Company Ltd.
9,316,715
3.72
The Anglo-Mauritius Assurance
Society Ltd.
6,775,882
2.71
6,203,600
2.48
POLICY Ltd.
5,765,803
2.30
SSLN c/o SSB Boston Old
Mutual Life Assurance Co.
(South Africa) Ltd.
4,346,535
1.74
La Prudence Mauricienne
Assurances Limitée
4,064,343
1.62
Pictet et Cie. (A/C Blakeney LP)
3,861,264
1.54
Rose Hill Transport Ltd.
3,256,490
1.30
SSL c/o SSB Boston Investec
Africa Fund
2,841,157
1.13
and optimal disclosure. All Board members are requested
to attend the Annual Meeting, to which all shareholders
are invited.
Material Clauses of the Constitution
The constitution of the MCB provides that no shareholder
can own more than 4% of the Bank’s issued capital
without prior approval from the Board of Directors.
Shareholding Profile
Ownership of ordinary share capital by size of shareholding
and the ten largest shareholders as at 30 June 2007 are
given in the following tables:
Number of
Shareholders
Size of shareholding
1-500 shares
Number of shares
owned
% Holding
10,740
1,270,907
0.51
501-1,000 shares
1,216
902,235
0.36
1,001-5,000 shares
2,009
4,943,916
1.97
642
4,666,433
1.86
1,050
24,811,230
9.91
50,001-100,000 shares
279
19,771,776
7.90
Above 100,000 shares
353
194,009,098
77.49
16,289
250,375,595
100.00
5,001-10,000 shares
10,001-50,000 shares
Total
37
continued
Dividend Policy
The MCB aims to supply its shareholders with ongoing returns in the form of a stable and relatively predictable level of
dividends. Interim dividends are declared in November, based on best estimates of half-yearly results to 31 December. As
from 2007/08, the final dividend will be declared by the Board just before the end of the financial year, when the trend in
Group profitability will have been even more firmly established, and paid towards the end of July. Key dividend ratios over
the past five years are as shown below:
FY 2002/03
FY 2003/04
FY 2004/05
FY 2005/06
FY 2006/07
Dividend per share (Rs)
1.50
1.70
1.90
2.12
2.90
Dividend cover (Number of times)
2.12
3.23
3.25
3.49
3.40
5.3
4.8
4.7
3.8
2.8
Dividend yield (%)
Share Price Information
The stock market achieved an outstanding performance in FY 2006/07 with relevant indices being pushed to new heights.
The SEMDEX grew by some 70% over the period to reach 1,433.07 at end June 2007. Likewise, SEMTRI, the total return
index, showed strong dynamism, expanding by 77.4% in rupee terms over the past financial year to close at 3,691.60 on
30 June 2007.
Reflecting market confidence in our institution, the MCB share price has outperformed the market during FY 2006/07 with a
substantial rise of 83.9%. The share price broke through the psychological level of Rs 100 on 9 January 2007 and reached
Rs 103 as at end June 2007, thereby sustaining its leading market capitalisation which stood at Rs 25.8 billion. The MCB
price has pursued its appreciation during the early months of FY 2007/08 with a 15.8% increase from the beginning of July
2007 to mid-September, as compared to a 3.5% growth in the SEMDEX.
Performance of MCB Share Price vis-à-vis the market
220
180
160
140
120
100
MCB Share Price Index
38
ANNUAL REPORT 2007
SEMDEX (rebased)
Sep 07
Aug 07
Jul 07
Jun 07
May 07
Apr 07
Mar 07
Feb 07
Jan 07
Dec 06
Nov 06
Oct 06
Sep 06
Aug 06
80
Jul 06
3 July 2006=100
200
Statement of Remuneration
Philosophy
The current job grading system is presently being reviewed
The Board is responsible for the remuneration strategy of
approach.
to inject more flexibility therein through a more functional
the Bank with related duties delegated to the Nomination
Employee Share Option Scheme
and Remuneration Committee.
Following the shareholders’ approval during the last Annual
The following principles are used to determine the proper
Meeting and clearance by the authorities, the Bank introduced
remuneration levels:
an Employee Share Option Scheme (ESOS) at the end of 2006
• the Bank regularly surveys the market to ensure that its
with a view to further aligning the interests of its employees
remuneration packages are competitive;
with those of shareholders. Besides fostering congruence
• remuneration practices are being restructured to
between organisational and individual objectives, the scheme
provide clearer differentiation between individuals with
also provides an opportunity for participating employees to
regard to performance; and
share in the growth and prosperity of MCB. All the employees
• strong incentives are created for superior performance.
of the Bank have thus been granted options to allocate up to
25% of their annual performance bonus towards buying MCB
Remuneration is reviewed after taking cognisance of market
shares with a vesting period of three years. 529,718 options
norms and practices as well as additional responsibilities
were thus granted in January 2007 of which 298,102 have
placed on directors and employees.
already been exercised as summarised in the table below:
Management
Number of options granted in December 2006
Initial option price (Rs)
Number of options exercised to date
Other employees
TOTAL
122,341
407,377
529,718
83.50
75.00
98,730
199,372
298,102
8,248
14,975
23,223
Percentage exercised
80.7
48.9
56.3
Number of employees
25
759
784
23,611
208,005
231,616
Value (Rs ‘000)
Available for the 4th window and expiring in mid-October 2007
Timetable – Important Forthcoming Events
November 2007
Declaration of interim dividend and release of first quarter results to 30 September 2007
December 2007
Annual Meeting of Shareholders
December 2007
Payment of interim dividend
February 2008
Release of half-year results
May 2008
Release of results for the 9-month period to 31 March 2008
June 2008
Declaration of final dividend
July 2008
Payment of final dividend
September 2008
Release of full-year results to 30 June 2008
39
Corporate Social Responsibility
continued
the population, particularly at primary school level. The
initiative benefited from the collaboration of the Ministry of
Corporate Social Responsibility (CSR) is the
commitment of businesses to contribute to
sustainable economic development by working with
employees, their families, the local community and
society at large to improve their lives in ways that
are good for business and for development.
Health and Quality of Life as well as that of Education and
Human Resources, while 26 sponsoring enterprises provided
financial support with every rupee thereby contributed
complemented by matching funding from the MCB for an
aggregate project cost of some Rs 15 million. Building on
the wide-ranging support of various stakeholders, including
Source: The International Finance Corporation
(Private Sector Development; The World Bank)
the keen participation of staff members, the campaign
turned out to be a commendable success.
The MCB’s Contribution to Sustainable
Development
Education remains the priority area of the CSR programme
At the MCB, it is believed that the success of a company
with nearly one third of the total budget having been
rests on continuous awareness and hard work to ensure that
allocated to this area in the last financial year on the back
its responsibilities towards all stakeholders are properly
of support provided to many educational and vocational skill
discharged. As such, the Bank has, for decades, recognised
programmes. For instance, in addition to being involved in a
the need to be socially involved and supportive of the wider
wide-ranging Education Scheme aimed at pupils in under-
community’s needs and is well known for its active support
privileged regions, the MCB contributes towards shaping
of worthy causes through multiple activities.
the country’s elite through the award of annual scholarships
for tertiary education.
In line with the decision taken last year, the Board of
Directors has adopted the policy of allocating 1% of the
Structure and Purpose
previous year’s pre-tax profits to the Company’s Corporate
The CSR structure has been revamped during FY 2006/07
Social Responsibility (CSR) projects. As a result, an amount
notably with the setting up of a dedicated business unit
of Rs 20 million was spent during FY 2006/07 in respect of
within the Communication SBU to ensure the proper
such projects in the following main sectors:
implementation of the Group’s approved CSR policy. This
unit is, amongst others, responsible to assess the relative
Rs ‘000
merits of project proposals in collaboration with the CSR
Education
6,645
Poverty Alleviation
3,565
Committee, comprising staff members from various
Environment
9,560
quarters, and submit them for validation to the Executive
7,404
CSR Committee, which is composed of members of the
o/w Chikungunya Campaign
Art, Culture and National Heritage
Total
230
20,000
Board of Directors.
The highest proportion of the CSR budget was allocated
Furthermore, the MCB has always benefited from the diligence
to a national campaign initiated by the MCB against
and support of its staff members, who enthusiastically
Chikungunya with the objective of raising awareness among
volunteer for noble causes as illustrated by the Chikungunya
40
ANNUAL REPORT 2007
campaign, the success of the in-house blood donation and
• MCB Foundation – provision on an annual basis of a
the participation of employees in Royal Raid 2007 in order
full scholarship for overseas study over a three-year
to raise funds for Friends in Hope Association, amongst
period based on performance at the local Higher School
others. In addition to hands-on involvement, employees also
Certificate examination
bring their financial contribution to philanthropic actions.
• MCB Rodrigues Scholarship scheme – granting
For instance, 300 employees have established ‘standing
of a scholarship to students from Rodrigues for
orders’ amounting to Rs 400,000 annually, hitherto used to
undergraduate degree at the University of Mauritius
finance projects through MCB Educational Scheme.
Poverty alleviation:
The CSR programme of the MCB will continue to lay
• PILS – SIDAWARE Project involving financing of several
significant emphasis on education and poverty alleviation
types of educational booklets which will be distributed
with other main areas of involvement being environment,
as support teaching material during training and public
sports and arts & culture. The objectives of the CSR policy
awareness campaigns throughout the island
will be geared towards achieving alignment with existing
• Support to rehabilitation centres
business objectives, properly evaluating projects, fostering
• Friends in Hope – contribution to the operating expenses
partnerships, optimally allocating resources, establishing
of its “centre d’apprentissage et de réinsertion sociale”
a structured employee volunteering programme and
• APEIM – contribution to salaries of an occupational
communicating strategically. In the Bank’s endeavour to
therapist & funding of the respite unit at the Bonne
improve the effectiveness of the CSR process, an “appel à
Mère Centre
projets” will be launched, which should result in community
needs being better identified, evaluated and addressed.
• SOS Femmes – one year of wages for two professionals
working with the centre
Some Examples of Support
Environment:
Education:
• Prevention campaign against Chikungunya
• MCB Education Scheme
• Mauritius Wildlife Foundation – financial support to the
›Covering teacher and parent training programmes,
conservation project of biodiversity of Round Island
the physical uplifting of teaching environments and
the supply of basic school supplies, in especially
National Heritage:
deprived situations (mainly around ZEP schools &
• National Heritage Fund – contribution to the project for
alternative education projects)
the preservation and restoration of Ile de la Passe
›Partnership with private and governmental bodies
for the ZEP programme, particularly at Nicolay
No political donations were made during the year.
Government School
› Participation in the “Bridge the Gap programme”
founded by the Ministry of Education and Human
Resources
41
continued
Auditors’ Fees
The Bank has developed and implemented social, health
The fees paid to the auditors (inclusive of VAT) were:
and environmental policies and practices that in all
material respects comply with existing legislative and
Group
2007
2006
Bank
2007
regulatory frameworks. The health and safety of staff
2006
Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000
Audit fees paid to:
BDO De Chazal Du Mée
9,846
7,779
9,200
7,475
Other firms
3,232
2,209
-
-
and visitors are of paramount importance to us and all
reasonable measures are taken to ensure a sound and
healthy working environment.
The MCB is an equal opportunity employer and does not
Fees for Other Services
discriminate in any way with regard to race, religion or
gender. Employment opportunities are openly advertised.
Group
2007
2006
Bank
2007
2006
Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000
Fees for other services
provided by:
BDO De Chazal Du Mée
1,927
3,966
1,819
3,904
Integrated Sustainability
Reporting
The MCB is committed to the highest standards of integrity
and ethical conduct in dealing with all its stakeholders.
Staff at all levels adhere to the Bank’s Code of Conduct and
the national Code of Banking Practice while epitomising our
core values in their daily activities, thereby upholding the
organisation’s unique culture. Reasonable grievances and
disciplinary procedures are in place to enable enforcement
of the codes.
42
ANNUAL REPORT 2007
Company Secretary
Company Secretary’s Certificate
I certify that, to the best of my knowledge and belief, the company has filed with the Registrar of Companies all such returns
as are required of the company under the Companies Act 2001 in terms of section 166(d).
Company Secretary
Head Office
9 – 15, Sir William Newton Street
Port Louis
28 September 2007
43
44
ANNUAL REPORT 2007
Management
Discussion
and Analysis
“ The redesign of the Port Louis Main Branch seeks to offer to
the customer a facilitated access to the Bank’s services.”
Management Discussion and Analysis
Highlights
training of branch staff and account executives, aimed
The leadership position of the MCB was reaffirmed
at ensuring continuous improvement in customer service.
in FY 2006/07 with another remarkable performance
Substantial investments are being made in the renovation
achieved despite a challenging environment. Indeed, profit
of branches to allocate more floor space to customers, to
attributable to the equity holders of the parent company
provide them with better performing self-service delivery
increased by 23.9% to reach some Rs 2,460.8 million,
channels and give them easier access to services like the Call
while earnings per share, boosted by the buy-back, in
Centre and secure Internet Banking. The core banking system
December 2006, of the 11.25% stake of Lloyds TSB Bank
of the MCB is being reviewed and will be changed in order
plc, increased by 31.6% to Rs 9.74. Additional comfort can
to improve the Bank’s capacity to provide a wider range of
be derived from the fact that good financial results were
services more efficiently. In addition, the introduction of Teller
obtained from all lines of business, reflecting the balanced
Cash Recyclers (TCRs), a first in Mauritius, will automate and
growth of the Group. Meaningfully, income from foreign
quicken the handling of cash, confirming the reputation of
sources and non-bank financial services contributed, for
the Group as a prime-mover in using technology to enhance
the first time, to more than 50% of consolidated profit,
customer service. Besides, conscious of the importance of
testifying to the success of the strategy adopted by the
sound risk management, the MCB has extended major efforts
Group to diversify its markets and products. In this respect,
towards compliance and implementation of best practices,
alongside actively pursuing the implementation of market
with a significant milestone being reached in April 2007 when
development initiatives with a clear emphasis on adapting
the Bank achieved a satisfactory state of readiness under the
the Bank’s offerings to the evolution of the operating
Basel II Standardised Approach.
environment and customer expectations, the MCB is
in the course of restructuring its investment services
The continued strong performances of the Group over the past
activities with a view to reinforcing its leadership position
few years and its established foothold in the banking sector
in the provision of financial services on the domestic
have contributed to enhance its image on the international
front. Furthermore, a strong focus was again given to
scene, thereby reinforcing the brand value. The MCB remains
the overseas expansion strategy notably through greater
the only local bank among the top 1,000 global banks, as per
market penetration in the region and a reinforcement of
‘The Banker’ July 2007 publication, while Moody’s Investors
the MCB franchise through the extension of its brand to all
Service has upgraded the MCB’s financial strength rating
foreign banking subsidiaries.
in April 2007. Moreover, the MCB became the first foreign
institution to issue a subordinated bond through the Bond
To sustain the business development initiatives, several
Exchange of South Africa, which was rated by Moody’s at Aa3
actions were taken during the course of FY 2006/07 to reinforce
on the South African National Scale.
capacity and enhance operational efficiency, considerable
attention being given to human resource development. As such,
Robust financial fundamentals, bright prospects and
a major training initiative, namely the culture development
the enhanced image of the MCB as well as the buy-back
programmes under the theme ‘Moving Customer Boundaries’,
of the stake of Lloyds TSB Bank plc have contributed to
was undertaken and particular emphasis was given to the
generate additional value for shareholders. Indeed, the
46
ANNUAL REPORT 2007
MCB share price once again outperformed the market with
and personal income taxes to a single rate of 15%
a substantial rise of 83.9% over FY 2006/07, leading to an
effective FY 2007/08. In the same breath, the forthcoming
increase in its market capitalisation to Rs 25.8 billion –
Competition Act should further encourage economic
that is, USD 820 million – at the end of the last financial
efficiency by fostering a more market-oriented environment.
year, by far the highest on the Stock Exchange of Mauritius.
The enhanced operating environment has already started
Whilst insistently espousing initiatives aimed at enhancing
yielding benefits in terms of improved economic growth and
shareholder value, the Group attaches high importance to
is expected to help sustain buoyant activity levels over the
furthering a performance culture. In this respect, the MCB
medium term, thereby generating additional opportunities
became, during FY 2006/07, the first local company to
for the Bank. On the fiscal front, while the lower tax
launch a share ownership plan for its entire staff, linked
environment will be beneficial to the MCB’s results, these
to performance. Under this Employee Share Option Scheme,
potential savings in future years will however be somewhat
employees are granted options to purchase MCB shares for
tempered by the introduction of a special levy on profitable
the equivalent of 25% of their respective annual performance
banking institutions.
bonuses, thus enabling them to participate in the growth
and prosperity of the Bank. This should contribute to further
Regarding the monetary policy framework, commendable
promote employee motivation and foster congruence with
efforts have been made by the authorities to strengthen
organisational goals. Besides, the Group continues to
the existing set-up by better integrating economic
be very active in terms of Corporate Social Responsibility
fundamentals in the decision-making process with the
(CSR), with 1% of the preceding year’s pre-tax profits being
objective of achieving price stability and ensuring balanced
allocated to such initiatives. A key undertaking during the
growth. In this context, as from December 2006, the Repo
last financial year has been the island-wide campaign
rate replaced the Lombard rate as the signalling rate for
against Chikungunya, which involved a large number of
monetary policy to more effectively reflect underlying forces
Bank staff and proved to be largely successful.
in the short term money market. Moreover, the Monetary
Policy Committee (MPC) was set up in April 2007 as provided
External Forces Review
for by the Bank of Mauritius Act 2004. Following the Finance
Legal and Institutional Environment
Act 2007 and in line with international best practice, this
The last financial year was, in many respects, a landmark in
institution has now been granted independence for the
the development of the country’s institutional environment.
formulation and determination of monetary policy. On a
Of particular significance, the Budget exercise in June 2006
different note, reflective of the policy to further open up
set the stage for enhancing national competitiveness notably
the market, Government of Mauritius treasury bills are now
through a streamlining of procedures, promoting openness
sold over the counter while there are plans to modify the
and economic diversification, improving macroeconomic
existing primary dealer system to enable participation from
management and, meaningfully, relieving fiscal pressure
a greater number of operators.
on businesses. The philosophy of the Government was
reaffirmed and even reinforced in the last Budget speech
In line with the efforts made by the authorities in the past
with, amongst others, an accelerated reduction in corporate
few years to upgrade the legislative framework for financial
47
continued
services, the Borrowers Protection Act 2007 was voted
construction of hotels and projects under the Integrated
this year to promote fairer practices between lenders and
Resort Scheme (IRS). Similarly, whilst expansion in the
borrowers and reduce information asymmetries in respect
trade sector was slightly lower than in 2005 in line with
of financial intermediation transactions, amongst others.
a reduced consumption growth, the domestic-oriented
Going forward, the Group will continue to exploit opportunities
industry bounced back from a stagnant performance and
generated by a more conducive operating environment
grew by 4.1% on the back of relatively brisk activities
linked to enhancements in relevant legislations.
related to a widened small and medium enterprise (SME)
base. The business and financial services sector sustained
Macroeconomic Review
a commendable evolution, driven by strong expansion in
Notwithstanding lingering external challenges and
the banking and business activities segments, while the
prevailing domestic imbalances, the economy in 2006 was
transport, storage and communications sector maintained
marked by some positive signs of burgeoning buoyancy
its high growth path with activity therein being upheld
amidst an apparent improvement in business confidence,
by the good performance in the field of Information and
partly fuelled by the far-reaching reform programme
Communication Technology (ICT).
initiated at national level and aimed at revamping the
economic model to sharpen the country’s competitiveness.
On the other hand, the sensitivity of the tourism sector
Indeed, invigorated by a turnaround in some key sectors
to exogenous shocks was illustrated last year when a
and sustained expansion in established drivers, economic
Chikungunya-induced slowdown was registered in spite of
growth strengthened to 5.0% last year with expansion
further opening up of air access and reinforced marketing
excluding sugar standing at 5.3%, representing increases
efforts. In effect, tourist arrivals grew by only 3.6%, a modest
of 2.7 and 2.5 percentage points respectively over the
performance for the sector considered as being one of the
performance of 2005. Reflecting continued momentum
most promising engines of growth for future years. This
in early 2007, overall growth on a financial year basis is
episode highlighted just how dependent the country is on
estimated to have risen from 3.6% in FY 2005/06 to 5.2%
foreign perceptions in an era of instantaneous information
in FY 2006/07.
flows and underlines the importance of upholding the brand.
On the whole, however, the prospects of the sector remain
Encouragingly, barring subdued performances in the sugar
bright as demonstrated by a surge in tourist arrivals this
and tourism sectors, growth was generally broad-based in
year. As for the sugar sector, it maintained a declining trend
2006. Thus, after the setbacks suffered in the four preceding
with a contraction of 2.9% in 2006 reflecting unfavourable
years, the export-oriented industry registered a growth rate
climatic conditions and a further drop in area harvested to
of 4.6%, boosted by a surge in fish-related exports and a
some extent linked to the rationalisation process. Whilst
relative pick-up in the textile and apparel sector following
some headway has been made with respect to transforming
restructuring initiatives undertaken for some years. The
the sugar industry into a competitive cane cluster, a growing
construction sector also staged a determined rebound
cause for concern as deadlines loom remains the persistent
with a 5.2% expansion reflecting resilient residential and
difficulties of stakeholders to discuss and conclusively
non-residential building work mainly associated with the
agree on critical issues.
48
ANNUAL REPORT 2007
Selected growth rates (Year 2006)
Business activities
Transport, storage & communications
Banking
Construction
Wholesale & retail trade
Insurance
Social & general public services
Export-oriented industry
Non-sugar agriculture
Domestic-oriented industry
Electricity, gas & water
Hotels & restaurants
Sugar
% -3.0
+0.0
+3.0
+6.0
+9.0
Upbeat activity in the tertiary sector, in the seafood hub and
capacity could be constrained by the poor savings rate, as
among SMEs contributed to a drop in the unemployment
gauged by the Gross Domestic Savings to GDP ratio of 15.0%
rate from 9.6% in 2005 to 9.1% last year, but the conditions
in 2006, thereby highlighting the growing importance of
in the labour market remain soft despite the perception of
foreign capital in a gap-plugging role.
enhanced economic prospects. In fact, bolstering growth
capabilities and consistently reducing the joblessness rate
Keeping inflation at bay has been a major challenge in the last
critically hinge on the effectiveness of strategies to promote
financial year in view of numerous price shocks both locally
investment whose level is still viewed as being inadequate.
and internationally. Indeed, one-off budgetary measures in
Although an improvement was observed in the Gross Domestic
2006 and increases in the international prices of oil and
Fixed Capital Formation to Gross Domestic Product (GDP)
basic food commodities as well as a relative weakening of
ratio from 21.4% in 2005 to 24.4% in 2006, it was to a large
the rupee against major currencies on an annual average
extent attributable to the purchase of aircraft to the tune of
basis have concurrently contributed to a surge in inflation to
Rs 5.7 billion. Exclusive of the latter, the ratio went up by only
10.7% as at June 2007. Though the inflation rate is expected
20 basis points to 21.6%, underscoring a further decline in
to decline mainly due to base effects, it should remain quite
real public sector investment following efforts to control
high in the short term on account of persisting pressures
Government expenditure. However, the notable real increase
and, hence, should be carefully watched considering the
of above 15% last year in private investment, stimulated
potential damaging impact that can otherwise ensue.
by opportunities in tourism and IRS projects among others,
As regards public finances, fiscal reforms through tax
and the significant rise in Foreign Direct Investment to
administration measures and restraint on spending have
Rs 7.2 billion are developments which augur well for the
supported a drop in the budget deficit as a percentage of
future particularly considering efforts undertaken to enhance
GDP which, nonetheless, overshot the targeted level by 30
the business framework. On the other hand, the ability of the
basis points to stand at 4.3% in FY 2006/07. Overruns in
economy to mobilise sufficient resources to boost productive
interest payments and in current transfers and subsidies
49
continued
were, among others, the main explanatory items. Laudably,
trend triggered a few months earlier, sparking concerns
a fall in the public sector debt to GDP ratio was also observed
about the possibility of outward capital flows. Looking
but it still imposes a high burden in terms of servicing.
ahead, considering the various opposing forces at play, the
Central Bank faces a serious challenge to strike the right
On the external front, a considerable deterioration in the
balance through its monetary policy stance between price
balance of trade, prompted by the purchases of aircraft
stability and general growth cum investment objectives. At
and worsening terms of trade – consequent to commodity
the broader level, though the recovery process seems to be
price hikes on global markets and depreciation in the
on a satisfactory pathway, the authorities should build on
effective rate of the rupee on average – largely outweighed
the growing impetus and pursue its restructuring exercise
a robust growth in gross tourism receipts, thus leading to a
in a timely and coherent fashion, whilst guarding against
significant rise in the current account deficit in FY 2006/07.
conflicting signals that may dampen business mood.
However, the overall balance of payments posted a surplus
of Rs 6.6 billion to some extent due to notable investment
Market Environment
inflows partly linked to IRS projects and purchases of
In line with higher lending rates by commercial banks
securities. These flows have provided support to the local
following the tighter monetary policy, a slowdown was
currency particularly in the early part of 2007 when the
registered in the loan portfolio growth of the banking sector
rupee regained some vitality after having lost a notable
during FY 2006/07 with credit to the economy increasing
portion of its value last year.
by 10.3% to Rs 141.5 billion as at 30 June 2007 as
compared to an expansion of 14.0% over FY 2005/06. The
The appreciable level of portfolio investment made by
lower credit growth was mainly prompted by significant
foreigners in the country over the last financial year largely
reductions in loans to public nonfinancial corporations as
accrued with respect to Government securities in the wake
well as to the agricultural and fishing sector on the back
of an important rise in the returns on treasury bills as
of the rationalisation process in the sugar industry. On the
gauged by an increase to 10.72% in the annual average
other hand, upbeat outlooks in sectors such as construction
Bank rate as compared to 6.94% in FY 2005/06. Whilst
(including housing), tourism and financial and business
the upward movement in the yields of treasury bills partly
services have contributed to substantial increases in
reflected increases in the Lombard rate by 50 basis points
advances to these segments. Likewise, loans relating to
in July 2006 and one percentage point in September 2006,
infrastructure witnessed a considerable rise chiefly linked
the Bank rate continued to soar in late 2006 and early
to power generation projects while the appreciable hike in
2007 to peak at 13.38% in February last. This compounded
respect of the personal and professional segment reflects
expectations of further monetary tightening generated by
sustained efforts of banks to further develop the retail
persistent and mounting inflationary pressures. However,
banking business.
a hike in the Repo rate, which became the key policy rate
in December 2006, only occurred in July 2007 with the
On the funding side, the banking sector observed a noteworthy
magnitude of the increase standing at a significant 75 basis
growth of 26.3% in total deposits during FY 2006/07, spurred
points. The Bank rate, nonetheless, maintained a downward
by a remarkable increase of 37.7% in foreign currency
50
ANNUAL REPORT 2007
Credit to the Economy
June 06
Rs m
June 07
Rs m
Change
%
Agriculture and fishing
7,844
6,852
(12.7)
Export-oriented industry
7,073
6,824
(3.5)
Domestic-oriented industry
7,903
8,121
2.8
Tourism
15,340
17,883
16.6
Transport
1,681
1,772
5.4
Sectors
Construction (including Housing)
19,475
22,917
17.7
Traders
17,713
19,736
11.4
492
599
21.7
Financial & business services
13,344
15,813
18.5
Infrastructure
2,833
4,137
46.0
Information & Comm. Technology
Global Business Licence Holders
8,907
10,158
14.0
Personal & Professional
11,943
14,311
19.8
Public Nonfinancial Corporations
8,938
6,904
(22.8)
Others
4,892
5,512
12.7
Total
128,378
141,539
10.3
deposits against the backdrop of the robust performance
high as gauged by the liquid asset to local currency deposit
of the global business sector. Rupee-denominated deposits,
ratio of some 39% as at 30 June 2007. This situation
however, grew at a slightly lower pace as compared to the
continues to stimulate competition at the level of credit
previous year in spite of the general increase in interest
in particular with pressures emanating both within the
rates. In particular, savings deposits achieved a moderate
banking industry and from non-bank financial institutions.
rise of 6.5% as opposed to 9.2% in the preceding year in
Banks have generally adopted an aggressive approach by
line with the downward trend in the national savings to
stepping up their marketing initiatives especially geared
GDP ratio and a possible change in consumer preference in
towards the retail segment to consolidate and increase their
favour of alternative modes of investment in the wake of the
market shares. Besides, several institutions have furthered
introduction of a 15% tax on interest income.
their presence on the market place through new branches
and automated distribution channels in order to increase
Deposits in the Banking Sector
proximity to their customers. In spite of this increasingly
June 06
Rs m
June 07
Rs m
Change
%
136,000
148,214
9.0
performance in terms of both credit to the economy and
Savings
70,671
75,292
6.5
local currency deposits, supported by measures aimed at
Demand
14,707
16,736
13.8
enhancing efficiency and better responding to customer
Time
50,622
56,186
11.0
Foreign currencies
208,441
286,940
37.7
Total
344,441
435,154
26.3
Types of Deposits
Rupee
challenging environment, the MCB has clocked a potent
needs and expectations.
Going forward, whilst the perceived improvement in the
On the whole, the general liquidity position of the banking
economic environment and institutional developments could
sector declined in the last financial year though remaining
provide interesting business opportunities, competition
51
continued
should swell further considering inter alia the proactive
Lines of Business
stance of financial institutions vying for productive
Corporate
ventures, the ongoing integration of the banking system
Amid fierce competition, the MCB has maintained its lead
and the coming into operation of new players. Against this
in the Corporate Banking business which continues to
background, the Bank will pursue its efforts to strengthen
post appreciable growth despite increasing pressure on
and deepen its customer base with due attention given to
margins and a still subdued investment climate. Of note
the quality of its portfolio and to the judicious sourcing of
is a significant increase in net interest margins, reflecting
funds. Moreover, the MCB will continuously seek to increase
the improved quality of the loans and advances portfolio
the contribution of non-bank financial services to its overall
and the result of efforts made over the last few years in
performance and extend its involvement in the region to
improving the Bank’s credit risk management process.
further widen its revenue base.
Revenue figures for all other product and service categories
also increased healthily.
Operations Review
On the strength of strategic initiatives undertaken in past
During FY 2006/07, customers have constantly been at the
years, whether relating to business development, such as
centre of our attention, preoccupation and priorities. In the
horizontal and vertical diversification, or in terms of internal
wake of the recent streamlining of the credit management
capacity and efficiency, notably through the business
process, Corporate account executives have been freed
process re-engineering exercise, the MCB has achieved a
from a number of back office duties allowing them to more
noteworthy financial performance during FY 2006/07 across
proactively listen to and address the rising expectations of
its various lines of business. Stimulated by the payoff of
customers in a fast-evolving business environment. Efforts
its bold past decisions, the Group has continued to invest
have also been dedicated to providing a seamless service
at different levels to ensure the sustainability of robust
to customers by ensuring that an optimal mix of products
profitability growth and even aim for superior returns over
and services across the Bank is provided to them as well
the longer term in line with its strategic plan. In effect, the
as by focusing on the effective management of customer
breadth and depth of international operations have been
relationships.
extended while, on the non-bank financial services front,
investment services are being restructured for greater focus
Knowledge being an instrumental driver of growth in the
and efficiency. On the domestic front, due attention is being
banking business, the Corporate Banking Business Unit
paid to improving market knowledge and enhancing customer
(BU) continues to harness customer information towards
service, notably through human resource development
improving service quality and strengthening client
programmes, supported by major enhancements in the
relationships. Indeed, one of the key initiatives during the
physical and technological infrastructure. Regarding the
year under review has been the refining of the customer
latter in particular, a major bank-wide initiative relates to
segmentation model, which is expected to:
the decision to replace the core banking system by one with
• ensure that the organisation structure is properly
improved functionalities and flexibility, commensurate with
geared towards addressing the varying needs of the
the Group’s growth and efficiency ambitions.
different segments of Corporate customers portfolio;
52
ANNUAL REPORT 2007
• improve the Bank’s targeting and exploitation of growth
while bearing in mind the need to uphold stringent risk
management standards. In all its endeavours, MCB Retail
opportunities; and
• act as an enabler for needs-based product development
has maintained a strong focus on staff development,
instrumental in meeting its business objectives. Indeed,
and tailoring of banking solutions.
branch staff are the primary recipients of the enterpriseThe Bank has again invested proactively in the professional
wide culture development programme which, coupled with
development of its personnel in the Corporate Banking BU
an ambitious physical layout upgrade initiative, will ensure
with the aim of honing their technical and interpersonal
a significant improvement in customer experience.
acumen and enhancing their field effectiveness. Targeted
training sessions, in-house as well as externally, have
In a challenging market environment, the retail function
contributed to sharpen staff technical and service skills.
has maintained its marketing and commercial efforts.
Further vendor schemes and company-specific customer
In FY 2007/08, the Corporate Banking BU is poised to
acquisition programmes have been launched successfully.
capitalise on some large scale IRS projects as well as
As regards IRS projects, the MCB has been at the forefront of
some important developments in the hospitality sector,
the ‘Marché International des Professionels de l’Immobilier’
with a consolidation of its leading position in traditional
(MIPIM) fair in France to promote its financing schemes
business niches. Other main avenues of opportunities
and banking services with respect to property acquisition
lie in the ongoing restructuring of the sugar sector,
by foreigners. Presence in other fairs such as the Salon
energy generation projects, land-based oceanic industry,
de la Maison and SME Trade Fair has brought a string
construction, real estate, seafood hub, Freeport operations
of additional commercial opportunities while helping to
and ICT among others.
reinforce customer relationships with targeted segments.
In-branch product promotion events, in particular the ‘Anou
To meet the challenges of the coming years, the Bank will
Cozé’ campaign, have also been privileged occasions for
pursue the implementation of innovative products and
strengthening rapport with customers whilst matching their
services, the strengthening of client relationships, investment
needs with the extensive range of MCB products and services.
in new enabling technologies and in human resources, further
In addition, to better meet the growing expectations of the
enhancement of its operational efficiency and the continuous
medium to high net worth segments of retail customers,
improvement of its risk management framework.
strong emphasis has been placed on increasing the
frequency of customer contacts and continuously monitoring
Retail
satisfaction with banking products and services. During the
The financial performance of the retail function over
last financial year, branch staff have again been very active
FY 2006/07 has been above targeted levels, the
in promoting community activities. The success of the
organisation starting to reap the benefits of ongoing
Chikungunya campaign within primary schools is largely
efforts to enhance commercial proactiveness while
attributable to the comprehensive participation of the staff
improving customer service and relationship. Business
of the Bank’s extensive branch network in coordinating the
processes have been further streamlined for efficiency
distribution of prevention packs.
53
continued
A major development regarding the retail function relates
the Bank capitalised on its exclusive partnerships with
to the redesign of the Port Louis Main Branch in line with
American Express and Diners Club to achieve a competitive
recommendations made by Allen International and anchored
edge. The MCB’s mobile Point of Sale (POS) working on a
on multiple objectives aimed at supporting business growth.
GPRS network, yet another first in Mauritius, allowed the
In the first place, it should help enhance customer experience
deployment of terminals in a timely and efficient fashion
through increased comfort and floor space in addition to the
while providing enhanced flexibility and convenience to
introduction of greeters, which has been largely successful
merchants.
in channelling clients, managing queues, addressing service
issues and promoting alternative channels for bank operations.
The MCB offers a comprehensive range of card payment
Moreover, the new layout should facilitate sales and assist in
solutions, including fleet cards, credit cards and debit
better responding to customer needs notably via dedicated
cards, to cater for both the individual and corporate
areas for specific segments. Efficiency in service delivery
segments. Regular card usage promotions have boosted
should also be fostered with the launch of TCRs coupled with
card utilisation at POS and have been successful in
the centralisation of back office processes. Another aim of the
gradually shifting consumers’ behaviour with, for instance,
project is to promote the use of remote delivery channels, for
debit card spending at POS posting a healthy 33% growth
instance, through the new self-service lobby and the provision
over FY 2006/07. A customer-focused marketing approach
of Internet Banking access in various areas of the branch,
has been adopted as gauged by the suite of additional
thereby effectively combining technological innovations with
benefits packaged with MCB cards to enhance the value
modern designs. Besides, the enhanced work environment
proposition. In this line of thought, Gold credit cards have
should boost employee motivation, leading to an improvement
been revamped to include a comprehensive annual multi-
in productivity and customer service. Whilst the benefits of
trip travel insurance cover and a host of exclusive offers at
the New Branch Concept are already perceptible, increasing
selected merchant partners. A Discount Offer programme
dividends are expected to flow in future periods as the various
was also launched whereby MCB cardholders can enjoy
phases of the programme are rolled out and extended to
special benefits at over fifty commercial outlets.
selected branches.
In November 2006, in partnership with MasterCard, the MCB
Cards
launched an online payment gateway to offer e-commerce
Following its restructuring and centralisation in 2006, the
merchants a secured payment solution for processing
Cards Strategic Business Unit (SBU) posted outstanding
online transactions. The e-commerce platform is a turnkey
results in FY 2006/07, with gross operating margin almost
package that is easily implemented and which comes with
doubling. The Bank marked its comeback on both the
a user-friendly back office merchant administration module
issuing and acquiring markets, re-establishing itself as the
that allows e-commerce merchants to view and track their
dominant player.
online sales. Merchants subscribing to this service are also
automatically registered for MasterCard SecureCode and
The acquiring business reaped the benefits of the positive
Verified by Visa, which provide another layer of security and
momentum of the tourism sector, in respect of which
hence protect them from fraudulent chargebacks. The new
54
ANNUAL REPORT 2007
e-commerce platform also allows merchants to tap into the
streams should be derived from the active development
opportunities offered by the internet, the fastest growing
of risk sharing agreements with top tier banks financing
sales channel.
commodities trading within and outside of Africa. Moreover,
the forthcoming launch of an Africa Representative Office in
Another milestone in card operations at the MCB was
South Africa will contribute to promote the whole spectrum
reached in April 2007 when all credit cards were migrated
of MCB banking and investment services with Southern
to a new card system. This enhanced IT platform has
African Development Community (SADC) and Common
allowed the organisation to offer additional card features
Market of Eastern and Southern Africa (COMESA) countries.
to customers while streamlining operations. A dedicated
A particular focus will be placed on promoting payments
collections team has been set up to actively monitor and
solutions, re-issuance of trade-related instruments and
manage delinquency ratios, which are kept under control.
cards processing with second-tier banks in Eastern and
MCB Cards also boasts the lowest chargeback rates in the
Sub-Saharan Africa, with the ultimate aim of becoming a
Central Europe Middle East Africa (CEMEA) region.
‘bank for banks’ in Sub-Saharan Africa.
All in all, the Cards SBU has positioned itself to become a
On the organisation side, the International Division has been
key growth generator for the MCB in the years to come.
structured with dedicated desks, the main one being the
Syndications Desk that has already demonstrated the Group’s
International Operations
ability to originate, structure and distribute large projects
During the financial year ended 30 June 2007, a substantial
while being an active Lead Arranger for finance raising for
rise was witnessed in foreign exposures of the MCB, whose
corporates in the Indian Ocean region and in Africa.
presence in the region was further consolidated, thus paving
the way for the Group to become the obvious banking and
In considering ventures in the region and beyond, risk
financial services provider in the region.
mitigation will remain at the forefront of the expansion
strategy. The Group has further consolidated its risk
On the map of already covered territories, one of the
appetite setting and management framework taking into
key initiatives over the last financial year has been the
account the need for further portfolio diversification and
rebranding of the two banking subsidiaries that operated in
the underlying complexity of the different environments in
Mozambique and Madagascar under the UCB trade name
which international operations are being developed.
into MCB Moçambique and MCB Madagascar respectively.
The Group is also looking at the expansion of its current
Non-Bank Financial Services
network in the region and is planning to open a branch in
The share of non-bank financial services in Group profit
the Maldives.
recorded an appreciable rise in FY 2006/07, underpinned
by strong profitability growth in the majority of related
The Group is concurrently prospecting for business
subsidiaries. Besides the start of operations in July 2006 of
opportunities in Africa in order to increase the share of
MCB Factors Ltd. and a change in status from associated
foreign-sourced income. To this end, significant revenue
company to subsidiary of Fincorp Investment Ltd., a prominent
55
continued
development in this segment during the year under review
to the customer a facilitated access to the Bank’s services
relates to progress made in respect of investment services.
alongside creating a more conducive working environment
Indeed, the restructuring of the Capital Markets businesses of
and ensuring that business units are able to respond
the Group namely MCB Investment Management, MCB Capital
to market opportunities more efficiently. In addition, the
Partners, MCB Registry & Securities, MCB Stockbrokers
increase in the number of ATMs and their transfer to the
and Multipliant Management Company, together with the
new self-service lobby has greatly improved access to the
support team from Investor and Securities Services, is almost
Bank’s customers. Furthermore, in line with its customer-
complete. It is intended that these businesses be regrouped
oriented strategy, the MCB has launched its first ‘stand
under a new subsidiary, MCB Capital Markets Ltd. (MCBCM)
alone’ ATM in partnership with ATM Solutions, a South
and permission is being sought from the Bank of Mauritius
African leader in providing retail ATMs. This new service will
to that effect. MCBCM will be operationally independent
provide the Bank’s valued customers with more convenient
from the Bank, and the staff and teams of all the MCBCM
and accessible off-site cash withdrawal facilities against a
subsidiaries will henceforth be part of the Group but will no
small fee. The project, which has been launched on a pilot
longer be Bank employees. Provided all regulatory approvals
phase, is earmarked to become an important component of
are obtained from the relevant authorities, MCBCM should be
the delivery service channel bringing banking services closer
fully operational by late 2007 with 2008 being marked out as
to the customers’ doorsteps in line with their expectations
a year of new product and service development for existing
while maintaining a high quality service standard.
and new client base.
The efforts undertaken to promote the utilisation of remote
Delivery Channels
delivery channels have been positively acknowledged by
Further initiatives have recently been taken towards
customers as gauged by the sustained growth in the volume
endowing the Bank with an optimal delivery channel
of transactions over the last three years. Besides, a major
framework that will help uphold its business strategies
source of satisfaction has been the surge in the number
in an efficient manner. Hence, the Bank pioneered the
of registered customers for Internet Banking to 18,368 as
implementation of TCRs in Mauritius reflecting its
at 30 June 2007, representing an increase of 24.5% as
commitment to remain at the forefront of technology. This
compared to one year earlier while the number of Telephone
launch in a real in-branch environment represented a
major milestone in the Bank’s efforts to optimise customer
experience at the Bank as it enables tellers to promptly
Automated transactions as a %
of total transactions
and accurately deposit, count, verify, authenticate,
%
90
secure, dispense and balance all denominations of notes,
85
in an open comfortable environment while improving
operating efficiency.
In the same vein, the redesign of the Port Louis Main Branch
is being rolled out in phases with the objective of offering
56
ANNUAL REPORT 2007
80
75
70
June 03
June 04
June 05
June 06
June 07
Banking customers increased by 3.7% over this period to
Volume of transactions (‘000)
reach 20,940. Building on the appreciable performance
achieved by remote delivery channels, further enhancements
will be brought to Internet Banking, Call Centre, Telephone
Banking and ATM operations, amongst others, while new
channels will be sought to provide customers with a more
convenient banking experience and user-friendly service
2004/05 2005/06 2006/07
Automated Teller Machines
25,567
27,875
30,700
Merchant Point of Sale
4,386
5,246
6,198
133
187
237
9
10
9
Internet Banking
Phone Banking
whilst ensuring cost efficiency.
Financial Review
Performance Against Objectives
Objectives for FY 2006/07
Performance in FY 2006/07
Return on Tier 1 Capital increased to
24.0%. This rise was helped by the buyback of 31.7 million shares.
This ratio should climb further towards
the 25% mark with the full-year effect of
the reduced number of shares in issue.
ROA of 2.35% achieved for the year.
An improvement is expected in ROA over
FY 2006/07.
Net interest income rose by 14% for the
Bank and nearly 17% for the Group.
Loan book growth was in line with
expectations and yields on Government
paper were much more in line with
commercial market rates. Fee income
grew by 17% for the Bank and 33%
at Group level while income from
foreign exchange transactions were
substantially higher than expected
leading to a 25% rise in Group
operating income.
Net interest income to rise by more
than 15% as a result of the expected
strong growth in average loan book.
Non-interest income growth to approach
20%, with good contributions from cards
business, trade and project finance
transactions.
Operating expenses were in line with
budgeted figures, with increases of 18%
for the Group and of 14% for the Bank.
FY 2007/08 will bear the brunt of the
inflation-linked salary increases of
July 2007. Additionally, infrastructure
and system costs will contribute to an
expected rise in expenses exceeding 15%.
Return on average equity (ROE)
Maintain return on Tier 1 Capital at
similar levels as in FY 2005/06 (21.4%).
Return on average assets (ROA)
ROA expected to increase marginally
above 2.15%.
Operating income
Growth in net interest income is
expected to exceed 12% on the back of
a comfortable rise in average loan book
and better overall yields on Government
stocks. Income from foreign exchange
transaction will stagnate but a good
performance from fee income will
contribute to a double-digit growth in
operating income.
Operating expenses
With FY 2006/07 bearing the full impact
of last year’s recruitment drive and as
a consequence of a significant capital
expenditure budget, operating costs are
expected to closely follow income growth.
57
continued
Performance in FY 2006/07
In view of the much better performance
on the revenue side, cost to income
ratio fell to 47.5%.
Cost to income ratio to improve slightly
as a result of revenue growing at a
faster pace than costs.
Average loan book grew by 8.2%, very
much following expected trends.
The Bank has very ambitious
expectations for FY 2007/08, with
several large projects coming on
stream. This will help boost the foreign
currency loan book by some 50%,
giving rise to an overall loan portfolio
growth exceeding 15%.
Growth of 11.2% in average deposits,
with a spectacular jump of 36% in
foreign currency deposits.
Growth of around 9% in deposits,
again with a bias on foreign currency
resources which should help our
regional expansion plans.
Group NPLs represented 7.0% of total
loans at 30 June 2007 and net NPLs
were stable at 3.1% of net loans.
Barring unexpected events, reduce the
gross ratio of NPLs by one percentage
point and bring down the ratio of net
NPLs to below 3%.
Cost to income ratio to remain at
around the same level as in the
previous year (49.8%).
Loans and advances growth
The delays noted in the implementation
of certain projects will give a boost
to new disbursements in the coming
year. Growth rate of average loan book
expected to increase to around 8.5%.
Deposits growth
Deposits to continue to grow at
around 10% in a continuing liquid
environment.
Asset quality
It is hoped that risk policies put in
place over the last three years will push
the NPL ratios towards 7% on a gross
basis and 3% on a net basis.
58
ANNUAL REPORT 2007
Review by Financial Priority Area
Bank rate, interest income on investment in securities grew
Results
at a modest rate of 1.9% as greater lending opportunities
Robust performances were registered in FY 2006/07 at
resulted in a lower volume of securities.
equity holders of the parent rising by 19.6% and 23.9%
respectively to reach Rs 1,921.4 million and Rs 2,460.8
million. Appreciable increases were recorded across all
the major revenue-generating lines, with a particularly
sizeable rise in profit arising from dealing in foreign
currencies. The share of foreign-sourced income in the
Group’s after-tax profit increased noticeably to 38.6%
Group
Rs bn
9
8
7
6
5
4
3
2
1
0
FY
2002/03
including contributions from foreign subsidiaries and
Interest Income
associate. The local non-bank entities also posted a rising
share of the Group’s profitability in line with the strategy
FY
2003/04
FY
2004/05
FY
2005/06
Interest Expense
FY
115
110
105
100
95
90
85
80
75
70
FY 2002/03 = 100
both Bank and Group levels, with profit attributable to
2006/07
Growth Index - NII (right scale)
Note: As from FY 2003/04, figures reflect non-consolidation of BFCOI
of assertively promoting non-bank financial services.
Interest expense rose at a substantial rate of 39.8% to
Besides, the notable profitability growth was underpinned
stand at Rs 5,041.7 million for the financial year under
by improving cost efficiency and asset quality, as reflected
review following a growth of 9.0% in deposits and a higher
by declines in the cost to income and NPLs to gross loans
cost of funds in accordance with a more restrictive monetary
ratios. Going forward, in spite of heightened competitive
policy stance. Consequently, the net interest income (NII) for
pressures, the Group is expected to capitalise on the
the Bank increased by 13.9% over the last financial year,
renewed buoyancy in the economic environment while
contributing to a rise of 16.8% in Group NII to Rs 3,612.7
continuing to expand its horizons to further consolidate
million. As such, net interest margin edged up by 12 and 22
its financial fundamentals at all levels as delineated in
basis points to 3.68% and 4.03% respectively for the Bank
its strategic plan.
and the Group, reflecting more productive lending operations.
Similarly, the corresponding ratios for NII to average total
Net Interest Income
Interest income of the Bank in FY 2006/07 shot up by 28.8%
to reach Rs 8,068.2 million, mainly driven by a significant
Bank
increase in interest revenue on loans in concurrence with an
Rs bn
appreciable rise in the loan book and an upward movement
in interest rates. A notable contribution also ensued from
receipts on placements with other banks which more than
doubled in the wake of the issue of subordinated debt whose
proceeds should be judiciously deployed to support the
MCB’s expansion strategy in the period ahead. On the other
hand, notwithstanding an annual average increase in the
9
8
7
6
5
4
3
2
1
0
FY
2002/03
FY
2003/04
Interest Income
FY
2004/05
FY
2005/06
Interest Expense
FY
140
135
130
125
120
115
110
105
100
95
FY 2002/03 = 100
assets rose to 3.32% and 3.45% respectively.
2006/07
Growth Index - NII (right scale)
59
continued
Other Income
The Bank achieved a very satisfactory growth of 25.9% in
%
non-interest income during FY 2006/07. Profit arising from
60
dealings in foreign currencies increased substantially in a
55
context of normal market conditions, following the severe
50
downturn experienced in FY 2005/06 due to tight liquidity
in the market. Furthermore, fee income and commissions
showed a sharp upward trend, fuelled by buoyant activity
45
40
FY
2002/03
in respect of trade finance as well as major increases in
FY
2003/04
Group
FY
2004/05
FY
2005/06
FY
2006/07
Bank
fees related to project finance and credit cards. Against this
background and bolstered by a substantial growth of 46.7%
to 45.9% and 47.5%. As such, operating profit before
in the share of income from associated companies, non-
provisions posted a strong rise of 22.2% to Rs 2,682.0
interest income at Group level expanded at an accelerated
million for the holding company and a significant expansion
rate of 38.2% to reach Rs 2,652.9 million in FY 2006/07.
of 31.2% at the consolidated level to Rs 3,483.5 million,
supported by the contribution from associated companies.
Non-Interest Expense
Even after factoring in a rise in the allowance for credit
Reflecting upbeat business activity, operating expenses of
impairment, partly due to a growing loan portfolio, a
the Bank went up by 13.9% to reach Rs 2,273.8 million
healthy performance was recorded in respect of operating
during FY 2006/07, with a notable rise being recorded in
profit, which reached Rs 2,311.4 million for the Bank and
costs related to systems and infrastructure. Staff costs
Rs 3,107.5 million for the Group in FY 2006/07, representing
and employee benefits increased by 11.4% on account
increases of 22.9% and 33.1% respectively as compared to
of continued efforts to reinforce human resources and
the previous financial year.
provisions linked to early retirement while depreciation
charges and amortisation of computer software costs
Operating profit before provisions
also increased by notable rates of 13.0% and 10.2%
Rs bn
respectively on the back of continued investment in
Information Technology. At Group level, non-interest
expenses grew at a higher rate of 18.0% to Rs 2,782.2
million reflecting substantial investment in physical
infrastructure and the impact of consolidating Fincorp
Investment Ltd. as a subsidiary.
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
FY
2002/03
Group
FY
2003/04
FY
2004/05
FY
2005/06
FY
2006/07
Bank
Operating Profit
Profit Attributable to Shareholders
Solid revenue growth relative to expenses has resulted in a
In line with the significant rise in operating profit and after
marked decline in the cost to income ratio at both Bank and
taking into consideration the impact of the newly introduced
Group levels by 1.8 and 2.3 percentage points respectively
levy on bank profits, the tax charge for the year surged to
60
ANNUAL REPORT 2007
Rs 389.9 million and Rs 560.8 million at Bank and Group
equity to total assets ratio of the Group declined marginally
levels respectively. Consequently, profit of the Bank for the
to 12.2% while the risk-weighted capital adequacy ratio
year increased by 19.6% to reach Rs 1,921.4 million while
rose to 15.7% at the end of the last financial year in spite
attributable profits at Group level expanded by 23.9% to
of the share buy-back given solid profit growth and support
stand at Rs 2,460.8 million in FY 2006/07. Benefiting from the
from Tier 2 capital in the form of subordinated debt.
impact of the reduced number of shares in issue following the
buy-back of 31.7 million shares in December 2006, earnings
Deposits and borrowings
per share soared by 31.6% to Rs 9.74 per share.
Aided by higher interest rates, total deposits at Bank level
Profit attributable to shareholders
grew by a notable 9.0% to attain Rs 75.4 billion as at June
2007 despite heightened competition for funds and the
Rs bn
dampening effect of the introduction of the specific tax on
2.5
interest income. Foreign currency deposits, in particular,
2.0
recorded a remarkable growth while savings deposits,
1.5
which account for nearly 50% of total deposits, witnessed
1.0
0.5
0.0
an increase of 7.8% to reach Rs 36.4 billion. At Group
FY
2002/03
FY
2003/04
Group
FY
2004/05
FY
2005/06
FY
2006/07
level, total deposits at the end of June 2007 amounted to
Rs 85.2 billion, corresponding to a growth of 10.3%.
Bank
Deposits
Liabilities
Capital resources
Rs bn
Notwithstanding the appreciable increase in profit for the
year, Group shareholders’ funds expanded by a relatively
moderate 9.3% to reach Rs 13.5 billion as at 30 June 2007,
reflecting a significant rise in dividend payments to Rs 723.3
million, and, in particular, the buy-back and cancellation of
shares held by Lloyds TSB Bank plc during the year under
90
80
70
60
50
40
30
20
June 03
June 04
Group
June 05
June 06
June 07
Bank
review. On the other hand, Group reserves were positively
impacted by fair value gains of Rs 500 million, mostly
As regards borrowings, the MCB raised ZAR 350 million in
reflecting revaluation of MCB Equity Fund’s quoted portfolio
the form of subordinated debt through the Bond Exchange
of shares. Taking into consideration the reduced number of
of South Africa, the proceeds of which were swapped
shares, the net asset value per share rose substantially to
in US dollars, while a repayment of USD 27 million was
stand at Rs 56.87 at the end of FY 2006/07 compared to
made with respect to a line of credit from the African
Rs 45.95 one year earlier. Regarding capital adequacy, the
Development Bank.
61
Gross loans and advances
continued
industry groups with loans and advances to the tourism,
construction, trade and personal and professional
Rs bn
sectors being key contributors. Conversely, advances to
70
60
the agricultural sector and the export-oriented industry
50
contracted by 10.5% and 4.0% respectively. In line with
40
the performance at holding company level, the Group
30
posted an 11.9% rise in gross loans and advances to
20
June 03
June 04
Group
June 05
June 06
June 07
Rs 69.1 billion as at 30 June 2007.
Bank
Investment in Government securities
Assets
After numerous years of expansion, investment in
Loans and advances
Government securities for the Bank observed a noteworthy
Partly reflecting an improvement in the business
28.9% drop to Rs 10.6 billion as at 30 June 2007,
environment, gross loans and advances increased by
highlighting better liquidity deployment towards more
10.2% at Bank level in FY 2006/07, up from a growth
productive ventures. Accordingly, the liquid assets to
of 5.8% achieved in the previous financial year. As
deposit ratio of the Bank declined over FY 2006/07 albeit
such, the Bank’s overall loans figure stood at Rs 64.1
remaining at a comfortable level of 19.4%. Likewise,
billion as at 30 June 2007, 10.5% of which related to
investment in Government securities at Group level
Segment B activities, that is, those essentially directed
decreased by 27.8% to Rs 13.3 billion, bringing its liquid
towards the provision of international financial services
assets to deposit ratio to 22.9%.
that give rise to foreign-sourced income. The growth in
the loan portfolio was fairly balanced across the main
Loan portfolio mix - Bank
Provisioning and Asset Quality
Non-performing loans (NPLs) for the Group represented
7.0% of total loans as at 30 June 2007, down from
7.7% one year ago. Corresponding figures for the Bank
Others 9.2%
Agricultural and
fishing 7.3%
were 7.37% and 8.0% respectively. This positive trend,
which has seen the NPL percentage fall from around
EOI 5.6%
Personal and
professional 10.9%
DOI 7.2%
10% to present levels in about three years, is, however,
tampered by lengthy recovery procedures prevailing
Infrastructure 3.6%
both in Mauritius courts and in other jurisdictions. On a
Financial and business
services 6.3%
Tourism 15.2%
environment at MCB has contributed to a marked slow
ICT 1.0%
Transport 1.9%
Traders 17.2%
more positive side, the increasingly tight risk monitoring
down in the rate of deterioration of performing loans, this
being evidenced by a levelling out of NPLs in absolute
Construction 14.5%
terms. Furthermore, the ratio of net NPLs to net loans for
the Bank has stayed at around 3.3% during the year, a
62
ANNUAL REPORT 2007
Net NPLs as a % of net loans
The charge for credit impairment at the level of the Bank
%
(excluding portfolio provision), was Rs 330 million for the
7
year, an increase of Rs 48 million over the previous year.
6
This is explained essentially by the necessity to improve
5
cover on existing, generally long outstanding, loans to take
4
into account changes in net present value of collaterals in a
3
2
context of rising interest rates.
June 03
Group
June 04
June 05
June 06
June 07
Risk Concentration
Bank
Credit concentration of risk by industry sectors refers to
quite satisfactory level with the cover ratio of NPLs by
total credit facilities including guarantees, acceptances and
specific provisions falling slightly to 57.6%, from 61.7%
other similar commitments extended by the Group to any one
last year, following the write-off of some irrecoverable
customer or group of closely-related customers for amounts
loans against provisions. The uncovered portion of the NPL
aggregating more than 15% of the capital base, classified
portfolio is more than adequately covered by collateral
by industry sectors.
held by the Bank, suitably written down in value to reflect
market parameters and delays in recovery.
Additionally, the Bank, in conformity with the Bank of
Credit concentration of risk by
industry sector
Parastatal 16.5%
Others 10.1%
Mauritius Guideline on Credit Impairment Measurement
and Income Recognition, recognises the varying degrees
of risk attached to the different components of its loan
portfolio. Loans have been analysed by sectors, each sector
having similar characteristics and a statistical provision
Agriculture &
fishing 13.5%
Entities outside
Mauritius
7.7%
Traders 9.4%
EPZ 13.5%
has been assigned to each sector based on past loss
experience and current attributes and outlook. This portfolio
provision was increased by Rs 40.6 million for the year to
Property 6.3%
Tourism 12.8%
Other
manufacturing 10.2%
reach Rs 439 million at 30 June 2007.
63
continued
Foreign Subsidiaries
Asset growth was, however, not matched by a corresponding
One of the prime targets in diversifying out of Mauritius
rise in net interest income as the latter part of calendar
was to do so in such a way as to spread risks. This ensures
year 2006 saw a spectacular fall in Treasury Bills rates,
that a tough year in any one particular jurisdiction is,
triggered by an over-liquid market. Concurrently, operating
in all probability, compensated by the resilience of the
costs rose by more than 20% during the period, the result
other countries of presence. The last financial year again
of a combination of inflation-linked price increases and a
illustrated the point.
change in VAT rules which led to a substantial drop in the
deductible tax element of expenses.
MCB Moçambique
This subsidiary did not have a very good year. Its balance
Net results for the year to 31 December 2006, at
sheet contracted as a result of the non recurrence of some
MGA 5.2 billion, were only marginally up on 2005 while
substantial trade finance operations. The loan portfolio
those for the first six months of 2007 reached MGA 2.4
decreased by some 27% to reach MTN 807 million at 30
billion, a 13% increase over the corresponding period.
June 2007. Concurrently, results were affected by a fall in
Contribution to MCB Group profits for the year went up by
commissions receivable together with important charges
15% to Rs 62 million.
for credit impairment. Contribution to Group profits fell by
some 38% to Rs 30 million for the year to 30 June 2007.
Prospects are relatively good, with the economy showing
encouraging signs of picking up pace. Several major
While operations in Mozambique continue to be affected
infrastructure and mining projects have been announced,
by a difficult economic and regulatory environment, MCB
some of which are already under way. This flux of investment
Moçambique will be striving to offer the same high level
has led to much improved liquidity locally and to relative
of service to its customers. In order to be closer to the
stability on the foreign exchange market. MCB Madagascar is
latter, the Bank will be opening a new branch in Matola,
pursuing its prudent expansion strategy aimed at providing
an industrial suburb of Maputo, before the end of 2007.
quality service to its essentially corporate customer base. In
The current year (2007/08) should see a return to more
this context, a new branch was opened in Mahajunga, on the
reasonable levels of credit impairment, leading in turn to
west coast of Madagascar, in March 2007.
increased profitability.
MCB Seychelles
MCB Madagascar
This subsidiary achieved much improved results for the year
The balance sheet of the Malagasy subsidiary has grown
to 31 December 2006, with profits after tax reaching SCR 19
in a very satisfactory manner during the FY 2006/07,
million, a 35% increase over 2005. The current financial year
especially in the second semester, with total assets
has started on an even better footing, half year results to 30
reaching MGA 147 billion at 30 June 2007, an increase of
June 2007 having exceeded SCR 13 million. The situation
20% over a year. During the same period, the loan book
in the Seychelles seems to be brightening, with a surge of
grew by 37% to reach MGA 83 billion at year end.
investment in the tourism sector in a context of gradual
economic liberalisation, improved liquidity on the historically
64
ANNUAL REPORT 2007
tight foreign exchange market and the readjustment of the
The investment team at MCBIM remains committed
local currency to more competitive levels.
to delivering superior risk adjusted returns and an
outstanding service.
The MCB Seychelles Group, which includes Mascareignes
Properties Ltd., a subsidiary owning the headquarters of the
bank in Mahé, contributed Rs 157 million to consolidated
The Fund had a very satisfactory year, posting fair value
profits to 30 June 2007, nearly a two-fold increase from last
gains (unrealised) of just over Rs 400 million. The portfolio
year. Prospects for the future look encouraging.
grew from Rs 1.17 billion to Rs 1.91 billion during the year
under review, with major new investments being made in
Local Subsidiaries
a hotel project in Mauritius and a Canadian fibre optic
MCB Investment Management Co. Ltd. (MCBIM)
network provider developing a project in Reunion Island.
MCBIM had an exceptional year ended 30 June 2007,
The Fund has an authorised size of Rs 3 billion and it is
realising profit after tax of Rs 20.4 million, representing
anticipated that a further Rs 500 million thereof may be
a growth of 99% over the previous year’s figure of Rs 10.3
drawn down in the course of FY 2007/08 for investment in a
million. Revenues rose by 66% to Rs 34.2 million whilst
variety of different projects in Mauritius and the region.
administrative expenses, including salaries and performance
bonuses, increased by 33% to Rs 12.2 million. Operating
The Fund made a profit of Rs 42.3 million for the year, up
margin thus increased from 53% to 63%. This remarkable
from Rs 19.3 million for the 13½-month previous period,
performance was driven by particularly strong growth in the
represented mostly by dividends from its portfolio of listed
local equity portfolios, solid growth in US dollar terms from
holdings. Total management and other fees of Rs 7 million
overseas portfolios, the significant depreciation of the rupee
were paid during the year and the Fund made a profit on
and large exceptional fees on two specific advisory deals.
disposal of listed shares of Rs 9.9 million.
Assets under management grew by 40% to Rs 7.8 billion as
at 30 June 2007, fuelled by market growth and to a lesser
MCB Capital Partners Ltd. (MCBCP)
extent, new mandates won.
MCBCP is the investment manager of MCB Equity Fund. The
year was eventful for MCBCP as it has recruited a full team
Assets under management continue to be well balanced
of investment analysts, moved into new premises and made
between local and foreign markets with mandates generally
significant new investments on behalf of the Equity Fund.
showing an equity bias, explained mostly by the long term
MCBCP derives its revenues from fees charged to the Fund,
nature of larger clients’ investment objectives. Results
which rose from Rs 6 million (for the period 19 April 2005 to
for 2008 are expected to be slightly lower than this year,
30 June 2006) to Rs 10 million for the year to 30 June 2007.
although on excluding the two exceptional deals mentioned
Operating profit made a corresponding leap to Rs 5 million
above, growth should be in double digits. Portfolios have
from Rs 0.5 million and profit after tax rose to Rs 3.8 million
weathered the market turbulence of July and August 2007
from Rs 0.4 million.
with satisfying resilience, vindicating the defensive bias of
our investment style.
65
continued
The Group sees significant potential for MCBCP to expand
Multipliant Management Co. Ltd. (MMC)
its network of contacts within the region and to generate
MMC was added to the Capital Markets arm of the
increased deal flow for the Fund.
Group in September 2006 when it was purchased from
Fincorp. MMC manages the four retail funds under the
MCB Registry & Securities Ltd. (MCBRS)
Penny Unit Trust Umbrella, namely Multipliant General
MCBRS achieved satisfactory growth in revenues of 13.9%,
Fund, The Penny Indexed Fund, The Penny Yield Fund
finishing the year with a total income of Rs 12.6 million.
and The MFL Fund. Assets under management of MMC
Profit for the year grew to Rs 3.3 million from Rs 2.4 million
within these four funds increased by 29.7% to a total of
in FY 2005/06, corresponding to a rise of some 40%.
Rs 701.3 million as at 30 June 2007. Accordingly, turnover
increased from Rs 5.3 million in FY 2005/06 to Rs 6.6
These favourable results were delivered in the face of
million in FY 2006/07, contributing to a rise in profit
stiffer competition for the company’s corporate registry
after taxation from Rs 0.4 million to Rs 0.7 million. The
services. Going forward, it is believed that the company’s
removal of tax relief on investments in unit trusts in the
reputation for professional and efficient service will
2006 budget had an adverse effect on the sales of new
continue to win it new mandates. Increased corporate
units but strategies are being developed by the Capital
activity such as rights and bonus issues should also allow
Markets team to increase the profile and distribution of
the company to grow revenues.
the funds.
MCB Stockbrokers Ltd. (MCBSB)
MCB Properties Ltd.
MCBSB had a very good year, posting growth in revenues
This subsidiary essentially owns a number of buildings
of 166% to Rs 19.5 million and a consequent rise in profit
housing banking premises of the MCB Group. Profit for
after tax of 152% to Rs 13.0 million. In fact, a non-recurring
the year to 30 June 2007 was Rs 5.3 million excluding an
deal during the year relating to the buy-back of Lloyds TSB
amount of Rs 21.5 million representing profits realised
Bank plc stakes in the MCB and Fincorp, helped boost
on the sale of properties during the year but which were
earnings considerably.
accounted for in the 2005/06 accounts as negative goodwill
arising on acquisition.
MCBSB has continued to develop its brokerage activities
and recruited a research analyst during the year to enable
Blue Penny Museum
the company to deliver more value added services. The
This company, which runs the museum located in the Caudan
stock market was again characterised by the strong
Waterfront, has been funded by a capital contribution of
interest from overseas investors for the leading Mauritian
Rs 1 million and shareholders’ loans of Rs 21.9 million from
companies. The company is taking steps to increase its
the MCB. It is not structured as a profit making entity but
share of this market and FY 2007/08 should see the first
represents part of the Group’s contribution to the safeguard
fruits of these efforts.
and protection of the national heritage.
66
ANNUAL REPORT 2007
MCB Factors Ltd.
Promotion and Development (PAD), an associate in which
MCB Factors Ltd. has recorded an important increase
Fincorp has a stake of 46.4%, achieved a remarkable
in activity over FY 2006/07 culminating into a profit of
performance for the current year, with attributable profits
some Rs 26 million. MCB Factors Ltd. provides a full
growing by 69% to reach Rs 489 million at 30 June 2007.
sales ledger administration service to its customers
While operating results were similar to those of 2005/06,
inclusive of funding against assignment of their trade
this year’s profits were boosted by realised profits on sale of
receivables. The services provided greatly facilitate
equities and by a substantial rise in the contribution from
clients’ administration of their credit sales ledger while
Médine Sugar Estate, a 30% associate company of PAD.
simultaneously providing much needed cash to manage
their business and meet their financial commitments.
The buy-back of the Lloyds TSB Bank plc shares, which cost
Over FY 2007/08, it is expected that MCB Factors Ltd. will
Fincorp Rs 203 million, was partly financed by the sale of
increase its range of services to cater more systematically
certain non-core investments, this operation generating a
to the needs of the export market as well as to offer full
profit of Rs 46.2 million in the books of Fincorp. The Group
factoring domestically.
share of this profit was cancelled on consolidation, the
investments sold having been purchased by the MCB Equity
Fund, a wholly owned subsidiary of MCB.
Following the buy-back by this company of the 14% stake
previously held by Lloyds TSB Bank plc and the subsequent
Net asset value per share of Fincorp at year end was
cancellation of the shares, Fincorp Investment Ltd., in which
Rs 29.78, an increase of 21% over the year. While the
MCB previously owned 49.5% of the share capital, has now
shares are still traded at a discount of some 35% to book
become a subsidiary of MCB, with the latter holding 57.6%
value, there has been a major adjustment to prices since
of Fincorp’s capital.
30 June 2006, with some value unlocked to shareholders,
mainly following the announcement of the purchase of
Fincorp again had a very good year, with consolidated
Lloyds TSB Bank plc shares in September 2006.
profits reaching Rs 300 million, a jump of 51% over the
year. Fincorp’s main investments performed well. Finlease,
Associated Companies
a 100% subsidiary of the company, providing leasing
Banque Française Commerciale Océan Indien (BFCOI)
services, posted a profit of Rs 48.4 million, slightly lower
The activities of this associate, a joint venture with Société
than that of the previous year. This result, deemed to be
Générale, have progressed in a very satisfactory manner. It
satisfactory by the Board, was achieved in an increasingly
is constantly gaining market share in Reunion Island, its
competitive environment and an unfavourable market for
principal place of business, through an expanding branch
interest rates. Lease receivables grew by some 20% during
network and dynamic marketing of an increasing range of
the year to reach Rs 1,844 million as at 30 June 2007.
products, while operating costs are being well contained.
Indications for the coming year point towards a double
Loans to customers have reached EUR 990 million as at
digit growth in assets and results.
30 June 2007, a growth of 24% over a year.
67
continued
Results for the calendar year 2006 were, at EUR 10.8
share in the growth and prosperity of the MCB and fostering
million, 22% up over 2005 and the first six months of 2007
congruence with organisational goals. The shares were issued
have been equally satisfying with profits after tax reaching
from the Treasury shares bought back over the last 3 years
EUR 6.1 million. Contribution to MCB’s Group profits for
under the share buy-back programme. Out of the 529,718
the year to 30 June 2007 amounted to Rs 241 million, a
options granted, staff have so far exercised 298,102 at prices
progression of 24.8% over the previous year.
ranging from Rs 75.00 to Rs 86.50.
Prospects for the coming years are good. However, BFCOI’s
Whilst promoting the interest of its stakeholders, the MCB
growth could be curtailed by the severe capital ratio
continues to maintain its capital structure within prudential
imposed upon it by the French regulatory authorities. While
and supervisory limits. Regulatory requirements with respect
it is true that the Bank’s capacity to lend is restricted by this
to banks’ capital structure in Mauritius are set by the Bank
obligation to maintain inordinately high levels of capital,
of Mauritius through its Guidance Notes on Risk-Weighted
the Board of BFCOI remains confident that the imposed
Capital Adequacy Ratio, which adapts the substance of
capital adequacy ratio will be brought down to levels more
the 1988 Basel Capital Accord to the local banking sector.
in line with international practice and corresponding to the
Based on the Accord, capital adequacy is gauged by the ratio
Bank’s risk profile.
of the sum of the risk-weighted assets and risk-weighted
off-balance sheet exposures of a bank to the latter’s capital
Capital Structure
base. Whilst the Basel Committee has set the minimum
In line with its objective of enhancing shareholder value, the
capital adequacy ratio at 8%, national authorities have
MCB proceeded, during the financial year under review, with
some leeway in fixing higher levels and the Bank of Mauritius
the buy-back of 31.7 million shares held by Lloyds TSB Bank
has set the lower limit for this ratio at 10%.
plc at a price of Rs 45 per share, representing a significant
discount on the then ruling market price. The deal was
For the purpose of assessing capital adequacy, capital is
completed as a ‘block trade’ in December 2006 and the shares
divided into Tier 1 (core) Capital and Tier 2 (supplementary)
were subsequently cancelled. In parallel, in October 2006, the
Capital. Tier 1 Capital, which consists primarily of share
Bank launched a programme to raise finance on the Bond
capital, additional paid-in capital, retained earnings and
Exchange of South Africa for an amount of ZAR 1.0 billion. The
hybrid capital components, provides the most stable and
initial bond issue amounted to ZAR 350 million, which was
readily available support to a bank against unforeseen
entirely swapped in US dollars, in the form of subordinated
losses. Tier 2 Capital is less permanent in nature,
debt which qualified for Tier 2 supplementary capital. The
consisting primarily of profit participation rights, long-term
bond issue gave a new access to international markets and
subordinated debt, unrealised gains on listed securities
raised the profile of MCB and Mauritius within the Southern
and other inherent loss allowances.
African Development Community (SADC) region.
Subsequent to the intensive consultative process triggered
During 2007, the Bank introduced the Employee Share Option
by the objective of revising the capital adequacy framework
Scheme, thereby providing an opportunity to all employees to
towards further strengthening the soundness and stability
68
ANNUAL REPORT 2007
of the international banking system, the New Capital Accord
guidance relating to the treatment of interest rate risk in
(Basel II) was released by the Basel Committee on Banking
the banking book, credit risk, operational risk and enhanced
Supervision on 26 June 2004. Whereas the 1988 Basel
cross-border communication and co-operation. In addition
Capital Accord focuses on the capital base of banks, Basel II
to ensuring that banks have adequate capital to support all
emphasises the measurement and management of key
the risks in their business, the supervisory review process
banking risks including credit risk, market risk and operational
of the New Accord aims at encouraging them to develop
risk. As such, it is meant to better reflect the underlying
and use better risk management techniques. The forward-
risks in banking and is thus expected to foster stronger risk
looking approach to capital adequacy supervision fostered
management practices within the banking industry. The risk
by Basel II should facilitate subsequent adjustments to the
management framework proposed in Basel II seeks to ensure
framework to reflect market developments and advances in
that the strategies formulated by a bank are clearly linked to
risk management practices.
its appetite for risk, so that its capital resources are managed
at an optimum level to support both its risk and strategic
Pillar 3: market discipline is intended to complement
objectives. Basel II is anchored on three pillars, namely:
the minimum capital requirements (Pillar 1) and the
supervisory review process (Pillar 2) through the alignment
Pillar 1: minimum capital requirements - Whilst key
of supervisory disclosures to international and domestic
elements of the 1988 Accord have been retained with
accounting standards. Basel II endeavours to foster market
respect to capital adequacy namely the general requirement
discipline by developing a set of disclosure requirements
for banks to hold total capital equivalent to at least 8% of
which will allow market participants to assess key pieces
their risk-weighted assets, the revised framework entails
of information on the scope of application, capital, risk
significantly more risk-sensitive capital requirements that
exposures, risk assessment processes and, hence, the
are both conceptually sound and adaptable to the existing
capital adequacy of the institution. It is deemed that such
supervisory and accounting systems in individual member
disclosures have particular relevance under the revised
countries. Modifications to the definition of risk-weighted
framework, given that increased reliance on internal
assets have two primary elements: substantive changes
methodologies gives banks more discretion in assessing
to the treatment of credit risk relative to the 1988 Accord
capital requirements.
and the introduction of an explicit treatment of operational
risk that leads to a measure of this category of risk being
While promoting improvements in risk management and
included in the denominator of the calculation of the capital
regulatory capital allocation, the new capital adequacy
ratio. Another major feature of Basel II is that it enables a
framework poses significant implementation challenges
greater use of internal risk assessments by banks.
for both supervisors and banks. Nonetheless, conscious of
the importance of good risk management, the MCB stepped
Pillar 2: supervisory review process discusses the key
up its efforts to ensure compliance with the best practices
principles of supervisory review, risk management guidance
in this area and achieved, by the beginning of the second
and supervisory transparency and accountability produced
quarter of 2007, a satisfactory state of readiness in the
by the Committee with respect to banking risks. This includes
implementation of the Basel II Standardised Approach
69
continued
to credit risk, operational risk and market risk. This has
Capital allocation has, as a result, become more sensitive
enabled the Bank to promote enhanced risk awareness
to risk and reflects an enhanced assessment of return
at all levels of the organisation and to align its minimum
against risk, thus further improving the strategic decision-
capital requirements more closely to the specific risks.
making process.
The table below shows the components of Tier 1 and Tier 2 Capital for the Bank and the capital adequacy ratios for both the
Bank and the Group.
June 07
Rs m
June 06
Rs m
June 05
Rs m
I: CAPITAL BASE
Paid up or assigned capital
Share Premium
Statutory Reserve
General Reserve
2,504
2,821
2,821
16
0
0
2,083
1,832
1,583
0
165
165
Other disclosed free reserves, including undistributed balance in Income Statement
3,772
3,937
3,213
Current year's retained profit
1,198
1,038
973
Fully paid bonus shares issued by capitalising property revaluation reserves
-966
-966
-966
Share buy-back: Treasury Shares
-384
-393
-393
8,223
8,434
7,396
0
0
0
740
335
256
1,411
0
0
TIER 1 Capital (A)
Reserves arising from revaluation of fixed assets
Reserves arising from revaluation of investments
Subordinated debt
Fully paid bonus shares issued by capitalising property revaluation reserves
TIER 2 Capital (B)
TOTAL (GROSS) CAPITAL A+B
966
966
966
3,117
1,301
1,222
11,340
9,735
8,618
Investments in banking subsidiaries and associates in Mauritius and overseas
-893
-893
-893
Lending to subsidiary and associate banks in Mauritius or overseas
-428
-400
-359
-22
-22
-22
9,996
8,420
7,344
65,317
56,911
52,440
Weighted amount of off-balance sheet exposures
8,364
8,071
6,294
Weighted risk assets for operational risk
6,648
6,133
5,920
Other deductions
TOTAL (NET) CAPITAL
II: WEIGHTED RISK ASSETS
Weighted amount of on-balance sheet assets
6
538
278
TOTAL WEIGHTED RISK ASSETS (BANK)
80,335
71,653
64,932
TOTAL WEIGHTED RISK ASSETS (GROUP)
91,966
78,476
71,293
Aggregate net open foreign exchange position
III: B.I.S RISK ADJUSTED RATIO
70
BANK
12.44
11.75
11.31
GROUP
15.65
15.24
13.88
ANNUAL REPORT 2007
Risk Weighted Assets and Off-Balance Sheet Exposures
Risk Weighted On-Balance Sheet Assets
Amount
(Rs m)
Cash, balances with the central bank, holdings of Govt. of Mauritius
and Bank of Mauritius securities, and claims guaranteed or
collateralised by such securities
Claims on central governments and central banks
Cash items in the process of collection
16,455
1,086
381
Claims on banks
12,173
Residential mortgages
Claims on non-bank private sector
Jun-07
Jun-06
Weight
(%)
Weighted Weighted Weighted
Amount Amount Amount
(Rs m)
(Rs m)
(Rs m)
0
0-100
20
20-100
0
1,086
Jun-05
0
764
0
893
76
93
59
2,857
1,742
471
6,279
50
3,139
2,759
2,119
47,973
100
47,973
43,235
41,262
Investments in corporate shares and securities
6,136
100
6,136
4,695
4,286
Other assets
4,048
100
4,048
3,623
3,350
65,317
56,911
52,440
Jun-06
Jun-05
Risk Weighted Off-Balance Sheet Exposures
Jun-07
Credit
Nominal
Credit Equivalent
Amount Conversion Amount
(Rs m) Factor (%) (Rs m)
Financial guarantees
Acceptances
2,007
100
Weight
(%)
2,007
0-100
Weighted Weighted Weighted
Amount Amount Amount
(Rs m)
(Rs m)
(Rs m)
1,170
1,840
1,674
0
100
0
0-100
0
0
0
Other guarantees
8,524
50
4,262
0-100
4,220
3,396
2,984
Documentary credits
4,269
20
854
20-100
Outstanding loans commitment
4,367
50
Risk Weighted Assets for Operational Risk (Rs m)
Jun-07
Average gross income for last 3 years
Capital charge (15%)
Equivalent Risk Weighted Assets
2,183
Jun-06
100
791
594
529
2,183
2,242
1,107
8,364
8,071
6,294
Jun-05
4,432
4,190
3,946
665
613
592
6,648
6,133
5,920
71
continued
Risk Report
Approach To Operational Risk
A significant milestone was reached in April 2007 when
The Standardised Approach to operational risk has allowed
MCB announced that it had achieved a satisfactory state
the Bank to classify its activities in the eight business lines
of readiness under the Basel II Standardised Approach.
defined by the guidelines – that is, Corporate Finance, Trading
In addition, significant improvements have been made
and Sales, Retail Banking, Commercial Banking, Payment
in the areas of Physical Security and IT access controls
and Settlements, Agency Services, Asset Management
as well as in Business Continuity Planning. Besides, the
and Retail Brokerage – allowing it to calculate capital
Group Risk SBU has been reorganised with effect from
adequacy in accordance with the Standardised Approach.
1 July 2007 notably to facilitate the implementation of
The staff of the Bank have also received comprehensive
Basel II.
training on processes and procedures for operational risk
management and successfully embraced the changing
Basel II
culture of risk awareness, ensuring that operational risk is
Adherence to the principles of the Basel II Standardised
being adequately addressed.
Approach has contributed to enhanced risk management
through the implementation of robust policies in the areas
Approach To Market Risk
of credit risk, operational risk and market risk of the Bank.
The MCB has the ability to fully comply with the major
Regarding the overseas subsidiaries within the MCB Group,
requirements set out in the Proposal Paper on Measurement
the Basel II Standardised Approach is to be adopted for
and Management of Market Risk published by the Bank of
credit and market risk. The overseas subsidiaries will
Mauritius in January 2007. Whilst broadly in line with the
however initially be adopting the Basic Indicator Approach
Market Risk Amendment, the Paper also specifies a level of
for Operational Risk.
trading book significance for market risk capital reporting
under the trading book rules, and allocates specific attention
Approach To Credit Risk
to the assessment of capital to support interest rate risk in the
The Bank has adopted the Standardised Approach to
banking book. The MCB policy is to ensure that its exposure
credit risk, including the Simple Approach to Credit
both to interest rate risk in the banking book (and across the
Risk Mitigation and the Current Exposure Method for
combined banking and trading books) and to liquidity risk is
Counterparty Credit Risk. The MCB has commenced
included in the risk monitoring and reporting framework to
efforts to develop the capacity to progress towards the
Senior Management and relevant Board Committees.
Internal Ratings-Based (IRB) Approach for Credit Risk
in line with the New Basel Capital Accord and is also in
Group Risk Structure
the process of implementing Moody’s Financial Analyst
The Group Risk SBU has undergone a number of changes
for the assessment of the credit ratings of its corporate
to focus even better on Credit Risk, Operational Risk and
customers. The use of historical internal ratings and
Market Risk with effect from 1 July 2007. The change in the
default data will enable the Bank to estimate the
Group Risk structure aims at facilitating the implementation
probability of default as required in the measurement of
of the Basel II Risk framework which will further involve
credit risk according to the IRB method.
systematic changes in the Bank’s policies, procedures
72
ANNUAL REPORT 2007
Risk Management Structure
Board
Credit Risk
Risk Monitoring
Committee
Supervisory and
Monitoring Committee
Audit Committee
Group Risk SBU
General Management
Group
Internal Audit SBU
Market Risk
Operational
Risk
Group
Compliance
ISM
Physical
Security
Legal
and systems as well as ongoing refinements in the capital
both General Management and to Business Units Heads for
allocation among these three main risk categories.
their input in relation to issues requiring attention.
With effect from 1 July 2007, the Heads of Group
A new Risk, Compliance, Legal and Security Committee has
Compliance BU (which includes AML/Fraud Prevention),
also been established under the chairmanship of the Chief
Information Security Management and Legal report to the
Executive (Banking) and meets monthly to ensure that
Chief Executive (Group) on Group matters and to the Chief
there exists proper communication between the various
Executive (Banking) on Bank matters. The Head of Security
risk functions.
reports to the Chief Executive (Banking) in order to enable
a closer alignment of the security function between the
Risk Monitoring Committee (RMC)
development of the Bank and the identification of security
The RMC has principal responsibility for the monitoring of
risks. Besides, the Head of Group Compliance still has
the risk portfolios at the Bank, set against the agreed risk
direct access to the Risk Monitoring Committee.
appetites. This committee comprises three independent
non-executive directors, two executive directors and the
Group Internal Audit SBU will, as was the case previously,
Head of Group Risk and meets on a regular basis to ensure
continue to report directly to the Audit Committee whilst
an effective link between the Board and the day-to-day
ensuring that all internal audit reports are submitted to
operations of the Bank.
73
continued
Credit Risk
customers whilst following the prudent and consistent
Credit Risk is defined as ‘the risk of loss arising from the
credit policies of the Bank. The effective identification,
non-performance by a customer, client or counterparty in
measurement, monitoring and control of the credit risk
any of its financial obligations towards the MCB ’.
associated with the Bank’s lending activities extensively
contribute towards maintaining the credit exposures
Credit Risk Governance
within the parameters set by the Group Credit Risk Policy’s
In order to provide for a proper and prudent segregation of
approach to risk management.
duties within the credit risk management architecture of
the MCB in accordance with applicable regulation and best
An effective dual control structure to authorise
practice, executive responsibility for credit risk management
transactions in excess ensures that the Bank’s exposure
is delegated by the Supervisory and Monitoring Committee
to credit risk is closely monitored. The well established
(SMC) to the Chief Executive (Banking).
delegation powers and the comprehensive credit policies
of the Bank ensure that credit decisions are conducted
The SMC is the nominated Board committee responsible
through a sound credit process and in the best interest
for the normal chain of operational command and control
of shareholders, in line with the Bank’s risk appetite and
delegated to line management in respect of credit risk
required return on capital.
through the promulgation of a comprehensive credit policy.
Credit Risk Measurement
As regards the responsibility of the RMC in respect of credit
The MCB has adopted the Standardised Approach to
risk, one of its primary functions is the independent review
calculate its credit risk capital, whereby appropriate risk
and reporting to the Board on the implementation of related
weights are applied to the on-balance and off-balance
management policy and its effects upon relevant portfolios
sheet exposures in line with the Guideline on Standardised
of the MCB.
Approach to Credit Risk issued by the Bank of Mauritius
and as required by the New Basel II framework. The eligible
Thus, the Board of the MCB has ultimate control and
collaterals are used to reduce the credit risk capital
oversight of credit risk management as well as of credit risk
required by the Bank accordingly.
policy and its deployment via the SMC, the Chief Executive
(Banking) and the Executive Credit Committee. It also has
The RMC is responsible to carry out a regular review of
access through the RMC to analysis and reporting from a
the credit risk capital reports to monitor the utilisation of
source which is functionally independent from the risk-
capital against the Bank’s risk appetite. The RMC’s role
taking business units.
is also to ensure that the Group has adequate capital
at all times to provide for its growth and to support
Credit Risk Management
unexpected losses. Any significant departure from the
The comprehensive credit risk management practices within
set allocation and from the budgeted return on capital
the MCB form an integral part of its business activities,
having a negative impact on the Bank is escalated to the
aiming at maximising business opportunities with its
appropriate Board committees.
74
ANNUAL REPORT 2007
Credit Risk Mitigation
exposure limit is approved annually by the SMC, but may
The MCB uses appropriate forms of risk mitigation to
be adjusted during the year to reflect new opportunities
reduce or transform risk exposures. Accepted credit
and changes in the countries’ risk profile, in consultation
risk mitigation techniques used within the MCB include
with the Strategy, Research and Development SBU and the
security/collateral, netting, guarantees and credit
Group Risk SBU. The explicit formulation of such a risk
derivatives, all of which contribute to a reduction in the
strategy aids in the early detection of deviations from
MCB’s credit risk for any exposure where such instruments
the planned course and in initiating the corresponding
are available. The credit risk mitigation instruments are
countermeasures in a timely manner.
evaluated periodically to ensure their continuing validity
Operational Risk
and value.
Operational risk is defined as ‘the risk of loss resulting from
Credit Risk Concentration
inadequate or failed internal processes, people and systems
Credit risk concentrations involve large exposures to groups
or from external events’.
of connected clients. These groups refer to companies
which are legally or economically connected in such a way
Operational Risk Management
that individual borrowers within the group would encounter
The management of operational risk is, explicitly or
repayment problems if a single one of them encountered
implicitly, a strategic component of organisational
financial difficulties.
performance. As the business activities of the MCB
grow in diversity and sophistication, the set of varied
The MCB’s credit portfolio is diversified by industry and the
accompanying risks require the Bank to reinforce its
Bank regularly monitors the credit risk concentration to
operational risk strategy. This involves the prompt
ensure that its risk-bearing capacity is not endangered.
identification, assessment, review and control of
operational risk through strengthened policies and
Country Exposure Limit Model
procedures, standards of business ethics and systems of
Country risk refers to the financial risks relating to the
internal control.
political, economic, or social instability of the country of the
borrower. Increased lending to borrowers in a given country
The adoption of the principles of the Basel Accord has been
can lead to correspondingly high losses for the Bank if
instrumental in heightening the awareness and the need
country risks materialise. The MCB therefore endeavours to
for a more comprehensive approach to the management of
limit its risk exposures to any single country according to its
operational risk.
risk appetite for international exposures.
Operational Risk Governance
In line with the strategy to increase its regional presence,
The operational risk framework emanates from explicit
the MCB has developed a new country exposure limit model
principles of governance defined by the Board and operates
to measure, monitor, and control country risk exposures
under an overarching set of standards delineated within the
in a timely manner. The risk appetite for the country
Group Operational Risk Policy.
75
continued
The ongoing oversight of operational risk at Group level is
The responsibilities of the independent operational risk
exercised by the Operational Risk and Compliance Committee
functions, in addition to monitoring and oversight, include:
(ORCC), chaired by the Chief Executive (Banking). Regular
• the set-up of a centralised operational incident and loss
operational risk reports submitted to ORCC highlight the
database and the extraction of management reports
status of the Bank’s operational risk profile, historical
identifying failures in or improvements to processes
losses and the control environment. The information from
and controls;
ORCC is tabled at the RMC, which reports to the Board on
• the bank-wide identification and management
all risk issues that could have an impact on the operations
of operational risk through risk and control self-
or reputation of the Bank.
assessments; and
• the identification, monitoring and reporting of a set of
Operational Risk Framework
Key Risk Indicators.
The operational risk management framework ensures the
consistent and comprehensive identification, assessment,
Business Continuity Management
monitoring, controlling and mitigation of operational risks,
The MCB is actively establishing and updating plans
including through appropriate insurance.
for ensuring the continuity of business in the event of a
significant disruption, leading to the reduction in the risk of
The framework supports the enhanced knowledge sharing
interruption of services. It has, with the help of consultants,
of significant aspects of operational risk and provides
successfully delineated and identified the key activities,
heightened potential for both risk and loss reduction.
functions and resources to support the essential features
Process improvement through quality management,
for comprehensive and effective business continuity plans.
robust disaster recovery plans and business continuity
management, as well as tighter controls of outsourcing
Market Risk
are important levers within the MCB in its search for
Market Risk is defined as ‘the risk of gain or loss arising from
positive results. In addition, ongoing communication and
activities undertaken in, or impacted by, financial markets
training help to foster an appropriate operational risk
generally. This includes both ‘Market Price Risk’ as well as
awareness culture.
ancillary risk such as liquidity and funding (liability) risk’.
The qualitative requirements of the operational risk
The framework for market risk is set out by the Group Market
framework encompass better and improved risk
Risk Policy (GMRP), which is a Board-approved sub-policy
identification, risk management and the establishment
of the Group Risk Policy. The GMRP covers the policies,
of a sound system of internal controls. The quantitative
principles and main functional responsibilities in relation
criteria include capital calculation and systematic bank-
to the management of market risk to be applied within the
wide collection of loss data.
MCB Group.
76
ANNUAL REPORT 2007
Market Risk BU
One of the main sources of interest rate risk arises due
Within the Group Risk SBU, the Market Risk BU (MRBU)
to timing differences between the interest reset dates of
acts as the primary risk control and risk-monitoring
bank assets, liabilities and off-balance sheet positions.
function related to market risk activities on behalf of the
The MCB manages interest rate risk in the trading and
MCB. The core function of MRBU is to exercise overall
non-trading books (i.e. across the whole balance sheet)
control and monitoring of market risk (including credit
by setting Gap and Cumulative Mismatch targets based
and operational risk arising from market risk activities)
on a maturity/repricing schedule. The purpose of these
within the MCB, collate market-risk related information
targets is to set benchmarks within which it is intended
from overseas subsidiaries and non-bank financial
to limit the amount of interest rate exposure at different
services activities of the Group. It also plays an important
points in the interest rate maturity spectrum.
role in assisting with the provision of balance sheet and
market risk analysis information to the Asset and Liability
The interest rate (repricing) risk exposure arising within the
Committee (ALCO).
banking book is monitored by MRBU and the consolidated
information reported to ALCO on a regular basis.
Asset And Liability Committee
The purpose of ALCO is to ensure that the overall asset/
Foreign Exchange Risk
liability and market risk mix, within the MCB, including
Foreign exchange risk is defined as ‘the risk that the Bank’s
its subsidiaries, is constantly managed within limits set
foreign currency positions will be adversely affected with
by the GMRP, and in accordance with guidelines laid down
the movements in exchange rates between one currency
by the Bank of Mauritius. Further, its purpose is to identify
and another’.
new areas of risk which might appear, either to exploit
such risks for profit or to manage any potential negative
The MCB manages foreign exchange/currency risk (FX
impact on the business.
risk) as a whole, whether arising from its day-to-day
trading decisions or embedded within the balance sheet.
ALCO is chaired by the Chief Executive (Banking) and is
For trading activities involving FX risk, the MCB allocates
attended by key members of Senior Management. Timely
trading limits which specify the maximum trading
and diverse information on such aspects as market risk and
position. The foreign currency risk target structure for FX
balance sheet management is provided by the reporting
risk in the balance sheet or otherwise from the general
team from the Finance SBU and Market Risk BU. In addition,
banking activities within the Group across all currencies
the reporting of the capital requirement for Market Risk is
and on a consolidated basis is formulated in terms of
done to the RMC on a monthly basis.
both the official regulatory limit of Bank of Mauritius
and internal limit/target. Overall exposure to FX risk is
Interest Rate Risk
monitored on an ongoing basis by MRBU for internal
Interest rate risk is defined as ‘the exposure of the Bank’s
reporting to ALCO.
financial condition to adverse movements in interest rates’.
77
continued
Liquidity Risk
Internal Audit
Liquidity risk is defined as ‘the risk that, at any time, the
During the year under review, the Internal Audit function
MCB does not have sufficient realisable financial assets to
of the MCB has undergone some important changes
meet its financial obligations as they fall due’.
particularly following the appointment, effective 1 January
2007, of a Head of Group Audit. In line with the National
The MCB Treasury BU is responsible for the day-to-day
Code of Corporate Governance, he reports to the Audit
management of liquidity risk, operating within targets and
Committee for direction and accountability and to Executive
limits as set and reviewed on a regular basis by ALCO and
Directors for administrative interface and support.
approved ultimately by the Board.
In fact, with a view to establishing a strategically focused
The liquidity policy of the MCB, which is in line with the Bank
Internal Audit function, various initiatives have been taken.
of Mauritius Guideline on Liquidity, is designed to ensure
These include:
that the Bank can meet its financial obligations as they fall
• widening the scope and depth of the audit through a
due in the normal course of business and that it maintains
an adequate stock of highly liquid assets to enable it to
meet unexpected funding needs at short notice. To these
ends, the MCB policy states three mutually reinforcing ‘lines
of defence’:
risk based approach;
• facilitating business risks workshops throughout the
Group; and
• the use of technology such as Computer Aided Audit
Techniques (CAAT) and an audit automated software.
• Cash Flow Management - whereby the MCB manages
expected inflows and outflows of funds according to
The testing and review of the internal control framework,
their scheduled maturity by setting targets to manage
taking into consideration the work of other stakeholders
the maximum mismatch allowed between maturing
such as external auditors, is carried out based on an audit
assets in different time-bands into the future.
plan approved by both Executive Directors and the Audit
• Liquid Assets Portfolio – whereby the MCB maintains
a stock of immediately realisable assets which it can
use to raise funds at short notice to meet unexpected
outflows of funds or to replace expected inflows of funds
which do not materialise for any reason.
• Diversification of Liability Base – whereby the MCB
• assess the achievement of organisational objectives
and control adequacy thereof;
• evaluate the relevance, reliability and integrity of
management information;
• appraise utilisation of resources;
maintains a spread of liabilities across different
• assess inventory and safeguarding of assets;
categories of depositor, and fully exploits the funding
• ascertain the extent of compliance with established
potential of the wholesale markets. Besides, the MCB
policies, procedures and instructions and recommend
seeks to restrict its dependency on any one depositor by
improvements thereto to prevent waste and fraud; and
capping its share of total deposits at 2%, in line with
• advise in a consulting capacity on systems of controls
Bank of Mauritius guideline.
78
Committee, designed to inter alia:
ANNUAL REPORT 2007
and other accounting and operational matters.
Results of audit assignments are distributed to the
Security practices and procedures continue to be developed
relevant internal stakeholders as well as to the Executive
and implemented in the branch and ATM network. CCTV
Directors using a much improved communication
systems at 66 locations, monitoring activity at ATMs
protocol. Recommendations are presented to the Audit
and other strategic areas within the branch network, are
Committee with clear indications of the status of their
currently being installed.
implementations.
The MCB’s declared priority of the preservation of life and the
The necessary framework has been built during the past nine
protection of its assets is being achieved in a coordinated
months to enable this SBU to progressively position itself
and proactive manner by the anticipation of events in the
as an ‘independent, objective assurance and consulting
medium term; an ongoing programme to define risk and
activity designed to add value and improve an organisation’s
identify threats, hazards and exposures; formalising and
operations. It helps an organisation accomplish its objectives
implementing, on a phased basis, all practical safety
by bringing a systematic, disciplined approach to evaluate
and security measures based on foresight and reasonable
and improve the effectiveness of risk management, control,
care, the monitoring of adherence thereto; and a continual
and governance processes’ as per the Institute of Internal
re-assessment of security in relation to the operating
Auditors’ recommendations.
environment in light of changing conditions.
Physical Security
Information Security Management (ISM)
Physical security relates to the safeguarding of employees,
The ISM BU is assessing all information systems within the
customers and other assets, so far as is reasonably
MCB in order to obtain, per system, an information security
practical, from potential risk or hazard at all times. The
risk map. The internal security review is now a yearly exercise
cornerstone of security is people safety.
and is currently underway for year 2007. Additionally, the
ISM BU has, through external suppliers, initiated external
It is the MCB’s objective to provide appropriate levels
security reviews of internet-exposed servers.
and standards of protection for people and assets to
either eliminate security risks or reduce their frequency of
The business continuity process is on track and a Business
occurrence and severity.
Continuity Management exercise that follows internationally
recognised best practices has been undertaken so as
The Security BU assumes responsibility for Safety and
to create Continuity Plans to provide an overall control
Health operations and a fully compliant programme is being
mechanism that will handle any disaster.
implemented. A staff and visitor access control operation has
been implemented in the MCB Centre and plans are on target to
A complete review of the MCB’s main IT systems access
further enhance the system. During the last financial year, the
rights is underway. This exercise will be extended to all of
Main Vault operation moved into custom-built accommodation
the MCB’s IT systems and aims to ensure that all accesses
in the new Phase III development at the MCB Centre and new
to systems within the Bank are based on two standards of
security systems were incorporated into the design.
practice: separation of duties and least privilege. Besides,
79
continued
a material blind spot identified during the course of the
participating in the review and approval of new business
year was expeditiously and comprehensively dealt with.
initiatives, products, services and systems; fostering good
relations with regulators; and assisting the establishment
ISM has further enhanced its Information Security advisory
of a homogeneous and coherent global compliance function
role and, as such, has been fully involved in major projects
across all subsidiaries of the MCB Group. The key areas of
undertaken by the MCB. In addition, briefing sessions have
the MCB Group Compliance Coverage, in each jurisdiction
been held to further upgrade the Information Security culture
in which it operates, are the laws and regulations; codes
within the organisation and, at the same time, to promote
of conduct and good practice; key business ethics and
the appropriate awareness of Information Security risks.
values; and reputational risk.
Compliance
Compliance Assurance Process Under Basel
Compliance risk is defined as ‘the risk arising from failure
Prior to publishing its state of readiness to comply with the
to comply with all applicable laws, regulations, codes of
Standardised Approach to credit, operational and market
conduct and standards of good practice governing the
risk in April 2007, the MCB’s compliance function validated
conduct of an organisation’s business in the countries in
the Configuration Management Documents of each of the
which it operates’. It is a composite risk made up of the
Bank’s Basel work streams and performed the necessary
risk of legal or regulatory sanctions, financial loss, or loss
verifications as part of its Compliance Assurance process,
to reputation. These risks are inter-related but for any
in line with the requirements of both Basel II and the Bank
financial services group such as the MCB, reputational risk
of Mauritius.
is of particular concern.
Legal
Function and Process
The Legal SBU, spearheaded by the Group In-House Lawyer,
It is the objective of the MCB’s compliance function to
has been reorganised and is now fully operational. The
provide adequate support to Management with a view to
implementation of its main functions is already completed
ensuring that the business activities of the Group and that
and the centralisation of all legal matters which is one of
of its employees are, at all times, compliant with all local
its key objectives has already been addressed. All legal
regulatory requirements and operate within international
matters are directed exclusively to the Legal SBU through a
best practice standards. As such, this function helps
new streamlined process.
to protect the reputation of the MCB and enables it to
demonstrate to regulators in all jurisdictions in which it
As a major supporting SBU to the lines of business, the
operates that it is a fit and proper operator.
Legal SBU is present in the early stages of the strategic
decision-making process, thus facilitating the achievement
Within the MCB Group, the Compliance function facilitates
of the Bank’s business objectives by identifying high legal
the management of compliance risk by establishing
risks, educating the business on potential legal risks
compliance policies and standards; providing an
associated with new business transactions and managing
independent reporting mechanism to the Board;
existing matters.
80
ANNUAL REPORT 2007
A particular responsibility of the Group Legal SBU is
risk-compliant set-up. A more differentiated approach is
also to extend the coverage and congruence of the legal
being adopted across the business lines with emphasis on
function across the MCB Group as well as the presentation
product development and the upgrading of service delivery
of bi-annual litigation returns from local and overseas
capabilities. In this context, an ambitious programme
subsidiaries.
has been initiated within the retail network, which will
result into a clearer demarcation of service offerings for
The Way Forward
the different customer segments. The development of
The vision statement of the MCB Group epitomises
electronic delivery channels is an ongoing process with the
its ambitions to create shareholder value through the
forthcoming deployment of more offsite ATMs, a revamped
diversification of its financial services offerings and
cards offering and enhancements to mobile phone and
regional expansion. In line with this objective and building
Call Centre services. In parallel, a new business model is
on the initiatives undertaken over the last years, the
being investigated with a view to more clearly segregating
Group will continue to reinforce its market positioning,
the Group’s front and back-office services and enhancing
within an ever more competitive environment, by offering
customer experience at all contact points. Besides, the
quicker, cheaper and more comprehensive services to its
MCB will shortly invest in the construction of one of the
increasingly sophisticated customers domestically as well
most modern buildings in the region in the Ebène Cybercity
as internationally. As such, efforts are being pursued to
to accommodate most of its technologically-intensive
consolidate the three pillars of service excellence: staff,
services and some staff training amenities.
processes and information technology.
Innovation has been a key element of the Group’s
The MCB will continue to invest in human resource
development strategies as reflected by a string of market
development with focused initiatives in order to maintain
firsts. Going forward, the setting up of a new core banking
high quality standards and deliver to the expectations
system will greatly facilitate the upgrading of service
of customers. This implies enhancing both soft skills
delivery both through the traditional and electronic
and technical training. In parallel, relevant professional
banking channels and increase ability to be proactive.
studies are being subsidised alongside the setting up of
In effectively selecting a world class suite for its banking
a scheme to recruit promising graduate trainees. The MCB
services, careful attention has been paid to the need to
remains an employer of choice and, as illustrated by the
set up a system that will enhance product development
successful launch of the Employee Share Option Scheme,
capabilities and give added flexibility to the business
it will pursue its efforts to attract and retain talent while
lines in providing quick and cost-effective services
promoting staff motivation through appropriate incentive
while facilitating data mining. The increased utilisation
and reward schemes.
of document scanning and electronic transmission
technologies with even greater emphasis on straight-
The review of business processes is geared towards
through processing will, in the wake of the core banking
providing more user-friendly and cost-effective products
system project, create more scope for enhanced service
and services to customers within a modern, efficient and
and cost efficiency.
81
continued
As regards business development, whereas domestic
of the South African Representative Office are important
banking activities remain the mainstay of the Group’s
milestones in further developing the Group’s ability to
profitability, it is exciting to note that the local and
detect and exploit business development potential in
foreign subsidiaries are at the forefront of development
the region. In parallel, the synergistic potential between
strategies and are showing excellent growth potential.
the Head Office and the established foreign subsidiaries
On the domestic front, increasing contributions to Group
is being boosted with ongoing exchanges aimed at
earnings are expected to emanate from its leasing and
replicating product and service offering within the Group
factoring arms as well as through Capital Markets.
based on specific local market potential. Another key
While competition in the markets for financial products
objective is to develop the MCB as a ‘bank for banks’
and services is becoming increasingly intense, the
in the region with the provision of payment and other
Group is confident that, with its staff commitment and
back-office services to less well endowed regional and
experience, it will build a strong value proposition for its
African banks. In addition, the Group will capitalise on
different customers. The forthcoming periods will be quite
its extensive relationship network, in particular that of its
challenging for the domestic subsidiaries with plans to
correspondent banks, to take advantage of joint financing
more effectively utilise existing and new delivery channels
opportunities. The regional expansion strategies will
notably through extensive communication and marketing
undoubtedly necessitate a continued focus on building
campaigns. In addition, the investment services offering
credibility on the international scene.
will be gradually tailored to better meet the needs of the
retail and corporate segments while being more readily
The effective implementation of these strategies should
available via the Bank’s network.
equip the Group with the necessary means to stand up to
the challenges lying ahead, in the process promoting the
On the international front, the Group has set challenging
interests of its stakeholders. Building on its robust financial
goals to grow its asset portfolio within the parameters set
fundamentals and organisational capabilities, the MCB is
by the Board of Directors. This will require sustained efforts
confident that, whilst broadening its regional activity, it can
to tap into business opportunities as they unfold in the
make further strides in bolstering its standing as a prime
region and beyond and to consolidate market knowledge.
financial service provider and a key player in the socio-
The setting up of the Maldives Branch and the opening
economic development of the country.
Pierre-Guy NOEL
Antony R. WITHERS
82
ANNUAL REPORT 2007
Financial
Statements
“ Income from foreign sources and non-bank
operations contributed, for the first time,
to more than 50% of consolidated profit.”
84
ANNUAL REPORT 2007
Statement of Management’s Responsibility
for Financial Reporting
The Group Financial Statements and the Financial Statements for the Bank’s operations in Mauritius presented in this report have been
prepared by Management, which is responsible for their integrity, consistency, objectivity and reliability. International Financial Reporting
Standards as well as the requirements of the Banking Act 2004 and the guidelines issued thereunder have been applied for the year ended
30 June 2007 and Management has exercised its judgement and made best estimates where deemed necessary.
The Bank has designed and maintained its accounting systems, related internal controls and supporting procedures to provide reasonable
assurance that financial records are complete and accurate and that assets are safeguarded against loss from unauthorised use or
disposal. These supporting procedures include careful selection and training of qualified staff, the implementation of organisation and
governance structures providing a well-defined division of responsibilities, authorisation levels and accountability for performance, and the
communication of the Bank’s policies, procedures manuals and guidelines of the Bank of Mauritius throughout the Bank.
The Bank’s Board of Directors, acting in part through the Audit Committee, Conduct Review Committee and Risk Monitoring Committee, which
comprise, principally, independent directors who are not officers or employees of the Bank, oversees Management’s responsibility for financial
reporting, internal controls, assessment and control of major risk areas, and assessment of significant and related party transactions.
The Bank’s Internal Auditor, who has full and free access to the Audit Committee, conducts a well-designed programme of internal audits.
Pursuant to the provisions of the Banking Act, the Bank of Mauritius makes such examination and inquiry into the operations and affairs of
the Bank as it deems necessary.
The Bank’s external auditors, BDO De Chazal Du Mée, have full and free access to the Board of Directors and its committees to discuss the
audit and matters arising therefrom, such as their observations on the fairness of financial reporting and the adequacy of internal controls.
Pierre-Guy NOEL
Antony R. WITHERS
J. Gérard HARDY
Director
President of the board
Bertrand DE CHAZAL
Director
Report of the Auditors
To the Shareholders of the Mauritius Commercial Bank Ltd.
Independent Auditors’ Report to the Members
This report is made solely to the members of The Mauritius Commercial Bank Ltd (the “Bank”), as a body, in accordance with Section 205 of
the Companies Act 2001. Our audit work has been undertaken so that we might state to the Bank’s members those matters we are required to
state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Bank and the Bank’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Report on the Financial Statements
We have audited the financial statements of The Mauritius Commercial Bank Ltd and its subsidiaries (the “Group”) and the Bank’s separate
financial statements on pages 88 to 163 which comprise the balance sheets at June 30,2007 and the income statements, statements
of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other
explanatory notes.
Directors’ Responsibility for the Financial Statements
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial
position of the Group and of the Bank and for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001 and Banking Act 2004.
This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Bank’s
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating
the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
86
ANNUAL REPORT 2007
Opinion
In our opinion, the financial statements on pages 88 to 163 give a true and fair view of the financial position of the Group and of the Bank
at June 30, 2007, and of their financial performance and their cash flows for the year then ended in accordance with International Financial
Reporting Standards and comply with the Companies Act 2001.
Report on Other Legal and Regulatory Requirements
Companies Act 2001
We have no relationship with, or interests in, the Bank or any of its subsidiaries, other than in our capacity as auditors, tax and business
advisers and dealings in the ordinary course of business.
We have obtained all information and explanations we have required.
In our opinion, proper accounting records have been kept by the Bank as far as it appears from our examination of those records.
Banking Act 2004
In our opinion, the financial statements have been prepared on a basis consistent with that of the preceding year and are complete, fair and
properly drawn up and comply with the Banking Act 2004 and the regulations and guidelines of the Bank of Mauritius.
The explanations or information called for or given to us by the officers or agents of the Bank were satisfactory.
The Financial Reporting Act 2004
The directors are responsible for preparing the Corporate Governance Report and making the disclosures required by Section 8.4 of the Code
of Corporate Governance of Mauritius (“Code”). Our responsibility is to report on these disclosures.
In our opinion, the disclosures in the Corporate Governance Report are consistent with the requirements of the Code
BDO DE CHAZAL DU MEE
Chartered Accountants
Per Jacques Pougnet - FCA
28th September 2007
Port Louis
Mauritius
Balance Sheets as at 30th June 2007
Notes
2007
Rs’000
GROUP
2006
Rs’000
2005
Rs’000
2007
Rs’000
BANK
2006
Rs’000
2005
Rs’000
Assets
Cash resources
Cash and balances with Central Banks
Balances with banks and interbank loans
Balances with banks abroad
3
4
4
6,235,477 5,509,108
345,645
214,156
9,863,254 6,480,484
16,444,376 12,203,748
Securities and other investments
Securities
Other investments - available-for-sale
- derivative financial instruments
Investments in associates
Investments in subsidiaries
5
7
7
8
9
13,252,182 18,364,266 16,422,090 10,573,779 14,874,838 13,557,949
3,535,001 1,824,931 1,148,290 1,334,009
622,177
745,207
23,795
16,125
28,102
23,795
16,125
28,102
5,281,108 3,256,832 2,318,127
875,530
872,151
830,802
- 2,126,099 1,766,732
826,959
22,092,086 23,462,154 19,916,609 14,933,212 18,152,023 15,989,019
Loans
Personal and credit cards
Business
Governments
Entities outside Mauritius
Less allowances for credit impairment
6
Other
Goodwill and other intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
10
11
12
13
14,761,071
47,550,037
126,636
6,652,786
69,090,530
(3,245,882)
65,844,648
11,385,708
44,595,234
6,366
5,736,880
61,724,188
(3,358,912)
58,365,276
4,867,674 4,042,455 4,015,691
147,802
204,565
1,073,063 9,987,990 6,622,201
5,940,737 14,178,247 10,842,457
10,761,022
43,052,205
16,619
4,434,864
58,264,710
(3,142,049)
55,122,661
88
ANNUAL REPORT 2007
11,085,228
41,316,947
5,736,880
58,139,055
(3,270,487)
54,868,568
9,646,552
40,741,152
4,556,394
54,944,098
(3,061,816)
51,882,282
288,302
354,111
326,200
229,201
314,138
288,337
3,443,069 3,036,585 2,537,961 2,449,780 2,193,777 2,102,935
15,844
31,980
84,774
15,096
31,647
84,284
2,014,397 1,955,893 1,303,140 1,771,334 1,600,962 1,273,689
5,761,612 5,378,569 4,252,075 4,465,411 4,140,524 3,749,245
110,142,722 99,409,747 85,232,082 94,516,015 88,003,572 76,147,042
The notes on pages 100 to 163 form part of these financial statements.
Auditors’ report on pages 86 and 87.
Pierre-Guy NOEL
12,969,386
44,475,277
6,652,786
64,097,449
(3,158,304)
60,939,145
3,481,887
1,044,609
4,526,496
Antony R. WITHERS
Notes
2007
Rs’000
GROUP
2006
Rs’000
2005
Rs’000
2007
Rs’000
BANK
2006
Rs’000
2005
Rs’000
Liabilities and Shareholders’ Equity
Deposits
Personal
Business
Governments
Banks
15
Borrowings
Borrowings from the Bank of Mauritius
Borrowings from other banks in Mauritius
and banks abroad
Subordinated debt
14
Other
Other liabilities
Outstanding lease obligations
Proposed dividend
Current tax liabilities
Deferred tax liabilities
Capital and reserves attributable to the ordinary equity
holders of the parent
Share capital
Reserves and surplus
Retained earnings
16
18
12
19
Less treasury shares
Minority interest
Total equity
61,893,853 56,951,011 51,476,168 57,229,612 53,748,473 48,751,177
20,973,361 17,801,612 15,613,470 16,418,950 13,709,024 12,263,458
758,576 1,449,191 1,088,671
252,469
753,478
233,749
1,531,833
993,046
735,568 1,536,428
997,600
735,568
85,157,623 77,194,860 68,913,877 75,437,459 69,208,575 61,983,952
840,329
1,056,122
1,203,518
840,329
1,056,122
1,203,518
3,938,310
1,411,108
6,189,747
5,184,415
6,240,537
2,187,721
3,391,239
4,284,574
1,411,108
6,536,011
5,380,538
6,436,660
2,260,531
3,464,049
3,475,399
383,833
21,732
3,880,964
3,245,244
6,366
271,598
616
3,523,824
1,928,998
11,418
273,818
370,112
5
2,584,351
2,918,087
2,327
327,374
3,247,788
2,671,798
6,133
239,501
2,917,432
1,688,215
10,994
273,818
317,829
2,290,856
2,503,756
4,589,731
6,765,698
13,859,185
(384,289)
13,474,896
1,439,492
14,914,388
110,142,722
2,821,105
3,703,209
6,203,437
12,727,751
(394,080)
12,333,671
116,855
12,450,526
99,409,747
2,821,105
2,688,757
5,116,005
10,625,867
(393,789)
10,232,078
110,537
10,342,615
85,232,082
2,503,756
2,738,331
4,436,959
9,679,046
(384,289)
9,294,757
9,294,757
94,516,015
2,821,105
2,406,662
4,605,968
9,833,735
(392,830)
9,440,905
9,440,905
88,003,572
2,821,105
2,131,738
3,847,881
8,800,724
(392,539)
8,408,185
8,408,185
76,147,042
Contingent Liabilities
Acceptances, guarantees, letters of credit, endorsements
and other obligations on account of customers, and
foreign exchange contracts
Commitments
Assets pledged against facilities granted by
the Bank of Mauritius
Tax assessment
Other
25,892,067 16,707,977 17,721,531 24,663,631 15,888,362 16,526,633
4,487,776 4,622,812 2,288,704 4,366,559 4,484,731 2,213,040
20
- 1,014,515
970,680
- 1,014,515
970,680
201,762
182,880
163,998
201,762
182,880
163,998
1,071,586
782,368
888,792
995,853
765,011
874,372
31,653,191 23,310,552 22,033,705 30,227,805 22,335,499 20,748,723
These financial statements were approved for issue by the Board of Directors on the 28th September 2007.
J. Gérard HARDY
Director
President of the board
Bertrand DE CHAZAL
Director
Income Statements for the year ended 30th June 2007
Notes
2007
Rs’000
GROUP
2006
Rs’000
2005
Rs’000
2007
Rs’000
BANK
2006
Rs’000
2005
Rs’000
21
7,068,108
1,232,702
637,596
8,938,406
5,494,526
1,157,577
254,336
6,906,439
4,398,156
1,117,467
156,871
5,672,494
6,475,536
1,012,713
579,994
8,068,243
5,057,539
994,082
211,544
6,263,165
4,076,108
926,732
118,268
5,121,108
Interest income
Interest on loans
Interest on investment in securities
Interest on placements with other banks
Interest expense
Interest on deposits
Interest on borrowings from banks and financial institutions
Other interest expense
22
Net interest income
Other income
Fee income and commissions
Profit arising from dealing in foreign currencies
Share of income of associated companies
Dividend income
Net gain on sale of securities
Other
23
1,108,301
987,138
414,392
82,713
9,903
50,439
2,652,886
6,265,616
835,757
670,908
282,390
58,829
30,051
41,275
1,919,210
5,012,398
695,075
820,341
230,398
49,739
284
50,271
1,846,108
4,767,316
839,650
863,657
221,374
4,464
1,929,145
4,955,731
716,235
596,670
149,875
58,995
10,283
1,532,058
4,189,790
606,709
753,241
233,219
11,650
28,408
1,633,227
4,150,503
(1,280,699)
(63,337)
(303,730)
(110,935)
(1,023,457)
(2,782,158)
3,483,458
(375,928)
3,107,530
3,107,530
(560,822)
2,546,708
2,546,708
(1,122,296)
(67,782)
(236,127)
(97,178)
(834,453)
(2,357,836)
2,654,562
(320,154)
2,334,408
78,675
2,413,083
(399,632)
2,013,451
2,013,451
(1,000,892)
(81,645)
(193,521)
(94,243)
(883,093)
(2,253,394)
2,513,922
(372,528)
2,141,394
2,141,394
(456,348)
1,685,046
(5,867)
1,679,179
(1,166,005)
(63,337)
(217,780)
(106,003)
(720,655)
(2,273,780)
2,681,951
(370,598)
2,311,353
2,311,353
(389,932)
1,921,421
1,921,421
(1,035,480)
(67,782)
(192,736)
(96,158)
(603,366)
(1,995,522)
2,194,268
(313,203)
1,881,065
37,800
1,918,865
(311,802)
1,607,063
1,607,063
(907,518)
(81,645)
(177,437)
(93,858)
(697,145)
(1,957,603)
2,192,900
(359,280)
1,833,620
1,833,620
(349,360)
1,484,260
1,484,260
2,460,845
85,863
2,546,708
1,986,423
27,028
2,013,451
1,657,889
21,290
1,679,179
1,921,421
1,921,421
1,607,063
1,607,063
1,484,260
1,484,260
29
9.74
7.40
6.16
29
9.74
7.11
6.16
23
Operating income
Non-interest expense
Salaries and human resource development
Employee benefits
Depreciation
Amortisation of intangible assets
Other
24
Allowance for credit impairment
Operating profit
Exceptional items
Profit before tax
Income tax expense
Profit after tax
Impairment/amortisation of goodwill
Profit for the year
25
26
Attributable to :Ordinary equity holders of the parent
Minority interest
Basic and diluted earnings per share for profit
attributable to the ordinary equity holders of the parent
after exceptional items (Rs)
Basic and diluted earnings per share for profit
attributable to the ordinary equity holders of the parent
before exceptional items (Rs)
(4,889,524) (3,449,997) (2,569,000) (4,616,568) (3,296,931) (2,433,582)
(428,923) (350,365) (163,969) (418,632) (296,272) (152,734)
(7,229)
(12,889)
(18,317)
(6,457)
(12,230)
(17,516)
(5,325,676) (3,813,251) (2,751,286) (5,041,657) (3,605,433) (2,603,832)
3,612,730 3,093,188 2,921,208 3,026,586 2,657,732 2,517,276
90
ANNUAL REPORT 2007
Notes
16,252
16,252
2,821,105
(317,349)
2,503,756
Share
Premium
Rs’000
2,821,105
2,821,105
2,821,105
2,821,105
2,821,105
At 1st July 2004
Effect of IAS 8
As restated
Share of increase in reserves of associates
Increase in interest in associate
Transfer on disposal of associate by Fincorp
Transfer on disposal of investment
Currency translation difference
Fair value gain
Net income/(expenses) recognised directly in equity
Profit for the year
Total recognised income/(expense) for the year
Dividends
28
Transfer to general banking reserve
Transfer to statutory reserve
Purchase of treasury shares
At 30th June 2005
Adjustment of fair value of assets in associate
As restated
Investment in subsidiary
Transfer on disposal of investment
Fair value gain
Net income/(expense) recognised directly in equity
Profit for the year
Total recognised income for the year
Dividends
28
At 30th June 2006
Prior year adjustment in the financial statements
27
of Fincorp Group
As restated
Transfer on disposal of property, plant and equipment
Release of share value/recognition of minority interest
following shares bought back & cancelled by Fincorp
Fair value gain
Net income recognised directly in equity
Profit for the year
Dividends
28
Shares bought back and cancelled by the Group
Employee share options exercised
At 30th June 2007
GROUP
Share
Capital
Rs’000
(29,145)
961,416
67,833
(21,618)
-
334,832
334,832
25,320
1,572
(16,027)
(53)
60,972
71,784
71,784
406,616
406,616
568,213
(6,339)
22,071
583,945
583,945
990,561
9,533
499,964
555,712
555,712
1,250
8,541
(384,289) 1,517,128
(394,080)
-
(350,993)
(350,993)
(42,796)
(393,789)
(393,789)
(291)
(394,080)
1,332,578
1,332,578
250,000
1,582,578
1,582,578
250,000
1,832,578
(499)
93,081
93,081
250,000
401,242 2,082,578
308,161 1,832,578
96,414
(2,834)
-
162,753
162,753
23,011
(23,700)
(689)
(689)
162,064
162,064
131,484
14,613
146,097
146,097
308,161
4,563,977
(299,950)
4,264,027
1,219
1,219
1,657,889
1,659,108
(510,898)
(46,232)
(250,000)
5,116,005
(45,575)
5,070,430
1,986,423
1,986,423
(569,006)
(34,410)
(250,000)
6,203,437
9,355,296
(299,950)
9,055,346
48,876
2,791
(16,027)
(53)
(24,022)
60,972
72,537
1,657,889
1,730,426
(510,898)
(42,796)
10,232,078
(45,575)
10,186,503
699,697
(6,339)
14,613
22,071
730,042
1,986,423
2,716,465
(569,006)
(291)
12,333,671
Rs’000
Total
622
572,531
155,241
184,153
2,460,845
2,644,998
(723,335)
(622)
(250,000)
(1,113,449)
6,765,698
164,275
499,964
832,946
2,460,845
3,293,791
(723,335)
(1,429,548)
24,793
13,474,896
4,669
(24,476)
571,909 6,208,106 12,309,195
7,294
171,541
21,618
(2,834)
491,044
491,044
545
(322)
223
223
46,232
537,499
537,499
34,410
571,909
Attributable to ordinary equity holders of the parent
Treasury
Capital Translation Statutory General Banking Retained
Shares
Reserve Reserve Reserve
Reserve
Earnings
Rs’000
Rs’000
Rs’000
Rs’000
Rs’000
Rs’000
9,469,854
(299,950)
9,169,904
48,876
2,791
(16,027)
(53)
(29,786)
60,972
66,773
1,679,179
1,745,952
(530,445)
(42,796)
10,342,615
(45,575)
10,297,040
699,697
25
(6,339)
13,976
22,071
729,430
2,013,451
2,742,881
(589,104)
(291)
12,450,526
Total
Equity
Rs'000
1,286,000
1,289,822
85,863
1,375,685
(33,675)
(1,326)
1,439,492
1,450,275
499,964
2,122,768
2,546,708
4,669,476
(757,010)
(1,430,874)
24,793
14,914,388
(18,047)
(42,523)
98,808 12,408,003
171,541
3,822
988
114,558
114,558
(5,764)
(5,764)
21,290
15,526
(19,547)
110,537
110,537
25
(637)
(612)
27,028
26,416
(20,098)
116,855
Minority
Interest
Rs’000
Statement of Changes in Equity for the year ended 30th June 2007
92
ANNUAL REPORT 2007
At 1st July 2004
Effect of IAS 8
As restated
Transfer on disposal of investments
Fair value gain
Net expense recognised directly in equity
Profit for the year
Total recognised (expense)/income for the year
Dividends
At 30th June 2005
Transfer on disposal of investments
Fair value gain recognised directly in equity
Net expense recognised directly in equity
Profit for the year
Total recognised (expense)/income for the year
Dividends
At 30th June 2006
Fair value gain recognised directly in equity
Profit for the year
Dividends
Shares bought back and cancelled by the Bank
At 30th June 2007
BANK
28
28
28
Note
2,821,105
2,821,105
2,821,105
2,821,105
(317,349)
2,503,756
Rs’000
Share
Capital
16,252
16,252
Rs’000
Share
Premium
(350,993)
(350,993)
(41,546)
(392,539)
(291)
(392,830)
8,541
(384,289)
Rs’000
Treasury
Shares
47,182
47,182
(11,454)
9,822
(1,632)
(1,632)
45,550
(36,571)
31,525
(5,046)
(5,046)
40,504
65,417
65,417
105,921
Rs’000
Capital
Reserve
1,332,578
1,332,578
250,000
1,582,578
250,000
1,832,578
250,000
2,082,578
Rs’000
Statutory
Reserve
Rs’000
Retained
Earnings
Rs’000
Total
457,270 3,470,809 7,777,951
(299,950) (299,950)
457,270 3,170,859 7,478,001
(11,454)
9,822
(1,632)
- 1,484,260 1,484,260
- 1,484,260 1,482,628
(510,898) (510,898)
46,340
(46,340)
(250,000)
(41,546)
503,610 3,847,881 8,408,185
(36,571)
31,525
(5,046)
- 1,607,063 1,607,063
- 1,607,063 1,602,017
(569,006) (569,006)
29,970
(29,970)
(250,000)
(291)
533,580 4,605,968 9,440,905
65,417
- 1,921,421 1,921,421
- 1,921,421 1,986,838
(723,335) (723,335)
(250,000)
- (1,117,095) (1,434,444)
24,793
533,580 4,436,959 9,294,757
General
Banking
Reserve
Rs’000
Statement of Changes in Equity for the year ended 30th June 2007
Cash Flow Statements for the year ended 30th June 2007
Net cash flows from trading activities
Net cash flows from other operating activities
Notes
31
2007
Rs’000
3,365,649
GROUP
2006
Rs’000
3,615,927
32
5,024,226
2,248,394 (2,807,184) 4,180,147
Dividends received from associates
Dividends paid
Dividends paid to minority shareholders in subsidiaries
2007
Rs’000
2,898,742
BANK
2006
Rs’000
3,216,461
2005
Rs’000
2,042,806
2,435,644 (2,642,806)
11,898
45,235
48,049
-
-
-
(723,335)
(842,824)
(479,599)
(723,335)
(842,824)
(479,599)
(33,675)
(20,098)
(19,547)
-
-
-
(447,467)
(410,523)
(285,508)
(337,493)
(301,248)
(431,917)
Income tax paid
Net cash flows from operating activities
2005
Rs’000
2,264,230
7,212,846
4,599,167 (1,404,574) 6,070,046
4,471,788 (1,380,847)
Investing activities
Purchase of investments
Proceeds from sale of investments
(1,017,721)
(688,991)
(88,720)
(648,052)
(232,595)
(40,950)
47,238
67,103
54,442
1,637
65,809
9,552
Investment in subsidiaries
Acquisition of subsidiary, net of cash acquired
34
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
-
-
-
(318,422)
(515,001)
(347,589)
(8,403)
(25)
-
(11,425)
(14,625)
-
(602,000)
(493,473)
(705,710)
(477,319)
(298,584)
(322,581)
(33,471)
(114,337)
(235,328)
(30,752)
(111,142)
(231,703)
83,600
1,880
18,322
8,000
4,722
8,000
(956,994) (1,476,333) (1,101,416)
(925,271)
(1,530,757) (1,227,843)
Net cash flows before financing
5,682,089
3,371,324 (2,361,568) 4,593,713
3,370,372 (2,306,118)
Financing
-
(291)
(42,796)
-
(291)
(41,546)
22,743
-
-
22,743
-
-
-
-
-
(4,785)
(21,870)
-
Proceeds from subordinated debt
1,474,126
-
-
1,474,126
-
-
Share buy back
(1,430,626)
-
- (1,434,444)
-
-
Subordinated loan to subsidiary
Capital element of finance lease rental payments
(1,835)
(5,052)
(7,092)
(3,806)
(4,861)
(6,953)
64,408
(5,343)
(49,888)
53,834
(27,022)
(48,499)
Increase/(Decrease) in cash and cash equivalents
5,746,497
3,365,981 (2,411,456) 4,647,547
3,343,350 (2,354,617)
Cash and cash equivalents at 1st July 2006
5,963,211
2,549,498
1,062,447
Effect of foreign exchange rate changes
Cash and cash equivalents at 30th June 2007
33
5,002,507
4,405,797
3,417,064
(43,971)
47,732
(41,553)
-
-
-
11,665,737
5,963,211
2,549,498
9,053,344
4,405,797
1,062,447
General Information
The Mauritius Commercial Bank Limited (“the Company”) is a public company incorporated by Royal Charter in 1838 and registered as
limited liability company on 18th August 1955. Its registered office is situated at 9-15, Sir William Newton Street, Port Louis, Mauritius.
The Mauritius Commercial Bank Limited was one of the first group of companies to be listed on The Stock Exchange of Mauritius.
The main activities of the Company and those of its subsidiaries (“the Group”) consist in providing a whole range of financial services in the
Indian Ocean region and beyond.
94
ANNUAL REPORT 2007
Index to Notes to the Financial Statements
Notes
Pages
1 Accounting Policies
100
(a) Basis of presentation
(b) Basis of consolidation
(c) Foreign currency translation
(d) Derivative financial instruments and hedging
101
(e) Offsetting financial instruments
(f) Interest income and expense
(g) Fees and commissions
(h) Sale and repurchase agreements
(i) Investment securities
(j) Trading securities
102
(k) Loans and provisions for loan impairment
(l) Goodwill
(m) Property, plant and equipment
103
(n) Computer software development costs
(o) Finance leases - where the company is the lessee
(p) Accounting for leases - where company is the lessor
(q) Cash and cash equivalents
104
(r) Provisions
(s) Employee benefits
(t) Deferred tax
(u) Borrowings
(v) Acceptances
(w) Segment reporting
continued
Notes
Pages
2 Financial Risk Management
105
(a) Strategy in using financial instruments
(b) Credit risk
(c) Market risk
(d) Currency Risk
- Concentration of assets, liabilities and off-balance sheet items
(e) Interest rate risk
- Interest sensitivity of assets and liabilities-repricing analysis
- Average interest rate by major currencies for monetary financial instruments
(f) Liquidity risk
- Maturities of assets and liabilities
(g) Fair values of financial assets and liabilities
3 Cash and balances with Central Banks
106-109
109
110-113
114
115
115-118
118
119
4 Due from other banks
5 Securities
120
6 Loans
121
(a) Loans comprise the following
(b) Remaining term to maturity
(c) Movements in allowances for credit impairment
(d) Allowances for credit impairment by industry sectors
122
(e) Credit concentration of risk by industry sectors
123
(f) Loans outside Mauritius
7 Other investments
124
(a) Available-for-sale
(b) Derivative financial instruments
8 Investments in associates
96
ANNUAL REPORT 2007
125
Notes
Pages
9 Investments in subsidiaries
126
10 Goodwill and other intangible assets
(a) Goodwill
(b) Other intangible assets
11 Property, plant and equipment
127-129
12 Deferred tax (liabilities)/assets
130
13 Other assets
14 Due to other banks
15 Deposits
131
(a) Deposits comprise the following
16 Other liabilities
17 Employee benefits assets
132-133
18 Outstanding lease obligations
134
19 Share capital and treasury shares
20 Contingent liabilities
135
(a) Instruments
(b) Commitments
(c) Assets pledged against facilities granted by the Bank of Mauritius
(d) Tax assessment
(e) Other
continued
21 Interest income
136
22 Interest expense
23 Other income
(a) Fee income and commissions
(b) Dividend income
24 Non-interest expense
137
25 Allowance for credit impairment
26 Income tax expense
138
27 Prior year adjustment
28 Dividends
29 Earnings per share
139
(a) Basic earnings per share
(b) Diluted earnings per share
30 Capital commitments
31 Net cash flows from trading activities
140
32 Net cash flows from other operating activities
33 Analysis of the balances of cash and cash equivalents as shown in the Balance Sheets
34 Acquisition of subsidiary
98
ANNUAL REPORT 2007
141
35 Segment information
142
- Geographical segments
142-144
- Business segments
145-147
36 Related party transactions
148-149
37 Segmental reporting - Bank
150
Balance Sheets
150-151
Income Statements
152
(a) Securities
153-154
(b) Loans
155
(i) Remaining term to maturity
(ii) Credit concentration of risk by industry sectors
(iii) Movements in allowances for credit impairment
156
(iv) Allowances for credit impairment by industry sectors
157-160
(c) Other Assets
161
(d) Deposits
(i) Personal, business and governments
(ii) Banks
(e) Other liabilities
162
(f) Contingent liabilities
(i) Instruments
(ii) Commitments
(iii) Assets pledged against facilities granted by the Bank of Mauritius
(iv) Tax assessment
(v) Other
(g) Other income
163
(i) Fee income and commissions
(ii) Dividend income
(h) Allowance for credit impairment
Notes to the Financial Statements for the year ended 30th June 2007
1.
Accounting Policies
The principal accounting policies adopted in the preparation of these financial statements are set out below:
(a) Basis of presentation
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and instructions, Guidelines and Guidance
notes issued by the Bank of Mauritius, in so far as the operations of the Bank are concerned.
Where necessary, comparative figures have been amended to conform with changes in presentation, or in accounting policies in the current year.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain property, plant and
equipment, available-for-sale investment securities, financial assets and liabilities held-for-trading and all derivative contracts.
Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting periods beginning on
or after 1 January 2007 that the Group has not early adopted.
Except for IFRS 7, Financial Instruments Disclosures, the Amendment to IAS 1, Presentation of Financial Statements - Capital Disclosures (effective for
annual periods beginning on or after 1 January 2007), and IFRS 8, Operating segments (effective for annual periods beginning on or after 1 January
2009), these standards, amendments and interpretations are not relevant to the Group’s operations.
IFRS 7, IFRS 8 and the Amendment to IAS 1 are disclosure requirements only and will not when adopted, affect the results of the Group.
(b) Basis of consolidation
(1) Subsidiaries
The consolidated financial statements include the Balance Sheet of the Bank and that of its subsidiaries as at 30th June. Subsidiaries are those
companies and other entities in which the Group, directly or indirectly, has power to exercise control over financial and operating policies.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated Income Statement from the date on which effective
control is transferred to the Group, up to the date of their disposal which is the date on which the parent ceases to have control. The purchase method
of accounting is used to account for the acquisition of subsidiaries. Intragroup balances, transactions, unrealised profits and losses are eliminated
on consolidation.
In the separate financial statements of the Bank, the investment in subsidiaries is initially recognised at cost (which includes transaction costs).
Subsequently, where the recoverable amount of the investment is less than the carrying value, an impairment loss is immediately recognised in the
Income Statement.
(2) Associates
Investments in associates are accounted for by the equity method of accounting. Associates are entities over which the Group generally has between
20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions
between the Group and its associates are eliminated to the extent of the Group’s interests in the associates. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associates includes goodwill. Equity
accounting is discontinued when the carrying amount of the investment in an associate reaches zero, unless the Group has incurred obligations or
guaranteed obligations in respect of the associates. The Group Income Statement reflects the Group’s share of post-tax profits of associates. It is not
practicable for adjustments to be calculated in cases where the associates have used accounting policies other than those adopted by the Bank for like
transactions and events in similar circumstances.
In the separate financial statements of the Bank, the investment in associated companies is accounted at cost (which includes transaction costs). The
carrying amount is reduced to recognise any impairment in the value of the individual companies.
(c) Foreign currency translation
‘The foreign subsidiaries’ Balance Sheets are translated to Mauritian Rupees using the closing rate method. Their Income Statements and cash flows
are translated at the average rate for the year. Any resulting exchange differences are taken to the Translation Reserve. On disposal of a foreign entity,
such exchange differences are recognised in the Income Statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated
at the closing rate.
Trading transactions denominated in foreign currencies are accounted for at the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities expressed in foreign currencies are reported at the rate of exchange ruling at the Balance Sheet date. Differences arising
from reporting monetary items are dealt with through the Income Statement.
1 0 0 ANNUAL REPORT 2007
1.
Accounting Policies (Continued)
(d) Derivative financial instruments and hedging
Derivative financial instruments include foreign exchange contracts and currency swaps. These are initially recognised in the Balance Sheet at cost
(which includes transaction costs) and subsequently remeasured at their fair value. Fair values of derivatives between two external currencies are
based on interest rate differential between the two currencies. Fair values of forwards involving Mauritian Rupees are based on treasury bills rate or
LIBOR. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
The Bank’s derivative transactions, while providing effective economic hedges under the Group’s risk management policies, do not qualify for hedge
accounting under the specific rules of IAS 39 and are therefore treated as derivatives held for trading with fair value gains and losses reported in the
Income Statement.
The fair values of derivative financial instruments held for trading are disclosed in note 7(b).
(e) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is a legally enforceable right to set off the
recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
(f) Interest income and expense
Interest income and expense are recognised in the Income Statement for all interest bearing instruments on an accrual basis using the effective yield
method based on the actual purchase price. Interest income includes coupons earned on fixed income investment and trading securities and accrued
discount and premium on treasury bills and other discounted instruments. When loans become doubtful of collection, they are written down to their
recoverable amounts and interest income is thereafter recognised based on the rate of interest that was used to discount the future cash flows for the
purpose of measuring the recoverable amount.
(g) Fees and commissions
Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan processing fees which are charged as
a front end fee are taken directly to income.
(h) Sale and repurchase agreements
Securities sold subject to linked repurchase agreements (“repos”) are retained in the Balance Sheet as Government securities and Treasury bills and
the counterparty liability is included in amount due to other banks or deposits, as appropriate.
Securities purchased under agreements to resell (“reverse repos”) are recorded as amount due from other banks or loans and advances, as appropriate.
The difference between sale and repurchase price is treated as interest and accrued over the life of repos agreements using the effective yield method.
(i) Investment securities
The Group classifies its investment securities as held-to-maturity or available-for-sale assets. Management determines the appropriate classification
of its investments at the time of the purchase. Investment securities with fixed maturity where management has both the intent and the ability to hold
to maturity are classified as held-to-maturity. Investment securities intended to be held for an indefinite period of time, which may be sold in response
to needs for liquidity or changes in interest rates, exchange rates or equity prices are classified as available-for-sale.
Investment securities are initially recognised at cost (which includes transaction costs). Available-for-sale listed financial assets are subsequently
remeasured at fair value based on quoted bid prices. Fair values for unlisted equity securities are estimated using maintainable earnings or net assets
bases refined to reflect the specific circumstances of the issuer. Unrealised gains and losses arising from changes in the fair value of securities classified
as available-for-sale are recognised in equity. Equity securities for which fair values cannot be measured reliably are recognised at cost less impairment.
Held-to-maturity investments are carried at amortised cost using the effective yield method, less any provision for impairment.
A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. The amount of the impairment loss for assets
carried at amortised cost is calculated as the difference between the asset’s carrying amount and the present value of expected future cash flows
discounted at the financial instruments original effective interest rate. By comparison, the recoverable amount of an instrument measured at fair value
is the present value of expected future cash flows discounted at the current market rate of interest for a similar financial asset.
Interest earned while holding investment securities is reported as interest income. Dividends receivable are included separately in dividend income
when a dividend is declared.
All regular way purchases and sales of investment securities are recognised at trade date which is the date that the Group commits to purchase or sell
the asset. All other purchases and sales are recognised as derivative forward transactions until settlement.
continued
1.
(j) Trading securities
Trading securities are securities which were either acquired for generating a profit from short-term fluctuations in price or dealer’s margin, or are
securities included in a portfolio in which a pattern of short-term profit taking exists. Trading securities are initially recognised at cost, (which includes
transaction costs) and measured at subsequent reporting dates at fair value. All related realised and unrealised gains and losses are recognised in
the Income Statement for the year.
(k) Loans and provisions for loan impairment
Loans originated by the Bank by providing money directly to the borrower (at draw down) are categorised as loans by the Bank and are carried at
amortised cost, which is defined as the fair value of cash consideration given to originate these loans as is determinable by reference to market prices
at origination date. Third party expenses, such as legal fees, incurred in securing a loan are treated as part of the cost of the transaction.
All loans and advances are recognised when cash is advanced to borrowers. An allowance for loan impairment is established if there is the objective
evidence that the Bank will not be able to collect all amounts due according to the original contractual terms of the loans. The amount of the provision
is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, including amounts
recoverable from guarantees and collateral, discounted at the original effective interest rate of the loans.
The loan loss provision also covers losses where there is objective evidence that probable losses are present in components of the loan portfolio at the
balance sheet date. These have been estimated upon the historical patterns of losses in each component, the credit ratings allocated to the borrowers
and reflecting the current economic climate in which the borrowers operate. When a loan is uncollectible, it is written off against the related provision
for impairment; subsequent recoveries are credited to the provision for loan losses in the Income Statement.
Statutory and often regulatory loan loss reserve requirements that exceed these amounts are dealt with in the general banking reserve as an
appropriation of retained earnings.
If the amount of the impairment subsequently decreases due to an event occuring after the write-down, the release of the provision is credited as a
reduction of the provision for loan losses.
(l) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of net assets of the acquired subsidiary or associate
at the date of acquisition. Goodwill on acquisition of subsidiaries is included in Intangible Assets.
Negative goodwill represents the excess of the fair value of the Group’s share of net assets acquired over the cost of acquisition and is recognised in
the Income Statement.
Goodwill on acquisition of associates is included in investments in associates.Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses.
On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the gains and losses on disposal.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Goodwill arising on acquisition prior to March 31, 2004 is
accounted for at the carrying amount and tested for impairment in accordance with IAS 36.
1.
(m) Property, plant and equipment
Property, plant and equipment are carried at historical cost or at revalued amounts less accumulated depreciation.
Revaluation surpluses are credited to reserves. Any subsequent decrease is first charged to reserves.
Thereafter, decreases are charged to the Income Statement to the extent that the decrease exceeds any amount formerly held in reserves in respect of
the same asset.
Land and buildings are revalued on a regular basis by qualified independent valuers.
Depreciation is calculated to write down the cost or amount of the valuation of such assets to their residual values on a straight-line basis over their
estimated useful lives as follows:
Buildings
50 years
Computer and other equipment
5 - 10 years
Other fixed assets
5 - 15 years
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Gains or losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are recognised as income or
expense in the Income Statement.
Repairs and renewals are charged to the Income Statement when the expenditure is incurred.
(n) Computer software development costs
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated
with identifiable and unique software products controlled by the Bank and the Group and will probably generate economic benefits exceeding costs
beyond one year, are recognised as intangible assets. Direct costs include staff costs of the software development team and an appropriate portion
of relevant overheads.
Expenditure that enhances or extends the benefits of computer software programmes beyond their original specifications and lives is recognised as a
capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using
the straight-line method over their useful lives but not exceeding a period of five years.
(o) Finance leases-where the company is the lessee
Assets acquired under finance leases are accounted for at the present value of the minimum lease payments and depreciated over their estimated
useful lives. A corresponding liability is recorded as outstanding lease obligations.
Lease payments are apportioned between the liability and the finance charge so as to achieve a constant periodic rate of interest on the outstanding
lease obligations.
(p) Accounting for leases - where company is the lessor
Finance leases
When assets are sold under a finance lease, the present value of the lease payments is recognised as a receivable, the amount being equal to the net
investment in the leases after specific provision for bad and doubtful debts in respect of all identified impaired leases in the light of periodical reviews.
The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.
Lease income is recognised over the term of the lease using the net investment method,which reflects a constant periodic rate of return.
Operating leases
Assets leased out under operating leases are included in plant and equipment in the balance sheet. They are depreciated over their expected useful
lives on a basis consistent with similar assets. Rental income is recognised on a straight line basis over the lease term.
continued
1.
(q) Cash and cash equivalents
For the purposes of the Cash Flow Statements, cash and cash equivalents comprise cash and balances with Central Banks and amounts due to and
from other banks. A further breakdown of cash and cash equivalents is given in notes 3, 4 and 33 to the financial statements.
(r) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
(s) Employee benefits
The Group operates a number of defined benefit and defined contribution plans throughout the region.
The defined benefit plan is fully funded. The assets of the funded plan are held independently and administered by the MCB Superannuation Fund. The
pension costs are assessed in accordance with the advice of qualified actuaries using the projected unit credit method. The Group’s contributions are
charged to the Income Statement in the year to which they relate. The main assumptions made in the actuarial valuation of the pension fund are listed
in note 17 to the financial statements.
(t) Deferred tax
Deferred tax is provided for, using the liability method, on all taxable temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements.
The principal temporary differences arise from depreciation of property, plant and equipment, provisions for impairment losses on loans and advances
and provisions for employee benefits.
The rates enacted or subsequently enacted at the balance sheet date are used to determine deferred tax.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences
can be utilised.
(u) Borrowings
Borrowings are recognised initially at ‘cost’, being their issue proceeds (fair value of consideration received) net of transaction costs incurred.
Borrowings are subsequently stated at amortised cost and any difference between net proceeds and the redemption value is recognised in the Income
Statement over the period of the borrowings using the effective yield method.
(v) Acceptances
Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be settled
simultaneously with the reimbursement from the customers . Acceptances are disclosed as liabilities with corresponding contra-assets.
(w) Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing products or services within a particular economic
environment (geographical segment) or in providing products or services which is subject to risks and rewards that are different from those of other
segments (business segment). Segments with a majority of revenue earned from sales to external customers and whose gross income, operating profit
or assets are 10 per cent or more of all the segments are reported separately.
Inter segment services are charged at prime commercial rates.
The Group’s results and assets relate predominantly to financial services within a particular economic environment and is mainly organised on a
geographical basis.
Detailed analyses of segment reporting are shown in note 35 to the financial statements.
2.
Financial Risk Management
(a) Strategy in using financial instruments
The use of financial instruments is a major feature of the Bank’s operations. It has been the Bank’s policy to take deposits from customers at variable
rates mostly by investing these funds in a wide range of assets.
The Bank also seeks to raise its interest margins, net of provisions, through lending to commercial and retail borrowers with a range of credit standing.
The Bank’s exposures are not restricted to just on-balance sheet loans and advances but, also, to guarantees and other commitments such as letters
of credit, performance and other bonds.
(b) Credit risk
Credit risk arises when customers or counterparties are not able to fulfill their contractual obligations. Credit Risk Management at the Bank is under
the responsibility of the Credit Risk Business Unit (CRBU). The CRBU has the task of reviewing the Bank’s credit policies and guidelines to ensure that
best lending practices are upheld at all times. Risk assessments are carried out to assist in portfolio management decisions including exposure levels
and the constitution of required provisions.
Credit related commitments
The main purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit, which
represent irrevocable assurances that the Bank will make payments in the event that a customer cannot meet its obligations to third parties, carry the
same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Bank to pay a third party, on behalf of
its customers up to a stipulated amount under specific terms and conditions, are collateralised by the underlying shipments of goods to which they
relate and therefore carry less risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With
respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments.
However, the likely amount of loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers
maintaining specific credit standards. The Bank monitors the term to maturity of credit commitments because longer term commitments generally
have a greater degree of credit risk than shorter term commitments.
(c) Market risk
Market risk arises from activities undertaken in or impacted by financial markets generally. This includes the risk of gain or loss arising from the
movement in market price of a financial asset or liability as well as ancillary risks such as liquidity and funding risk. The market risk management
policies at the Bank are set by the Risk Committee of the Board and executive management of this class of risk is delegated to the Asset and Liability
Committee (ALCO). The Market Risk Business Unit (MRBU) plays a central role in monitoring and controlling market risk activities. It is the aim of MRBU
to ensure that market risk policies and guidelines are being effectively complied with and that limits are being observed.
(d) Currency risk
Currency Risk is defined as the risk that movements in foreign exchange rates adversely affect the value of the Bank’s foreign currency positions.
Exposure resulting from trading activities is monitored through the use of targets and limits. Limits are given to the individual trader and monitored
by the Treasury Manager. Such limits include daily, monthly, half-yearly and yearly stop losses. Exposure resulting from non-trading activities is
managed through the Asset Liability Management framework, with reference to guidelines and policies set and approved by ALCO and the Board
Risk Monitoring Committee.
continued
2.
Financial Risk Management (continued)
(d) Currency risk (continued)
Concentration of assets, liabilities and off-balance sheet items
Group
At June 30, 2007
Assets
Securities
Loans
Goodwill & other intangible assets
Deferred tax assets
Other assets
EURO
USD
RS '000
RS '000
23,910
16,969
27,783
20,019
3,282,221 4,584,477
622,500
2,759
1,797
2,199,454
3,447,400 8,918,551
39,480
115,829
9,023,007 14,280,142
GBP
MUR
RS '000
RS '000
7,379 3,988,807
100,000
1,536,090
- 10,573,779
711,509
2,314
15,309
- 3,081,654
341,108 51,212,009
229,201
- 2,449,780
15,096
16,355 1,592,624
1,903,246 73,969,768
OTHER
TOTAL
RS '000
RS '000
5,390 4,042,455
147,802
585,202 9,987,990
- 10,573,779
- 1,334,009
1,616
23,795
- 5,281,108
178,381 64,097,449
229,201
- 2,449,780
15,096
7,046 1,771,334
777,635 99,953,798
(3,158,304)
96,795,494
13,347,228
110,142,722
6,497,243 6,757,229
6,435 4,258,664
- 1,411,108
142,787
425,216
6,646,465 12,852,217
2,395,642 59,300,743
840,329
44
39,824 1,633,525
2,327
327,374
2,435,510 62,104,298
486,602 75,437,459
840,329
19,431 4,284,574
- 1,411,108
676,735 2,918,087
2,327
327,374
1,182,768 85,221,258
10,007,076
95,228,334
Subsidiaries
Total assets
Liabilities
Deposits
Borrowings from Bank of Mauritius
Borrowings from other banks in Mauritius and banks abroad
Subordinated debt
Other liabilities
Subsidiaries
Total liabilities
Net on-balance sheet position
Subsidiaries
2,376,542
1,427,925
(532,264) 11,865,470
(405,133) 14,732,540
(3,158,304)
3,340,152
14,914,388
Off balance sheet net notional position
Credit commitments
Subsidiaries
(106)
1,728
4,777,265 12,290,251
1,720
5,646
883,476 10,020,774
703
9,691
1,058,424 29,030,190
1,349,653
30,379,843
2.
Bank
At June 30, 2007
Assets
Securities
Investment in associates
Loans
Deferred tax assets
Other assets
EURO
USD
RS '000
RS '000
23,910
16,969
27,783
20,019
3,282,221 4,584,477
622,500
2,759
1,797
428,346
3,447,400 8,918,551
39,480
115,829
7,251,899 14,280,142
GBP
MUR
RS '000
RS '000
7,379 3,988,807
100,000
1,536,090
- 10,573,779
711,509
2,314
15,309
447,184
- 2,126,099
341,108 51,212,009
229,201
- 2,449,780
15,096
16,355 1,592,624
1,903,246 73,461,397
OTHER
TOTAL
RS '000
RS '000
5,390 4,042,455
147,802
585,202 9,987,990
- 10,573,779
- 1,334,009
1,616
23,795
875,530
- 2,126,099
178,381 64,097,449
229,201
- 2,449,780
15,096
7,046 1,771,334
777,635 97,674,319
(3,158,304)
94,516,015
6,497,243 6,757,229
6,435 4,258,664
- 1,411,108
142,787
425,216
6,646,465 12,852,217
2,395,642 59,300,743
840,329
44
39,824 1,633,525
2,327
327,374
2,435,510 62,104,298
486,602 75,437,459
840,329
19,431 4,284,574
- 1,411,108
676,735 2,918,087
2,327
327,374
1,182,768 85,221,258
1,427,925
(532,264) 11,357,099
(405,133) 12,453,061
(3,158,304)
9,294,757
(106)
1,728
4,777,265 12,290,251
1,720
5,646
883,476 10,020,774
703
9,691
1,058,424 29,030,190
Total assets
Liabilities
Deposits
Subordinated debt
Other liabilities
Total liabilities
605,434
Credit commitments
continued
2.
Group
EURO
RS '000
Total assets
Total liabilities
6,335,566 11,069,003 2,190,767 71,680,472
5,065,137 11,342,829 2,132,230 59,547,336
1,270,429
(273,826)
58,537 12,133,136
At June 30, 2006
USD
RS '000
GBP
RS '000
MUR
RS '000
Subsidiaries
Credit commitments
Subsidiaries
(1,976)
112
2,376,014 6,856,955
817
597,546
OTHER
RS '000
TOTAL
RS '000
616,200 91,892,008
475,135 78,562,667
141,065 13,329,341
(3,270,487)
10,058,854
2,391,672
12,450,526
7,192
9,482,501
1,661
7,806
1,060,077 20,373,093
957,696
21,330,789
At June 30, 2006
Total assets
Total liabilities
5,347,510 11,069,003 2,190,767 72,050,579
5,065,137 11,342,829 2,132,230 59,547,336
282,373
(273,826)
58,537 12,503,243
616,200 91,274,059
475,135 78,562,667
141,065 12,711,392
(3,270,487)
9,440,905
Credit commitments
(1,976)
2,376,014
Bank
112
6,856,955
817
597,546
7,192
9,482,501
1,661
7,806
1,060,077 20,373,093
2.
Group
EURO
RS '000
USD
RS '000
Total assets
Total liabilities
6,325,742
4,192,788
2,132,954
6,709,645
347,423 66,094,148
6,283,737 1,683,915 55,089,327
425,908 (1,336,492) 11,004,821
392,266 79,869,224
489,090 67,738,857
(96,824) 12,130,367
(3,061,816)
9,068,551
1,274,064
10,342,615
8,224
2,757,175
1,236
6,584,655
(39)
18,504
560,126 8,001,771
(696)
27,229
835,946 18,739,673
1,270,562
20,010,235
At June 30, 2005
Total assets
Total liabilities
5,632,045
4,192,788
1,439,257
6,709,645
347,423 65,681,173
6,283,737 1,683,915 55,089,327
425,908 (1,336,492) 10,591,846
838,572 79,208,858
489,090 67,738,857
349,482 11,470,001
(3,061,816)
8,408,185
Credit commitments
8,224
2,757,175
1,236
6,584,655
(696)
27,229
835,946 18,739,673
At June 30, 2005
GBP
RS '000
MUR
RS '000
Subsidiaries
Credit commitments
Subsidiaries
OTHER
RS '000
TOTAL
RS '000
Bank
(39)
18,504
560,126 8,001,771
(e) Interest rate risk
Interest rate risk refers to the potential variability in the Bank’s financial condition owing to changes in the level of interest rates. It is the Bank’s policy
to apply variable interest rates to lending and deposit taking. Fixed interest rates are applied to deposits in foreign currencies; however maturities in
this regard are only short-term.
continued
2.
(e) Interest rate risk (continued)
Interest sensitivity of assets and liabilities - repricing analysis
Group
Up to
1 month
RS '000
1-3
months
RS '000
3-6
months
RS '000
6-12
months
RS '000
1-3
years
RS '000
Over 3
years
RS '000
Non-interest
bearing
Total
RS '000
RS '000
- 4,042,455 4,042,455
At June 30, 2007
Assets
Balances with banks and
interbank loans
-
-
-
-
-
100,000
6,095,745
3,559,447
-
-
-
140,362
Securities
1,641,214
2,390,207
1,124,603
3,042,437
1,183,383
1,191,935
-
-
-
622,500
-
-
47,802
192,436
147,802
9,987,990
- 10,573,779
Other investments
- available-for-sale
Loans
711,509
1,334,009
-
-
-
-
-
-
23,795
23,795
-
428,346
-
-
-
-
4,852,762
5,281,108
52,260,734
6,633,412
552,111
897,937
698,025
2,698,224
-
-
-
-
-
-
229,201
229,201
357,006 64,097,449
-
-
-
-
-
-
2,449,780
2,449,780
Deferred tax assets
-
-
-
-
-
-
15,096
15,096
Other assets
-
-
-
-
-
-
1,771,334
1,771,334
60,097,693 13,011,412
1,676,714
4,562,874
1,881,408
4,030,521 14,693,176 99,953,798
(3,158,304)
96,795,494
Subsidiaries
13,347,228
Total assets
110,142,722
Liabilities
Deposits
Borrowings from other banks
in Mauritius and banks abroad
Subordinated debt
Other liabilities
66,913,394
1,610,082
279,294
211,373
145,463
15,597
6,262,256 75,437,459
-
-
-
-
590,741
249,588
-
840,329
81,567
-
4,201,875
-
1,411,108
-
-
-
1,132
-
4,284,574
1,411,108
-
-
-
-
-
-
2,918,087
2,918,087
2,327
-
-
-
-
-
-
2,327
-
-
-
-
-
-
327,374
327,374
66,997,288
5,811,957
1,690,402
211,373
736,204
265,185
9,508,849 85,221,258
Subsidiaries
10,007,076
Total liabilities
95,228,334
On balance sheet interest sensitivity gap (6,899,595) 7,199,455
(13,688) 4,351,501
1,145,204
3,765,336
5,184,327 14,732,540
(3,158,304)
3,340,152
Subsidiaries
14,914,388
2.
Interest sensitivity of assets and liabilities- repricing analysis (continued)
Bank
Up to
1 month
RS '000
1-3
months
RS '000
3-6
months
RS '000
6-12
months
RS '000
1-3
years
RS '000
Over 3
years
RS '000
Non-interest
bearing
Total
RS '000
RS '000
- 4,042,455 4,042,455
At June 30, 2007
Assets
Balances with banks and
interbank loans
-
-
-
-
-
100,000
6,095,745
3,559,447
-
-
-
140,362
Securities
1,641,214
2,390,207
1,124,603
3,042,437
1,183,383
1,191,935
-
-
-
622,500
-
-
47,802
192,436
147,802
9,987,990
- 10,573,779
Other investments
Loans
711,509
1,334,009
-
-
-
-
-
-
23,795
23,795
-
428,346
-
-
-
-
447,184
875,530
2,126,099
2,126,099
-
-
-
-
-
-
52,260,734
6,633,412
552,111
897,937
698,025
2,698,224
357,006 64,097,449
-
-
-
-
-
-
229,201
229,201
-
-
-
-
-
-
2,449,780
2,449,780
Deferred tax assets
-
-
-
-
-
-
15,096
15,096
-
-
-
-
-
-
1,771,334
1,771,334
60,097,693 13,011,412
1,676,714
4,562,874
1,881,408
Other assets
4,030,521 12,413,697 97,674,319
(3,158,304)
Total assets
94,516,015
Liabilities
Deposits
Subordinated debt
Other liabilities
Total liabilities
66,913,394
1,610,082
279,294
211,373
145,463
15,597
-
-
-
-
590,741
249,588
6,262,256 75,437,459
-
840,329
81,567
-
4,201,875
-
1,411,108
-
-
-
1,132
-
4,284,574
1,411,108
-
-
-
-
-
-
2,918,087
2,918,087
2,327
-
-
-
-
-
-
2,327
327,374
327,374
-
-
-
-
-
-
66,997,288
5,811,957
1,690,402
211,373
736,204
265,185
9,508,849 85,221,258
(13,688) 4,351,501
1,145,204
3,765,336
2,904,848 12,453,061
(3,158,304)
9,294,757
continued
2.
Group
Total assets
Up to
1-3
1 month
months
RS '000
RS '000
53,556,173 14,652,616
3-6
months
RS '000
3,758,194
6-12
months
RS '000
4,275,548
1-3
years
RS '000
4,302,505
Total liabilities
59,778,465 12,950,245
1,303,667
452,045
652,779
505,582
2,919,884 78,562,667
2,454,527
3,823,503
3,649,726
1,797,216
6,124,290 13,329,341
At June 30, 2006
Over 3 Non-interest
years
items
Total
RS '000
RS '000
RS '000
2,302,798 9,044,174 91,892,008
(3,270,487)
10,058,854
2,391,672
Subsidiaries
12,450,526
Bank
At June 30, 2006
Total assets
53,556,173 14,652,616
3,758,194
4,275,548
4,302,505
2,302,798
8,426,225 91,274,059
Total liabilities
59,778,465 12,950,245
1,303,667
452,045
652,779
505,582
2,919,884 78,562,667
2,454,527
3,823,503
3,649,726
1,797,216
5,506,341 12,711,392
(3,270,487)
9,440,905
2.
Group
Total assets
Up to
1 month
RS '000
49,191,475
1-3
months
RS '000
4,251,145
3-6
months
RS '000
4,010,212
6-12
months
RS '000
4,061,314
1-3
years
RS '000
5,915,568
Over 3 Non-interest
years
items
Total
RS '000
RS '000
RS '000
3,841,689 8,597,821 79,869,224
Total liabilities
55,661,313
5,862,450
361,350
262,438
1,221,902
2,085,577
2,283,827 67,738,857
On balance sheet interest sensitivity gap (6,469,838) (1,611,305)
3,648,862
3,798,876
4,693,666
1,756,112
6,313,994 12,130,367
At June 30, 2005
(3,061,816)
9,068,551
1,274,064
Subsidiaries
10,342,615
Bank
At June 30, 2005
Total assets
49,191,476
4,251,145
4,010,212
4,061,314
5,915,568
3,841,689
7,937,454 79,208,858
Total liabilities
55,661,313
5,862,450
361,350
262,438
1,221,902
2,085,577
2,283,827 67,738,857
On balance sheet interest sensitivity gap (6,469,837) (1,611,305)
3,648,862
3,798,876
4,693,666
1,756,112
5,653,627 11,470,001
(3,061,816)
8,408,185
continued
Average interest rate by major currencies for monetary financial instrument
Bank
EURO
USD
GBP & OTHERS
MUR
%
%
%
%
n/a
n/a
n/a
n/a
Balances with other banks in Mauritius and banks abroad
3.74
5.65
5.34
11.02
Securities
n/a
n/a
n/a
8.31
At June 30, 2007
Assets
Available-for-sale investments
n/a
4.90
n/a
8.38
Loans
6.02
8.38
5.27
11.39
Liabilities
Deposits
2.65
4.57
4.59
6.99
n/a
n/a
n/a
5.47
3.11
5.88
4.72
5.41
EURO
USD
GBP & OTHERS
MUR
%
%
%
%
Bank
At June 30, 2006
Assets
n/a
n/a
n/a
n/a
Balances with other banks in Mauritius and banks abroad
2.75
5.54
4.38
6.86
Securities
n/a
n/a
n/a
6.86
Available-for-sale investments
n/a
n/a
n/a
5.05
Loans
4.75
7.34
4.58
9.55
Deposits
1.59
3.55
3.99
5.52
n/a
n/a
n/a
n/a
1.95
4.85
3.53
5.14
Liabilities
2.
(f) Liquidity risk
Liquidity risk can be defined as the risk of a funding crisis, notably a lack of funds to meet immediate or short term obligations in a costeffective way.
There are two aspects of liquidity risk management a) cash flow management to ensure a balanced inflow and outflow of funds on any one specific
day b) the maintenance of a stock of liquid assets to ensure that the Bank has a constantly available store of value, which can be utilised in the event
of an unexpected outflow of funds. The MCB has a documented liquidity policy compliant with the Bank of Mauritius Guideline on Liquidity. The Bank
Treasury manages liquidity in accordance with this policy, on a day-to-day basis.
Maturities of assets and liabilities
Up to
Group
At June 30, 2007
1 month
RS '000
Assets
Cash and balances with Central Banks 2,948,856
Balances with banks
and interbank loans
147,802
6,416,670
Securities
1,641,214
Other investments
Loans
21,098,918
Deferred tax assets
Other assets
32,253,460
1-3
months
RS '000
3-6
months
RS '000
6-12
months
RS '000
1-3
years
RS '000
Non-maturity
items
Total
RS '000
RS '000
- 1,093,599 4,042,455
-
-
-
-
2,845,155
2,390,207
1,124,603
3,042,437
1,183,383
3,607,998
8,843,360
591,112
1,715,715
622,500
2,299,621
5,964,558
711,509 1,334,009
23,795
23,795
- 5,281,108 5,281,108
6,453,273 29,999,851
46,676 64,097,449
229,201
229,201
- 2,449,780 2,449,780
15,096
15,096
- 1,771,334 1,771,334
7,636,656 31,906,078 11,633,971 99,953,798
(3,158,304)
96,795,494
13,347,228
110,142,722
59,430,424
-
1,799,655
-
1,507,490
-
2,589,613
-
4,815,683
590,741
5,294,594
249,588
- 75,437,459
840,329
25,369
220
59,456,013
1,089,375
440
2,889,470
429
1,507,919
684
2,590,297
989,948
554
6,396,926
2,178,750
1,411,108
9,134,040
1,132 4,284,574
- 1,411,108
2,918,087 2,918,087
2,327
327,374
327,374
3,246,593 85,221,258
10,007,076
95,228,334
(27,202,553) 5,953,890
207,796
3,374,261
1,239,730 22,772,038
8,387,378 14,732,540
(3,158,304)
3,340,152
14,914,388
Subsidiaries
Total assets
Liabilities
Deposits
Subordinated debt
Other liabilities
Over 3
years
RS '000
714,292
1,191,935
Subsidiaries
Total liabilities
Net liquidity gap
Subsidiaries
147,802
11,873 9,987,990
- 10,573,779
continued
2.
(f) Liquidity risk (continued)
Maturities of assets and liabilities (continued)
Up to
Bank
At June 30, 2007
1 month
RS '000
Assets
Cash and balances with Central Banks 2,948,856
Balances with banks
and interbank loans
147,802
6,416,670
Securities
1,641,214
Other investments
Loans
21,098,918
Deferred tax assets
Other assets
32,253,460
Total assets
Liabilities
Deposits
Subordinated debt
Other liabilities
Total liabilities
Net liquidity gap
1 1 6 1-3
months
RS '000
3-6
months
RS '000
6-12
months
RS '000
1-3
years
RS '000
Over 3
years
RS '000
Non-maturity
items
Total
RS '000
RS '000
- 1,093,599 4,042,455
-
-
-
-
2,845,155
2,390,207
1,124,603
3,042,437
1,183,383
714,292
1,191,935
147,802
11,873 9,987,990
- 10,573,779
3,607,998
8,843,360
591,112
1,715,715
622,500
2,299,621
5,964,558
6,453,273 29,999,851
7,636,656 31,906,078
711,509 1,334,009
23,795
23,795
875,530
875,530
2,126,099 2,126,099
46,676 64,097,449
229,201
229,201
2,449,780 2,449,780
15,096
15,096
1,771,334 1,771,334
9,354,492 97,674,319
(3,158,304)
94,516,015
59,430,424
-
1,799,655
-
1,507,490
-
2,589,613
-
4,815,683
590,741
5,294,594
249,588
- 75,437,459
840,329
25,369
220
59,456,013
1,089,375
440
2,889,470
429
1,507,919
684
2,590,297
989,948
554
6,396,926
2,178,750
1,411,108
9,134,040
1,132 4,284,574
- 1,411,108
2,918,087 2,918,087
2,327
327,374
327,374
3,246,593 85,221,258
(27,202,553) 5,953,890
207,796
3,374,261
1,239,730 22,772,038
6,107,899 12,453,061
(3,158,304)
9,294,757
ANNUAL REPORT 2007
2.
Up to
Group
At June 30, 2006
1 month
RS '000
Total assets
29,399,493
1-3
months
RS '000
5,176,327
3-6
months
RS '000
2,908,134
6-12
months
RS '000
4,734,232
1-3
Over 3 Non-maturity
years
years
items
Total
RS '000
RS '000
RS '000
RS '000
9,504,811 31,173,727 8,995,284 91,892,008
Total liabilities
(54,698,049) (1,710,395) (1,283,581) (2,490,973) (8,589,996) (6,869,789) (2,919,884) (78,562,667)
Net liquidity gap
(25,298,556) 3,465,932
1,624,553
2,243,259
914,815 24,303,938
6,075,400 13,329,341
(3,270,487)
10,058,854
2,391,672
Subsidiaries
12,450,526
Bank
At June 30, 2006
Total assets
29,399,493
5,176,327
2,908,134
4,734,232
9,504,811 31,173,727
8,377,335 91,274,059
Total liabilities
(54,698,049) (1,710,395) (1,283,581) (2,490,973) (8,589,996) (6,869,789) (2,919,884) (78,562,667)
Net liquidity gap
(25,298,556)
3,465,932 1,624,553
2,243,259
914,815 24,303,938
5,457,451 12,711,392
(3,270,487)
9,440,905
continued
2.
Group
Total assets
Up to
1 month
RS '000
25,737,395
Total liabilities
(49,782,849) (1,617,207) (1,488,344) (2,330,351) (6,079,700) (4,430,397) (2,010,009) (67,738,857)
Net liquidity gap
(24,045,454) 2,645,871
At June 30, 2005
1-3
months
RS '000
4,263,078
3-6
months
RS '000
2,478,681
990,337
6-12
months
RS '000
4,572,359
2,242,008
1-3
Over 3 Non-maturity
years
years
items
Total
RS '000
RS '000
RS '000
RS '000
8,639,237 25,914,471 8,264,003 79,869,224
2,559,537 21,484,074
6,253,994 12,130,367
(3,061,816)
9,068,551
1,274,064
Subsidiaries
10,342,615
Bank
At June 30, 2005
Total assets
25,737,395
Total liabilities
(49,782,849) (1,617,207) (1,488,344) (2,330,351) (6,079,700) (4,430,397) (2,010,009) (67,738,857)
Net liquidity gap
(24,045,454)
4,263,078
2,645,871
2,478,681
990,337
4,572,359
2,242,008
8,639,237 25,914,471
2,559,537 21,484,074
7,603,637 79,208,858
5,593,628 11,470,001
(3,061,816)
8,408,185
(g) Fair values of financial assets and liabilities
The fair values of those financial assets and liabilities not presented on the Group’s and the Bank’s balance sheets at their fair values are not materially
different from their carrying amounts.
3.
Cash and Balances with Central Banks
Foreign currency notes and coin
4.
2007
Rs’000
GROUP
2006
Rs’000
2005
Rs’000
2007
Rs’000
BANK
2006
Rs’000
2005
Rs’000
6,181,829
5,472,555
4,825,889
3,988,807
3,979,138
3,440,102
53,648
36,553
41,785
53,648
36,553
41,785
6,235,477
5,509,108
4,867,674
4,042,455
4,015,691
3,481,887
345,645
214,156
-
147,802
204,565
-
Due from other Banks
9,863,254
6,480,484
1,073,063
9,987,990
6,622,201
1,044,609
10,208,899
6,694,640
1,073,063 10,135,792
6,826,766
1,044,609
continued
5.
Securities
Remaining term to maturity
Within 3 months
Rs’000
2007
3 - 6 months 6 - 12 months 1 - 5 years Over 5 years
Rs’000
Rs’000
Rs’000
Rs’000
Total
Rs’000
2006
Total
Rs’000
2005
Total
Rs’000
GROUP
Government stocks
Treasury bills
199,688
398,694
2,360,674
4,132,413
412,525
7,503,994
7,573,975
4,712,346
4,264,003
834,189
649,996
-
-
5,748,188
10,790,291
11,709,744
4,463,691
1,232,883
3,010,670
4,132,413
412,525 13,252,182
18,364,266
16,422,090
BANK
Government stocks
Treasury bills
1 2 0 199,688
369,198
2,360,674
2,035,390
339,928
5,304,878
5,014,336
2,350,166
3,831,733
824,705
612,463
-
-
5,268,901
9,860,502
11,207,783
4,031,421
1,193,903
2,973,137
2,035,390
339,928 10,573,779
14,874,838
13,557,949
ANNUAL REPORT 2007
6.
Loans
(a) Loans comprise the following:
GROUP
BANK
2007
2006
2005
2007
2006
2005
Rs’000
Rs’000
Rs’000
Rs’000
Rs’000
Rs’000
14,761,071 11,385,708 10,761,022 12,969,386 11,085,228 9,646,552
47,550,037 44,595,234 43,052,205 44,475,277 41,316,947 40,741,152
126,636
6,366
16,619
6,652,786 5,736,880 4,434,864 6,652,786 5,736,880 4,556,394
69,090,530 61,724,188 58,264,710 64,097,449 58,139,055 54,944,098
Business
Governments
Less:
Allowances for credit impairment
(3,245,882) (3,358,912) (3,142,049) (3,158,304) (3,270,487) (3,061,816)
65,844,648 58,365,276 55,122,661 60,939,145 54,868,568 51,882,282
Finance lease receivables included above amount to Rs 1,850 million as at 30th June 2007 (2006 & 2005: nil).
Within 3 months
Over 3 months and up to 6 months
Over 6 months and up to 1 year
Over 1 year and up to 5 years
Over 5 years
26,266,750
182,627
2,972,256
17,324,752
22,344,145
69,090,530
23,855,412
660,078
1,522,068
14,742,212
20,944,418
61,724,188
26,376,522
543,036
1,220,015
11,874,638
18,250,499
58,264,710
24,753,592
591,112
2,299,621
14,983,433
21,469,691
64,097,449
Specific
Rs'000
2007
Portfolio
Rs'000
Total
Rs'000
(c) Movements in allowances for credit impairment
22,585,034
627,017
797,568
13,646,577
20,482,859
58,139,055
24,526,417
492,304
1,178,206
11,509,158
17,238,013
54,944,098
2006
2005
Rs'000
Rs'000
GROUP
Provisions at 1st July 2006
Effect of adopting BOM guideline on credit impairment
As restated
Effect of consolidating Fincorp Group as a subsidiary
Translation differences in respect of subsidiaries
Provisions made during the year
Provisions released during the year
Amounts written off
Provisions at 30th June 2007
Interest suspense
Provisions and interest suspense at 30th June 2007
2,038,932
2,038,932
4,448
7,812
391,827
(64,083)
(386,548)
1,992,388
800,866
2,793,254
398,200
398,200
13,828
40,600
452,628
452,628
2,437,132
2,437,132
18,276
7,812
432,427
(64,083)
(386,548)
2,445,016
800,866
3,245,882
2,311,098
2,311,098
88
407,503
(85,806)
(195,751)
2,437,132
921,780
3,358,912
1,956,772
227,900
2,184,672
(3,796)
553,901
(174,673)
(249,006)
2,311,098
830,951
3,142,049
1,970,877
1,970,877
356,392
(33,978)
(356,781)
1,936,510
782,994
2,719,504
398,200
398,200
40,600
438,800
438,800
2,369,077
2,369,077
396,992
(33,978)
(356,781)
2,375,310
782,994
3,158,304
2,250,130
2,250,130
382,922
(68,224)
(195,751)
2,369,077
901,410
3,270,487
1,904,718
227,900
2,132,618
530,141
(163,623)
(249,006)
2,250,130
811,686
3,061,816
BANK
As restated
Amounts written off
Interest suspense
continued
6.
Loans (continued)
(d) Allowances for credit impairment by industry sectors
2007
Gross amount Non performing Specific
of loans
loans
provision
Rs’000
Rs’000
Rs’000
Portfolio
provision
Rs’000
2006
2005
Total
provision
Rs’000
Rs’000
Rs’000
GROUP
Manufacturing
of which EPZ
Tourism
Transport
Construction
Traders
Information and communication technology
Financial and business services
Infrastructure
Personal
of which credit cards
Professional
Media, entertainment and recreational activities
Special certificate holders
Others
5,566,500
9,234,396
3,705,815
10,765,167
1,525,520
9,854,691
12,242,799
701,730
2,985,234
2,396,405
6,895,035
424,520
308,657
247,054
666,809
5,700,533
69,090,530
147,811
789,928
370,281
132,929
28,536
781,889
1,176,326
15,638
92,080
65
1,214,190
90,900
157,234
54,172
89,973
151,860
4,832,631
61,147
456,327
200,648
102,620
12,544
430,450
802,838
9,587
40,632
35
645,124
75,810
77,997
51,766
15,104
87,083
2,793,254
45,572
71,753
42,500
16,051
6,790
63,249
97,051
8,794
6,587
3,505
98,033
16,700
2,836
6,008
1,451
24,948
452,628
106,719
528,080
243,148
118,671
19,334
493,699
899,889
18,381
47,219
3,540
743,157
92,510
80,833
57,774
16,555
112,031
3,245,882
83,168
685,239
388,051
80,299
17,137
486,768
855,952
17,690
74,035
2,404
696,997
86,900
59,507
144,484
4,881
150,351
3,358,912
76,337
542,166
356,121
45,667
13,830
567,117
889,791
14,960
42,405
900
548,009
88,362
63,816
145,287
29,805
161,959
3,142,049
4,651,286
8,215,950
3,611,280
9,734,493
1,246,237
9,314,223
11,015,428
642,740
4,070,176
2,317,647
6,720,941
424,520
295,560
161,797
583,044
5,127,927
64,097,449
120,101
757,944
367,681
128,802
25,983
779,881
1,155,837
15,356
88,718
65
1,213,070
90,900
157,234
53,357
89,973
138,876
4,725,197
39,031
441,505
198,042
100,330
12,156
428,942
780,759
9,462
37,821
35
644,737
75,810
77,997
51,520
15,104
80,105
2,719,504
44,100
67,600
42,500
14,000
6,100
63,000
95,800
8,400
5,700
3,100
97,300
16,700
2,700
5,400
1,100
24,500
438,800
83,131
509,105
240,542
114,330
18,256
491,942
876,559
17,862
43,521
3,135
742,037
92,510
80,697
56,920
16,204
104,605
3,158,304
80,818
654,449
386,987
79,640
13,159
486,131
821,928
17,690
72,862
2,404
693,984
86,900
59,057
144,484
4,881
139,000
3,270,487
75,730
531,829
350,365
45,069
10,224
566,223
842,751
14,960
41,009
900
545,253
88,362
63,382
145,287
29,805
149,394
3,061,816
BANK
Manufacturing
of which EPZ
Tourism
Transport
Construction
Traders
Infrastructure
Personal
Professional
Others
6.
Loans (continued)
(e) Credit concentration of risk by industry sectors
Total credit facilities including guarantees, acceptances and other similar commitments extended by the Bank to any one customer or group of closelyrelated customers for amounts aggregating more than 15% of its capital base, classified by industry sectors.
2007
Rs’000
2,612,091
GROUP
2006
Rs’000
2,553,588
2005
Rs’000
3,475,720
Manufacturing
5,533,978
4,698,244
4,118,212
of which EPZ
Tourism
Transport
2,700,609
2,687,849
2,804,533
2,679,985
2,544,481
3,914,682
832
19,709
-
Construction/Property
1,359,659
568,516
539,882
Traders
6,647,451
2,332,708
537,834
1,617,382
1,619,602
2,225,898
Others
2,853,427
1,335,576
2,035,111
23,304,805 15,672,424 16,847,339
(f) Loans outside Mauritius
(i) Banks
2007
Rs’000
548,346
GROUP
2006
Rs’000
425,537
2005
Rs’000
221,358
2007
Rs’000
548,346
BANK
2006
Rs’000
425,537
2005
Rs’000
222,087
(ii) Government
1,086,262
754,722
874,800
1,086,262
754,722
874,800
(iii) Other entities
5,018,178
4,556,621
3,338,706
5,018,178
4,556,621
3,459,507
6,652,786
5,736,880
4,434,864
6,652,786
5,736,880
4,556,394
continued
7.
Other Investments
(a) Available-for-sale
2007
Rs’000
GROUP
2006
Rs’000
2005
Rs’000
BANK
2006
Rs’000
2007
Rs’000
2005
Rs’000
Quoted
Official list : shares
876,033
394,665
388,536
-
-
39,636
Development and Enterprise Market/Over The Counter : shares
143,036
98,548
66,860
-
-
51,352
2,515,932
1,331,718
692,894
1,334,009
622,177
654,219
3,535,001
1,824,931
1,148,290
1,334,009
622,177
745,207
Unquoted
Shares
(b) Derivative financial instruments
The Group utilises the following derivative instruments to manage its exposure to foreign currency risk:
Currency forwards represent commitments to purchase foreign and domestic currency, including undelivered spot transactions.
Currency swaps are commitments to exchange one set of cash flows for another. Swaps result in an economic exchange of currencies. Except for
certain currency swaps, no exchange of principal takes place. The Group’s credit risk represents the potential cost to replace the swap contracts if
counterparties fail to perform their obligation. This risk is monitored on an ongoing basis with reference to the current fair value, a proportion of the
notional amount of the contracts and the liquidity of the market. To control the level of credit risk taken, the Group assesses counterparties using the
same techniques as for its lending activities.
The fair values of derivatives instruments held are set out below:
GROUP & BANK
Derivatives held-for-trading
Contractual/
Nominal
Fair value
Amount
assets
Rs’000
Rs’000
Fair value
liabilities
Rs’000
Year ended 30th June 2007
Foreign Exchange Derivatives
Currency forwards
4,424,633
Currency swaps
11,626
14,001
2,604,885
12,169
102
7,029,518
23,795
14,103
2,503,693
15,930
18,048
Currency forwards
Currency swaps
769,862
195
5,883
3,273,555
16,125
23,931
Currency forwards
3,063,632
13,716
32,481
Currency swaps
2,513,721
14,386
22,848
5,577,353
28,102
55,329
8.
Investments in Associates
The Group’s interest in its principal associates are as follows:
BANK
Country
of
incorporation
Assets
Rs’000
Liabilities
Rs’000
Minority
Interest
Rs’000
Revenues
Rs’000
Profit
Rs’000
Holding
%
Cost
Rs'000
Banque Française Commerciale O.I.
France
50,723,336 47,343,365
-
3,616,084
473,412
49.99
447,184
809,698
306,321
237,930
46.43
-
Promotion and Development Ltd
Mauritius
7,825,557
562,354
Caudan Development Ltd
Mauritius
2,634,635
569,937
-
125,733
35,037
5.34
-
Fincorp Investment Ltd
Mauritius
n/a
n/a
n/a
214,354
132,136
49.51
447,184
428,346
Subordinated loan to associate
875,530
France
Mauritius
41,773,881 39,064,801
5,455,767
2,536,097
-
2,965,316
389,983
49.99
447,184
-
270,759
176,645
49.51
24,735
471,919
400,232
872,151
France
Mauritius
28,631,630 26,494,066
3,814,647
2,130,398
-
2,008,600
243,888
49.99
447,184
-
269,886
222,066
49.51
24,735
471,919
358,883
830,802
Except for Banque Française Commerciale Ocean Indien which is unquoted, the other associates are quoted.
2007
Rs’000
Market value of quoted investment
Cost of unquoted investment
Group share of net assets
Goodwill
-
BANK
2006
Rs’000
654,399
2005
Rs’000
490,799
447,184
447,184
447,184
447,184
1,101,583
937,983
2007
Rs’000
4,795,877
GROUP
2006
Rs’000
2,799,715
2005
Rs’000
1,902,359
56,885
56,885
56,885
428,346
400,232
358,883
5,281,108
3,256,832
2,318,127
continued
9.
Investments in Subsidiaries
MCB Equity Fund Ltd
MCB Moçambique SA
MCB Seychelles Ltd
MCB Factors Ltd
MCB Properties Ltd
MCB Registry and Securities Ltd
Multipliant Management Co. Ltd
MCB Madagascar SA
MCB Investment Management Co. Ltd
MCB Capital Partners Ltd
Blue Penny Museum
MCB Stockbrokers Ltd
Country
of
incorporation
Mauritius
Mozambique
Seychelles
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Madagascar
Mauritius
Mauritius
Mauritius
Mauritius
2007
%
100.00
91.28
100.00
100.00
57.56
100.00
100.00
100.00
75.00
62.22
100.00
97.88
100.00
Effective holding
2006
%
100.00
90.58
100.00
100.00
49.51
100.00
100.00
49.51
75.00
60.00
100.00
97.48
100.00
2005
%
100.00
90.58
100.00
49.51
100.00
49.51
75.00
60.00
100.00
100.00
Subordinated loan to subsidiary
2007
Rs’000
1,534,903
227,653
211,522
50,000
24,735
14,625
12,000
11,425
7,131
3,000
1,000
950
500
2,099,444
26,655
2,126,099
BANK
2006
Rs’000
1,216,481
227,653
211,522
50,000
14,625
12,000
7,131
3,000
1,000
950
500
1,744,862
21,870
1,766,732
2005
Rs’000
364,153
227,653
211,522
12,000
7,131
3,000
1,000
500
826,959
826,959
2007
Rs’000
BANK
2006
Rs’000
2005
Rs’000
Except for Fincorp Investment Ltd, which is quoted, the other above companies are unquoted.
10. Goodwill and other Intangible Assets
(a) Goodwill
At 1st July 2006
Impairment/amortisation during the year
At 30th June 2007
2007
Rs’000
33,501
33,501
GROUP
2006
Rs’000
33,501
33,501
2005
Rs’000
35,301
(1,800)
33,501
2007
Rs’000
GROUP
2006
Rs’000
2005
Rs’000
(b) Other intangible assets
Computer Software
Cost
At 1st July 2006
Transfer from property, plant and equipment
Additions
Disposals
Exchange adjustment
At 30th June 2007
Amortisation
At 1st July 2006
Transfer from property, plant and equipment
Disposals adjustment
Charge for the year
Exchange adjustment
At 30th June 2007
Net book value
TOTAL
1,075,499
950,257
4,421
10,836
33,471
114,337
(9,721)
(84)
1,199
153
20,118
1,124,987 1,075,499
754,889
1,753
(24)
110,935
309
2,324
870,186
254,801
288,302
657,558
(65)
97,178
218
754,889
320,610
354,111
715,357 1,058,616
936,722
159
10,836
235,328
30,752
111,142
(143)
(9,710)
(84)
(444)
950,257 1,079,658 1,058,616
705,003
159
231,703
(143)
936,722
563,755
(128)
94,243
(312)
657,558
292,699
326,200
554,655
(128)
93,858
648,385
288,337
288,337
744,478
(24)
106,003
850,457
229,201
229,201
648,385
(65)
96,158
744,478
314,138
314,138
11. Property, Plant and Equipment
Assets under
Land
finance
and
leases
buildings
Rs'000
Rs'000
Computer
and other
equipment
Rs'000
Other
fixed
assets
Rs'000
Total
Rs'000
GROUP
Cost & valuation
At 1st July 2006
Additions
Disposals
Exchange adjustment
Acquisition of subsidiary
Transfer to other intangible assets
Transfer
At 30th June 2007
Accumulated depreciation
At 1st July 2006
Charge for the year
Disposal adjustment
Exchange adjustment
Transfer
At 30th June 2007
Net book values
At 30th June 2007
18,613 2,605,861 1,549,173
170,305
266,764
(67)
(79,379)
(54,926)
(25,672)
(20,617)
5,459
111
(2,848)
(7,089)
(30,470)
36,412
11,457 2,640,645 1,779,528
478,055 4,651,702
164,931
602,000
(42,670) (177,042)
(2,877)
(49,166)
315,721
321,180
111
(1,573)
(4,421)
1,147
912,734 5,344,364
15,029
2,306
(65)
(7,089)
10,181
251,069 1,615,117
80,269
303,730
(33,450)
(99,166)
(1,648)
(10,560)
89,267
93,874
53
(763)
(1,753)
1,147
385,891 1,901,295
1,276
289,404 1,059,615
56,076
165,079
(11,823)
(53,828)
(585)
(8,327)
4,607
53
(990)
5,942
333,072 1,172,151
2,307,573
607,377
526,843
3,443,069
BANK
Cost & valuation
At 1st July 2006
Additions
Disposals
Transfer
At 30th June 2007
At 1st July 2006
Charge for the year
Disposal adjustment
Transfer
At 30th June 2007
Net book values
At 30th June 2007
17,991 1,834,904 1,415,496
156,858
224,061
(67)
(410)
(54,429)
(7,089)
5,942
10,835 1,991,352 1,591,070
400,910 3,669,301
96,400
477,319
(28,565)
(83,471)
1,147
469,892 4,063,149
14,726
2,167
(65)
(7,089)
9,739
223,785 1,475,524
45,633
217,780
(26,394)
(79,935)
1,147
244,171 1,613,369
1,096
222,789 1,014,224
27,007
142,973
(28)
(53,448)
5,942
249,768 1,109,691
1,741,584
481,379
225,721
T H E M A U R I T I U S C O M M E R C I A L B A N K LT D . 2,449,780
127
continued
11. Property, Plant and Equipment (continued)
Assets under
Land
finance
and
leases
buildings
Rs'000
Rs'000
Computer
and other
equipment
Rs'000
Other
fixed
assets
Rs'000
Total
Rs'000
GROUP
Cost & valuation
At 1st July 2005
Additions
Disposals
Exchange adjustment
At 30th June 2006
At 1st July 2005
Charge for the year
Disposal adjustment
Exchange adjustment
Transfer
At 30th June 2006
Net book values
At 30th June 2006
29,023 2,135,225 1,420,832
187,772
256,598
(11)
(2,632) (131,523)
32,740
5,105
252,756
(10,399)
(1,839)
18,613 2,605,861 1,549,173
451,688 4,036,768
49,103
493,473
(46,611) (180,777)
1,156
39,001
21,317
274,073
1,402
(10,836)
478,055 4,651,702
18,897
3,738
(8)
(7,598)
15,029
203,349
36,804
2,775
46,476
289,404
1,030,009
148,095
(128,744)
3,057
7,198
1,059,615
246,552 1,498,807
47,490
236,127
(50,551) (179,303)
399
6,231
6,779
53,255
400
251,069 1,615,117
3,584
2,316,457
489,558
226,986
3,036,585
BANK
Cost & valuation
At 1st July 2005
Additions
Disposals
At 30th June 2006
At 1st July 2005
Charge for the year
Disposal adjustment
Transfer
At 30th June 2006
Net book values
At 30th June 2006
28,401 1,762,262
72,642
(11)
(10,399)
17,991 1,834,904
1,295,579
185,979
(64,223)
(1,839)
1,415,496
374,604 3,460,846
39,963
298,584
(15,059)
(79,293)
1,402
(10,836)
400,910 3,669,301
18,734
3,598
(8)
(7,598)
14,726
200,239
22,550
222,789
942,585
127,274
(62,833)
7,198
1,014,224
196,353 1,357,911
39,314
192,736
(12,282)
(75,123)
400
223,785 1,475,524
3,265
1,612,115
401,272
177,125
2,193,777
11. Property, Plant and Equipment (continued)
Assets under
Land
finance
and
leases
buildings
Rs'000
Rs'000
Computer
and other
equipment
Rs'000
Other
fixed
assets
Rs'000
Total
Rs'000
GROUP
Cost & valuation
At 1st July 2004
Additions
Disposals
Exchange adjustment
At 30th June 2005
At 1st July 2004
Charge for the year
Disposal adjustment
Exchange adjustment
At 30th June 2005
Net book values
At 30th June 2005
25,807 1,677,276 1,305,494
3,712
470,327
174,921
(496)
(9,428)
(55,043)
(2,950)
(4,381)
(159)
29,023 2,135,225 1,420,832
410,686 3,419,263
60,462
709,422
(17,062)
(82,029)
(2,398)
(9,729)
(159)
451,688 4,036,768
13,376
5,819
(298)
18,897
221,202 1,379,127
41,090
193,521
(14,122)
(67,280)
(1,618)
(6,561)
246,552 1,498,807
10,126
181,555
962,994
23,211
123,401
(1,220)
(51,640)
(197)
(4,746)
203,349 1,030,009
1,931,876
390,823
205,136
2,537,961
BANK
Cost & valuation
At 1st July 2004
Additions
Disposals
At 30th June 2005
At 1st July 2004
Charge for the year
Disposal adjustment
At 30th June 2005
Net book values
At 30th June 2005
25,354 1,629,904 1,206,057
3,543
134,558
143,758
(496)
(2,200)
(54,077)
(159)
28,401 1,762,262 1,295,579
345,586 3,206,901
44,265
326,124
(15,247)
(72,020)
(159)
374,604 3,460,846
13,352
5,680
(298)
18,734
177,986
22,253
200,239
881,978
112,941
(52,334)
942,585
173,600 1,246,916
36,563
177,437
(13,810)
(66,442)
196,353 1,357,911
9,667
1,562,023
352,994
178,251
2,102,935
If the land and buildings were stated on the historical basis, the amounts would be as follows :
GROUP
BANK
2007
2006
2005
2007
2006
2005
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
4,648,539 3,955,870 3,340,937 3,367,324 2,973,469 2,765,015
(1,809,816) (1,531,845) (1,423,691) (1,521,890) (1,392,252) (1,282,795)
2,838,723 2,424,025 1,917,246 1,845,434 1,581,217 1,482,220
Cost
continued
12. Deferred Tax (Liabilities)/Assets
The movement on the deferred income tax account is as follows :-
At 1st July 2006
Provisions for credit impairment
As restated
Effect of reduction in tax rate
Exchange adjustments in respect of foreign subsidiaries
Amount utilised during the year
Income statement (charge)/credit
At 30th June 2007
Deferred tax assets :Provisions and post retirement benefits
Provisions for credit impairment
Tax losses carried forward
Accelerated tax depreciation
Other provisions
Deferred tax liabilities :Accelerated tax depreciation
2007
Rs'000
31,364
31,364
(3,187)
1,129
(10,812)
102
(24,484)
(5,888)
GROUP
2006
Rs'000
84,769
84,769
(520)
(29,126)
(23,759)
31,364
2005
Rs'000
44,598
37,500
82,098
2,671
84,769
2007
Rs'000
31,647
31,647
(3,187)
(13,364)
15,096
BANK
2006
Rs'000
84,284
84,284
(29,126)
(23,511)
31,647
2005
Rs'000
44,322
37,500
81,822
2,462
84,284
70,388
42,781
296
(97,621)
15,844
21,732
(5,888)
86,160
42,982
296
(97,458)
31,980
616
31,364
90,955
72,560
296
(79,199)
162
84,774
5
84,769
70,388
42,781
(98,073)
15,096
15,096
86,160
42,982
(97,495)
31,647
31,647
90,955
72,560
(79,231)
84,284
84,284
492,184
852,835
230,165
439,213
2,014,397
655,943
577,387
198,362
524,201
1,955,893
365,086
449,329
179,181
309,544
1,303,140
380,818
781,800
230,165
378,551
1,771,334
464,613
526,121
198,362
411,866
1,600,962
293,507
391,971
179,181
409,030
1,273,689
840,329
3,938,310
1,411,108
6,189,747
1,056,122
5,184,415
6,240,537
1,203,518
2,187,721
3,391,239
840,329
4,284,574
1,411,108
6,536,011
1,056,122
5,380,538
6,436,660
1,203,518
2,260,531
3,464,049
13. Other Assets
Balances due in clearing
Accrued interest receivable
Employee benefits asset (see note 17)
Others
14. Due to Other Banks
Subordinated debt
15. Deposits
(a) Deposits comprise the following:
GROUP
BANK
2007
2006
2005
2007
2006
2005
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
61,893,853 56,951,011 51,476,168 57,229,612 53,748,473 48,751,177
20,973,361 17,801,612 15,613,470 16,418,950 13,709,024 12,263,458
758,576 1,449,191 1,088,671
252,469
753,478
233,749
1,531,833
993,046
735,568 1,536,428
997,600
735,568
85,157,623 77,194,860 68,913,877 75,437,459 69,208,575 61,983,952
Personal
Business
Governments
Banks
Demand deposits
Savings deposits
Time deposits with remaining term to maturity:
Up to 3 months
Over 5 years
22,127,563 19,574,106 15,856,113 17,667,775 14,827,472 11,919,560
38,218,456 35,346,507 32,005,686 36,350,470 33,715,621 30,543,722
6,724,051 5,937,181 6,843,405 5,675,406 5,220,168 6,179,283
1,797,039 1,809,064 1,839,189 1,507,490 1,280,357 1,326,419
3,421,566 2,786,136 2,605,433 2,589,613 2,475,128 2,297,599
9,904,467 9,361,605 7,327,897 8,677,629 9,305,014 7,281,215
1,432,648 1,387,215 1,700,586 1,432,648 1,387,215 1,700,586
23,279,771 21,281,201 20,316,510 19,882,786 19,667,882 18,785,102
83,625,790 76,201,814 68,178,309 73,901,031 68,210,975 61,248,384
(ii) Banks
Demand deposits
Up to 3 months
Over 5 years
1,241,633
818,479
602,839
1,246,228
823,033
602,839
290,200
124,567
132,729
290,200
124,567
132,729
50,000
50,000
1,531,833
993,046
735,568 1,536,428
997,600
735,568
85,157,623 77,194,860 68,913,877 75,437,459 69,208,575 61,983,952
TOTAL
16. Other Liabilities
Accrued interest payable
MCB Superannuation Fund
MCB Foundation
Derivative financial instruments (note 7 (b))
Interest suspense, impersonal & other accounts
1,301,016
186,806
12,750
14,103
2,761,590
4,276,265
(800,866)
3,475,399
Interest suspense shown in note 6(c)
1,031,308
720,315
364,303
158,415
12,750
12,750
23,931
55,329
2,734,732 1,813,140
4,167,024 2,759,949
(921,780) (830,951)
3,245,244 1,928,998
1,237,336
992,598
692,092
186,806
364,303
158,415
12,750
12,750
12,750
14,103
23,931
55,329
2,250,086 2,179,626 1,581,315
3,701,081 3,573,208 2,499,901
(782,994) (901,410) (811,686)
2,918,087 2,671,798 1,688,215
continued
17. Employee Benefits Assets
GROUP
2006
Rs'000
2,169,478
Amounts recognised in Balance Sheets at end of year:
Present value of funded obligations
Fair value of plan assets
(3,092,815) (2,427,893) (2,075,061) (3,092,815) (2,427,893) (2,075,061)
Surplus of plan assets
(703,697)
(258,415)
2005
Rs'000
1,914,583
(160,478)
2007
Rs'000
2,389,118
BANK
2006
Rs'000
2,169,478
2007
Rs'000
2,389,118
(703,697)
(258,415)
2005
Rs'000
1,914,583
(160,478)
Unrecognised actuarial gains/(loss)
473,532
60,053
(18,703)
473,532
60,053
(18,703)
Assets shown in note 13
(230,165)
(198,362)
(179,181)
(230,165)
(198,362)
(179,181)
Amounts recognised in the Income Statements:
94,858
87,065
74,710
94,858
87,065
74,710
Interest cost
Current service cost
212,500
178,316
160,549
212,500
178,316
160,549
Expected return on plan assets
(242,923)
(197,599)
(151,911)
(242,923)
(197,599)
(151,911)
Actuarial gain recognised
(1,098)
-
(1,703)
(1,098)
-
(1,703)
Total included in non-interest expense (note 24)
63,337
67,782
81,645
63,337
67,782
81,645
(198,362)
(179,181)
359,100
(198,362)
(179,181)
359,100
63,337
67,782
81,645
63,337
67,782
81,645
Movements in (assets)/liability recognised in Balance Sheets:
At 1st July 2006
Total expense as above
Disbursements *
-
-
(543,000)
-
-
(543,000)
(95,140)
(86,963)
(76,926)
(95,140)
(86,963)
(76,926)
At 30th June 2007
(230,165)
(198,362)
(179,181)
(230,165)
(198,362)
(179,181)
Actual return on plan assets
657,500
350,288
206,978
657,500
350,288
206,978
Discount rate
2007
%
10.50
BANK
2006
%
10.00
2005
%
9.50
10.50
10.00
9.50
Future salary increases **
9.00
8.50
8.00
Future pension increases
6.00
5.50
5.00
Contributions and direct benefits paid
The principal actuarial assumptions at end of year:
* An injection of Rs 543 million was made by the Bank into the Superannuation Fund during the year to 30th June 2005 to enable the latter to take over the liability for the
payment of full CPI index-linked pensions and of a 13th month bonus to all pensioners. Such payments were previously effected by the Bank.
** 9.0% for clerical staff and 8.5% for non-clerical staff.
17. Employee Benefits Assets (continued)
GROUP & BANK
2007
2006
2005
Rs'000
Rs'000
Rs'000
2,169,478 1,914,583 1,713,011
Reconciliation of the present value of funded obligations
Present value of obligation at start of period
Current service cost
94,858
87,065
74,710
Interest cost
212,500
178,316
160,549
Benefits paid
(87,718)
(84,419)
(71,228)
Liability loss
-
73,933
37,541
2,389,118
2,169,478
1,914,583
2,427,893
2,075,061
1,319,385
242,923
197,599
151,911
95,140
86,963
619,926
Benefits paid
(87,718)
(84,419)
(71,228)
Asset gains
414,577
152,689
55,067
3,092,815
2,427,893
2,075,061
Present value of obligation at end of period
Reconciliation of fair value of plan assets
Fair value of plan assets at start of period
Employer contributions
Fair value of plan assets at end of period
2007
%
GROUP & BANK
2006
%
2005
%
Local equities
25
20
24
Local bonds
14
8
8
Property
4
5
4
Distribution of plan assets at end of year
Percentage of assets at end of year
Loan
3
4
22
Overseas bonds and equities
34
35
39
Other
20
28
3
Total
100
100
100
Where the plan is funded, the overall expected rate of return on plan assets is determined by reference to market yields on bonds and expected yield
differences on other types of assets held.
2007
%
GROUP & BANK
2006
%
2005
%
Assets held in the entity's own financial instruments
8
6
6
Other assets used by the entity
6
15
8
Additional disclosure on assets issued or used by the reporting entity
Percentage of assets at end of year
Asset experience gain during the period
2007
Rs'000
414,577
Expected employer contributions
2008
Rs'000
103,189
Note: Employee benefits obligations have been provided for based on the report from Hewitt LY Ltd., Actuaries and Consultants.
continued
18. Outstanding Lease Obligations
2006
Rs'000
GROUP
2005
Rs'000
BANK
2006
Rs'000
2007
Rs'000
2005
Rs'000
Minimum lease payments:
Up to 1 year
4,422
5,967
1,894
4,221
5,742
1,960
4,423
572
1,913
4,221
Over 2 years and up to 5 years
572
2,531
-
572
2,485
6,954
12,921
2,466
6,706
12,448
(588)
(1,503)
(139)
(573)
(1,454)
6,366
11,418
2,327
6,133
10,994
Less:
Future finance charges
The present value of finance lease liabilities may be analysed as follows:
Up to 1 year
3,975
5,052
1,773
3,787
4,861
1,837
3,975
554
1,792
3,787
Over 2 years and up to 5 years
554
2,391
-
554
2,346
6,366
11,418
2,327
6,133
10,994
19. Share Capital and Treasury Shares
Balances at 1st July 2004
Number of shares
Share
Treasury
Capital
Shares
282,110,456
(12,645,010)
Total
269,465,446
-
(1,059,400)
(1,059,400)
282,110,456
(13,704,410)
268,406,046
-
(7,100)
(7,100)
At 30th June 2006
282,110,456
(13,711,510)
268,398,946
Cancellation of shares
(31,734,861)
-
(31,734,861)
Purchases
At 30th June 2005
Purchases
Exercise of share options
At 30th June 2007
The nominal value of the shares is Rs 10 each.
-
298,102
298,102
250,375,595
(13,413,408)
236,962,187
20. Contingent Liabilities
GROUP
2006
Rs'000
2007
Rs'000
2005
Rs'000
BANK
2006
Rs'000
2007
Rs'000
2005
Rs’000
(a) Instruments
Acceptances on account of customers
Guarantees on account of customers
318,872
178,783
10,932,402
9,737,078
229,311
-
-
-
8,342,386 10,531,399
9,376,142
8,006,064
Letters of credit and other obligations on account of customers
7,097,324
3,104,190
2,864,528
6,707,885
2,910,558
2,573,585
Foreign exchange contracts
7,121,096
3,337,284
5,915,276
7,029,518
3,273,555
5,577,353
422,373
350,642
370,030
394,829
328,107
369,631
Other contingent items
25,892,067 16,707,977 17,721,531 24,663,631 15,888,362 16,526,633
(b) Commitments
4,487,776
Loans and other facilities, including undrawn credit facilities
4,622,812
2,288,704
4,366,559
4,484,731
2,213,040
(c) Assets pledged against facilities granted by the Bank of Mauritius
The carrying amount of assets that have been pledged to secure the liabilities of the Bank are as follows:
Securities issued by Government of Mauritius
(d) Tax assessment *
-
1,014,515
970,680
-
1,014,515
970,680
201,762
182,880
163,998
201,762
182,880
163,998
451,586
397,486
433,872
375,853
380,129
419,452
(e) Other
Inward bills held for collection
Outward bills sent for collection
620,000
384,882
454,920
620,000
384,882
454,920
1,071,586
782,368
888,792
995,853
765,011
874,372
31,653,191 23,310,552 22,033,705 30,227,805 22,335,499 20,748,723
* The Bank received in 2005 an income tax assessment relating to the three years ended 30th June 2003.
The Bank objected to that part of the assessment which disputed the deductibility of the loss of Rs 632 million sustained as the result of the fraud of
February 2003.
The objection to that assessment has been rejected at this stage and the matter is pending in front of the Assessment Review Committee.
The maximum liability that could arise from this assessment amounts to Rs 202 million, including penalties.
continued
21. Interest Income
2007
Rs'000
GROUP
2006
Rs'000
2005
Rs'000
2007
Rs'000
BANK
2006
Rs'000
2005
Rs’000
Interest on loans
7,068,108
5,494,526
4,398,156
6,475,536
5,057,539
4,076,108
Interest on investments in securities
1,232,702
1,157,577
1,117,467
1,012,713
994,082
926,732
637,596
254,336
156,871
579,994
211,544
118,268
8,938,406
6,906,439
5,672,494
8,068,243
6,263,165
5,121,108
4,889,524
3,449,997
2,569,000
4,616,568
3,296,931
2,433,582
428,923
350,365
163,969
418,632
296,272
152,734
22. Interest Expense
7,229
12,889
18,317
6,457
12,230
17,516
5,325,676
3,813,251
2,751,286
5,041,657
3,605,433
2,603,832
23. Other Income
(a) Fee income and commissions
Trade finance
246,141
194,825
160,849
210,571
152,831
138,005
Corporate finance
230,295
209,057
235,920
218,124
195,998
189,629
Credit card
218,917
174,174
136,488
193,313
156,349
123,152
Guarantees
109,450
127,017
88,384
102,450
120,206
83,208
303,498
130,684
73,434
115,192
90,851
72,715
1,108,301
835,757
695,075
839,650
716,235
606,709
Subsidiary
-
-
-
23,796
-
-
Associate
-
-
-
11,898
29,745
24,628
Others
-
24,483
27,113
-
-
6,765
Management and other fees
(b) Dividend income
Income from quoted investments:
Income from unquoted investments:
Subsidiaries
-
-
-
150,057
90,058
153,433
Associates
-
-
-
-
-
27,487
Others
82,713
34,346
22,626
35,623
30,072
20,906
82,713
58,829
49,739
221,374
149,875
233,219
24. Non-Interest Expense
2007
Rs'000
1,278,813
63,337
1,886
303,730
110,935
1,023,457
2,782,158
2,267
Employee benefits
Equity settled share-based payments
Depreciation charge
Consultancy fees in respect of B.P.R. and related projects
Other operating expenses
Number of employees at the end of the year
GROUP
2006
Rs'000
1,122,296
67,782
236,127
97,178
13,458
820,995
2,357,836
2,172
2005
Rs'000
1,000,892
81,645
193,521
94,243
101,945
781,148
2,253,394
2,163
2007
Rs'000
1,164,119
63,337
1,886
217,780
106,003
720,655
2,273,780
2,025
BANK
2006
Rs'000
1,035,480
67,782
192,736
96,158
13,458
589,908
1,995,522
1,956
2005
Rs’000
907,518
81,645
177,437
93,858
101,945
595,200
1,957,603
1,917
Share-based payments
On 26th December 2006, at the Annual Meeting, the shareholders approved the transfer of 13,711,510 shares held as Treasury shares in accordance with
the terms of an Employee Share Option Scheme.
The number and weighted average exercise price of share options are as follows:
Weighted avg
exercise price
Granted during the year
76.82
Exercised during the year
77.82
Outstanding and exercisable at 30th June 2007
Number of
options
529,918
(298,102)
231,816
The options outstanding at 30th June 2007 have an exercise price in the range of Rs 75 to Rs 83.50 and a weighted average contractual life of 3½ months.
The weighted average share price at the date of exercise for share options exercised during F/Y 06/07 was Rs 110.92.
The fair value of services in return for share options granted is based on the fair value of the share options granted measured by the average market price of
the share of the last three months, as may be adjusted by the Board of Directors of the Bank to reflect the impact of changes in the capital structure of the
Bank. The fair value at measurement date is Rs 83.50.
25. Allowance for Credit Impairment
2007
Rs'000
432,427
9,590
(64,083)
(2,006)
375,928
Provisions for bad and doubtful debts
Bad debts written off for which no provisions were made
Recoveries of advances written off
GROUP
2006
Rs'000
407,503
2,025
(85,806)
(3,568)
320,154
2005
Rs'000
553,901
538
(174,673)
(7,238)
372,528
2007
Rs'000
396,992
9,590
(33,978)
(2,006)
370,598
BANK
2006
Rs'000
382,922
2,015
(68,224)
(3,510)
313,203
Rs’000
530,141
(163,623)
(7,238)
359,280
137
continued
26. Income Tax Expense
2007
Rs'000
514,675
GROUP
2006
Rs'000
374,249
2005
Rs'000
434,710
2007
Rs'000
355,395
BANK
2006
Rs'000
286,743
2005
Rs’000
329,116
Deferred tax
27,671
23,759
(2,671)
16,551
23,511
(2,462)
Special levy on banks
19,221
-
-
19,221
-
-
Income tax based on the adjusted profits
(Over)/Under provision in previous year
Charge for the year
(745)
1,624
24,309
(1,235)
1,548
22,706
560,822
399,632
456,348
389,932
311,802
349,360
The tax on the profits differs from the theoretical amount that would arise using the basic tax rate as follows:
Profit before tax
3,107,530
2,413,083
2,141,394
2,311,353
1,918,865
1,833,620
(414,392)
(282,390)
(230,398)
-
-
-
2,693,138
2,130,693
1,910,996
2,311,353
1,918,865
1,833,620
605,956
532,673
477,749
520,054
479,716
458,405
45,964
36,997
21,274
-
-
-
Income not subject to tax
(125,130)
(183,533)
(84,199)
(142,756)
(183,356)
(125,868)
Expenses not deductible for tax purposes
136,767
96,717
68,794
115,149
98,670
42,428
(121,211)
(84,846)
(51,579)
(120,501)
(84,776)
(48,311)
19,221
-
-
19,221
-
-
Less profit of Associates
Tax calculated at a rate of 22.5% / 25%
Effect of different tax rates
Impact of:
Tax credits
Special levy on banks
(Over)/Under provision in previous year
Tax charge
(745)
1,624
24,309
(1,235)
1,548
22,706
560,822
399,632
456,348
389,932
311,802
349,360
27. Prior Year Adjustment
The prior year adjustment is in respect of accounting for preference shares as investment in associates under the equity method rather than available-forsale financial assets in the books of Promotion and Development Ltd.
28. Dividends
Interim paid on 19th December 2006 Rs 1.15 per share
Final paid on 19th June 2007 at Rs 1.75 per share
2007
Rs'000
308,659
BANK
2006
Rs'000
268,399
2005
Rs’000
237,080
414,676
300,607
273,818
723,335
569,006
510,898
29. Earnings Per Share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the ordinary equity holders of the parent by the weighted average number
of ordinary shares outstanding during the year, excluding the weighted average number of ordinary shares purchased by the Bank and held as
treasury shares.
2007
Rs'000
GROUP
2006
Rs'000
2005
Rs'000
Profit attributable to ordinary equity holders of the parent after exceptional items
2,460,845
1,986,423
1,657,889
Profit attributable to ordinary equity holders of the parent before exceptional items
2,460,845
1,907,748
1,657,889
252,534
268,399
269,210
Basic earnings per share after exceptional items (Rs)
9.74
7.40
6.16
Basic earnings per share before exceptional items (Rs)
9.74
7.11
6.16
Weighted average number of ordinary shares (thousands)
(b) Diluted earnings per share
Diluted earnings per share is calculated by dividing the profit attributable to the ordinary equity holders of the parent by the weighted average number of
ordinary shares outstanding during the year after adjustment for the effects of all dilutive potential ordinary shares. The Bank has only one category of
dilutive potential ordinary shares which is share options.
For share options, the proceeds from these instruments shall be regarded as having been received from the issue of ordinary shares at the average market
price of ordinary shares during the period. The difference between the number of ordinary shares issued and the number of ordinary shares that would
have been issued at the average market price of ordinary shares during the period shall be treated as an issue of ordinary shares for no consideration.
Profit attributable to ordinary equity holders of the parent after exceptional items
2,460,845
1,986,423
1,657,889
Profit attributable to ordinary equity holders of the parent before exceptional items
2,460,845
1,907,748
1,657,889
252,534
268,399
269,210
10
-
-
Weighted average number of ordinary shares basic (thousands)
Effect of share options in issue (thousands)
252,544
268,399
269,210
Diluted earnings per share after exceptional items (Rs)
9.74
7.40
6.16
Diluted earnings per share before exceptional items (Rs)
9.74
7.11
6.16
Weighted average number of ordinary shares diluted (thousands) at year end
30. Capital Commitments
Capital Commitments at 30th June are as follows:
2007
Rs'000
GROUP
2006
Rs'000
2005
Rs'000
2007
Rs'000
BANK
2006
Rs'000
2005
Rs'000
Expenditure contracted for but not incurred
269,082
200,507
357,592
269,082
200,507
357,592
Expenditure approved by the Board but not contracted for
696,597
363,472
254,622
696,597
363,472
254,622
continued
31. Net Cash Flows from Trading Activities
2007
Rs'000
3,107,530
GROUP
2006
Rs'000
2,334,408
2005
Rs'000
2,141,394
2007
Rs'000
2,311,353
BANK
2006
Rs'000
1,881,065
2005
Rs’000
1,833,620
Increase in interest receivable and other assets
(150,463)
(337,912)
(35,786)
(222,364)
(136,986)
(158,252)
Increase in other liabilities
197,605
1,309,338
269,202
238,974
951,048
291,476
Operating profit
Employee share option expenses
Disbursements to Superannuation Fund
Cash inflow from exceptional item
1,695
-
-
1,695
-
-
-
-
(543,000)
-
-
(543,000)
-
37,800
-
-
37,800
-
(Release)/additional provision for employee benefits
(31,803)
(19,181)
4,719
(31,803)
(19,181)
4,719
Charge for credit impairment
432,427
407,503
553,901
396,992
382,922
530,141
Release of provisions for credit impairment
(64,083)
(85,806)
(174,673)
(33,978)
(68,224)
(163,623)
Exchange adjustment
(121,602)
(50,700)
(5,466)
(91,132)
(41,349)
(9,513)
Depreciation
303,730
236,127
193,521
217,780
192,736
177,437
110,935
97,178
94,243
106,003
96,158
93,858
Profit on disposal of property, plant and equipment
(5,724)
(406)
(3,573)
(4,464)
(552)
(2,422)
Impairment of intangible assets
9,697
19
15
9,686
19
15
Preliminary expenses written off
-
-
468
-
-
-
Release on disposal of investments
-
-
(53)
-
-
-
Profit on disposal of investments and associates
(9,903)
(30,051)
(284)
-
(58,995)
(11,650)
(414,392)
(282,390)
(230,398)
-
-
-
3,365,649
3,615,927
2,264,230
2,898,742
3,216,461
2,042,806
8,019,033
2,831,523
6,228,884
7,224,623
2,901,943
32. Net Cash Flows from Other Operating Activities
Net increase in deposits
6,972,671
Net increase in loans and advances
(6,923,723) (3,681,945) (4,797,868) (6,433,591) (3,300,984) (4,041,377)
Increase in securities
4,804,174 (1,798,663)
Decrease/(Increase) in balances due in clearing
171,104
5,024,226
(290,031)
(862,814) 4,301,059 (1,316,889) (1,551,183)
21,975
83,795
2,248,394 (2,807,184) 4,180,147
(171,106)
47,811
2,435,644 (2,642,806)
33. Analysis of the Balances of Cash and Cash Equivalents as shown in the Balance Sheets
2007
Rs'000
GROUP
2006
Rs'000
2005
Rs'000
2007
Rs'000
BANK
2006
Rs'000
2005
Rs’000
6,235,477
5,509,108
4,867,674
4,042,455
4,015,691
3,481,887
10,208,899
6,694,640
1,073,063 10,135,792
6,826,766
1,044,609
ASSETS
Due from other banks
LIABILITIES
Due to other banks
(4,778,639) (6,240,537) (3,391,239) (5,124,903) (6,436,660) (3,464,049)
CASH AND CASH EQUIVALENTS
11,665,737
CHANGE IN YEAR
5,702,526
5,963,211
2,549,498
9,053,344
3,413,713 (2,453,009) 4,647,547
4,405,797
1,062,447
3,343,350 (2,354,617)
34. Acquisition of Subsidiary
On 1st July 2006, the Bank acquired 100% of the share capital of Multipliant Management Co. Ltd. The details of the fair values of the assets and liabilities
acquired are as follows :
Rs'000
3,022
Cash and cash equivalents
Property, plant & equipment
58
Investments
8,534
Deferred tax assets
102
Other assets
612
Other liabilities
(903)
Cost of acquisition
11,425
Less: Intragroup cash flow on acquisition
(3,022)
Cash outflow on acquisition
8,403
continued
35. Segment Information
Primary reporting format - geographical segments
Group
Rs'000
Mauritius
Rs'000
Reunion*
Rs'000
Seychelles Madagascar Mozambique Eliminations
Rs'000
Rs'000
Rs'000
Rs'000
Income:
External gross income
11,176,900 10,085,402
Expenses
Operating profit
Profit before tax
-
543,200
298,786
249,512
(8,107,834) (7,450,925)
-
(303,673)
(181,554)
(171,682)
3,069,066
-
239,527
117,232
77,830
2,634,477
(375,928)
(370,598)
-
10,557
7,771
(23,658)
2,693,138
2,263,879
-
250,084
125,003
54,172
414,392
174,938
239,454
-
-
-
3,107,530
2,438,817
239,454
250,084
125,003
54,172
104,557,468 97,271,884
-
6,406,387
2,286,329
3,081,654
2,199,454
-
-
94,822,769 88,153,416
-
6,191,409
1,871,840
-
27,529
26,566
16,982
Income tax expense
(560,822)
Profit for the year
2,546,708
Other segment items:
Segment assets
5,281,108
1,159,800 (2,566,932)
-
15,844
Deferred tax assets
110,142,722
Total assets
Segment liabilities
1,028,796 (2,422,692)
405,565
Unallocated liabilities
95,228,334
Total liabilities
Capital expenditure
635,471
564,394
Depreciation charge
303,730
253,364
-
34,092
5,068
11,206
Amortisation
110,935
108,113
-
214
1,875
733
Impairment charge
9,697
* Note: Figures for Banque Française Commerciale Ocean Indien have been aggregated under this heading, Reunion being this bank’s main place of business.
1 4 2 -
288,302
ANNUAL REPORT 2007
35. Segment Information (continued)
Group
Rs'000
Mauritius
Rs'000
8,543,259
7,687,934
Expenses
Reunion*
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
Income:
Operating profit
Exceptional items
Profit before tax
-
361,706
228,348
265,271
(6,171,087) (5,608,061)
-
(251,034)
(127,110)
(184,882)
2,372,172
-
110,672
101,238
80,389
2,079,873
(320,154)
(313,203)
-
523
114
(7,588)
2,052,018
1,766,670
-
111,195
101,352
72,801
78,675
78,675
282,390
85,355
197,035
-
-
-
2,413,083
1,930,700
197,035
111,195
101,352
72,801
Income tax expense
(399,632)
Profit for the year
2,013,451
Segment assets
-
6,555,485
1,638,812
1,421,361
1,835,471
-
-
Total assets
99,409,747
Segment liabilities
86,680,641 78,679,876
-
6,406,292
1,336,273
Deferred tax assets
Total liabilities
95,766,824 87,269,072
3,256,832
1,563,905 (1,260,450)
-
354,111
31,980
1,445,150 (1,186,950)
278,580
86,959,221
Capital expenditure
607,810
432,123
-
164,703
5,074
5,910
Depreciation charge
236,127
196,661
-
32,809
2,690
3,967
97,178
96,158
-
122
898
-
Amortisation
Impairment charge
-
19
continued
Group
Rs'000
Mauritius
Rs'000
7,288,204
6,538,412
Expenses
Reunion*
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
Income:
Operating profit
-
379,114
203,836
166,842
(5,004,680) (4,589,268)
-
(206,738)
(109,006)
(99,668)
2,283,524
-
172,376
94,830
67,174
1,949,144
(372,528)
(359,280)
-
(623)
(1,141)
(11,484)
1,910,996
1,589,864
-
171,753
93,689
55,690
230,398
107,560
122,838
-
-
-
2,141,394
1,697,424
122,838
171,753
93,689
55,690
82,502,981 75,073,464
-
5,514,751
1,511,590
1,201,461
(798,285)
806,949
1,511,178
-
-
-
-
Total assets
85,232,082
Segment liabilities
74,234,114 67,147,975
-
5,444,690
1,204,272
1,119,223
(682,046)
Profit before tax
(456,348)
Income tax expense
Profit after tax
1,685,046
Impairment of goodwill
(5,867)
1,679,179
Profit for the year
Segment assets
2,318,127
326,200
84,774
Deferred tax assets
655,353
74,889,467
Total liabilities
Capital expenditure
944,750
558,078
-
366,408
15,487
4,777
Depreciation charge
193,521
178,135
-
6,427
2,922
6,037
94,243
93,858
-
22
363
-
Amortisation
Impairment charge
15
Secondary reporting format - business segments
Group
Rs’000
External gross income:
The Mauritius Commercial Bank Ltd
9,997,388
MCB Madagascar SA
298,786
MCB Moçambique SA
249,512
MCB Seychelles Ltd
543,200
165,947
Others
234,828
Eliminations
(312,761)
11,176,900
Group
Rs'000
Net interest Fees and Investment Forex profit
income commissions income
and others
Rs'000
Rs'000
Rs'000
Rs'000
Operating income:
4,955,731
3,026,586
839,650
221,374
868,121
MCB Madagascar SA
218,984
157,881
53,455
-
7,648
MCB Moçambique SA
194,735
131,080
27,317
-
36,338
MCB Seychelles Ltd
465,610
244,822
133,148
-
87,640
52,493
3,844
38,214
8,875
1,560
Others
213,976
48,517
81,766
39,966
43,727
Eliminations
(250,305)
-
(65,249)
(187,502)
2,446
5,851,224
3,612,730
1,108,301
82,713
1,047,480
414,392
6,265,616
Segment assets
99,076,207 95,541,206
3,535,001
5,281,108
288,302
Deferred tax assets
15,844
Unallocated assets
5,481,261
110,142,722
Total assets
continued
Group
Rs’000
7,795,223
MCB Madagascar SA
228,348
MCB Moçambique SA
265,271
MCB Seychelles Ltd
361,706
Others
98,757
(206,046)
Eliminations
8,543,259
Group
Rs'000
Net interest
income/
Fees and Investment Forex profit
(expense) commissions income
and others
Rs'000
Rs'000
Rs'000
Rs'000
Operating income:
4,189,790
2,657,732
716,235
149,875
665,948
MCB Madagascar SA
176,451
128,119
37,121
-
11,211
MCB Moçambique SA
172,946
109,415
31,008
-
32,523
MCB Seychelles Ltd
296,188
198,191
52,431
-
45,566
92,913
(269)
48,172
28,757
16,253
Others
Eliminations
(198,280)
-
(49,210)
(119,803)
(29,267)
4,730,008
3,093,188
835,757
58,829
742,234
282,390
5,012,398
Segment assets
90,758,221 88,933,290
Deferred tax assets
354,111
31,980
5,008,603
Unallocated assets
99,409,747
Total assets
1 4 6 3,256,832
ANNUAL REPORT 2007
1,824,931
Group
Rs’000
6,754,335
MCB Madagascar SA
203,836
MCB Moçambique SA
166,842
MCB Seychelles Ltd
379,114
Others
101,449
(317,372)
Eliminations
7,288,204
Group
Rs'000
Net interest Fees and Investment Forex profit
income commissions income
and others
Rs'000
Rs'000
Rs'000
Rs'000
Operating income:
MCB Madagascar SA
4,150,503
2,517,276
606,709
233,219
793,299
155,198
107,075
33,525
-
14,598
MCB Moçambique SA
135,107
74,494
29,976
-
30,637
MCB Seychelles Ltd
310,075
220,404
55,430
-
34,241
Others
101,449
1,959
15,435
22,068
61,987
Eliminations
(315,414)
-
(46,000)
(205,548)
(63,866)
4,536,918
2,921,208
695,075
49,739
870,896
230,398
4,767,316
Segment assets
78,633,778 77,485,488
1,148,290
2,318,127
326,200
Deferred tax assets
84,774
Unallocated assets
3,869,203
85,232,082
Total assets
continued
36. Related Party Transactions
(a) The Group
Loans and Advances
Balances at 30th June 2006
Movements relating to directors and managers who retired during the year
Existing loans of new appointees
Associates now converted into subsidiaries
Other net movements
Balances at 30th June 2007
Leases receivable
Balance at year end:
30th June 2007
Deposits
30th June 2005
30th June 2006
30th June 2007
Off Balance sheet items
30th June 2005
30th June 2006
30th June 2007
Interest income
For the year ended:
30th June 2005
30th June 2006
30th June 2007
Interest expense
For the year ended:
30th June 2005
30th June 2006
30th June 2007
Other income
For the year ended:
30th June 2005
30th June 2006
30th June 2007
Associated companies
and entities in which
the Bank holds more
than a 10% interest
Directors and
Key Management
Personnel
Rs'000
Rs'000
Enterprises in which
Key Directors and
Key Management
Personnel have
significant interest/
influence
Rs'000
3,144,997
175,000
(691,870)
117,792
2,745,919
44,234
(4,647)
76
16,080
55,743
160,713
(38,314)
122,399
N/A
N/A
43,718
317,040
300,353
49,986
85,464
78,085
73,091
19,665
2,313
32,205
22,289
21,549
6,606
150
350
500
1,014
10,354
403
126,610
148,738
186,168
3,294
3,955
4,670
10,314
16,798
18,770
5,965
23,433
2,644
3,623
4,961
5,012
982
920
2,430
18,996
21,236
25,393
188
129
116
311
659
18,655
All the above related party transactions were carried out at least under market terms and conditions with the exception of loans to key Management Personnel
who benefited from preferential rates as applicable to staff.
36. Related Party Transactions (continued)
The figure for “other income” from Associated Companies includes an element, representing management fees charged to associated companies in
respect of salaries, notional rental of office space and provision of technical, administrative and other assistance to local Group companies. It also
includes an amount of Rs 21.8M, Rs 20.1 M and Rs 13.7 M respectively for 2007, 2006 and 2005 in respect of management fees charged to BFCOI.
Additionally, the Bank has entered into management contracts with its foreign banking subsidiaries and charges management fees based on operating
income. These fees represent the re-invoicing of expatriate salaries and benefits, where applicable, as well as management, administrative and
technical support provided by MCB. Gross amounts claimed, net of withholding tax in the local jurisdiction, were as follows :
MCB Seychelles
MCB Madagascar
MCB Mozambique
5.88 % of Gross operating income
5% of operating income 5% of operating income
Rs 29.0 M
Rs 10.7 M
Rs 6.2 M
IT and Systems support to the above three companies is provided by BFCOI who has claimed EUR 288,000, EUR 256,000 and EUR 142,000 from MCB
Seychelles, MCB Madagascar and MCB Moçambique respectively. These amounts have been charged to our subsidiaries’ income statements and
consolidated in Group non-interest expense.
(b) The Bank
In addition to the amounts disclosed in (a) above, the following information relate to subsidiaries of the Bank :
Loans and
Advances
Rs’000
Deposits
Rs’000
Off Balance
sheet items
Rs’000
(i) Balances as at 30th June :
30th June 2005
222,322
531,726
897,711
30th June 2006
604,031
513,656
895,331
30th June 2007
1,589,365
718,396
735,354
(ii) Income and expenses :
Interest
income
Interest
expense
Other
income
For the year ended:
30th June 2005
15,934
9,983
44,646
30th June 2006
63,270
15,505
42,819
30th June 2007
107,835
44,944
60,044
(c) Key Management personnel compensation
Remuneration and other benefits relating to key management personnel,
including directors, were as follows :
Salaries and short term employee benefits
Post employment benefits
Termination and other benefits
The Group and the Bank
2007
Rs'000
81,055
2006
Rs'000
53,723
4,897
3,562
-
16,520
85,952
73,805
continued
37. Segmental Reporting - Bank
The Bank classifies its assets and liabilities into two segments; Segment A and Segment B. Segment B activity is essentially directed to the provision
of international financial services that give rise to “foreign source income”.
Segment B assets will generally consist of placements with and advances to foreign financial institutions, notably associated companies and overseas
correspondents. Segment B liabilities will normally arise from deposits, borrowings and funds deposited by non-residents, global business companies
and residents.
Segment A activity relates to all banking business other than Segment B activity.
Expenditure incurred by the Bank but which is not directly attributable to its income derived from Mauritius or its foreign source income is apportioned
in a fair and reasonable manner.
BALANCE SHEETS as at 30th June 2007
Note
BANK
Rs'000
2007
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
2006
SEGMENT A SEGMENT B
Rs'000
Rs'000
ASSETS
Cash resources
Securities and other investments
4,042,455
-
4,015,691
4,015,691
-
147,802
147,802
-
204,565
204,565
-
9,976,118
6,622,201
8,102
6,614,099
9,976,118 10,842,457
4,228,358
6,614,099
- 14,874,838 14,874,838
-
9,987,990
11,872
14,178,247
4,202,129
37(a)
Securities
10,573,779 10,573,779
Other investments- available-for-sale
4,042,455
1,334,009
579,734
754,275
622,177
580,866
41,311
23,795
17,011
6,784
16,125
16,125
-
875,530
-
875,530
872,151
24,735
847,416
2,126,099
1,679,793
446,306
1,766,732
1,320,426
446,306
14,933,212 12,850,317
2,082,895 18,152,023 16,816,990
1,335,033
12,969,386 12,923,934
45,452 11,085,228 11,041,620
43,608
Business
44,475,277 44,433,284
Investments in subsidiaries
Loans
37(b)
6,652,786
-
41,993 41,316,947 41,250,130
6,652,786
5,736,880
66,817
-
5,736,880
64,097,449 57,357,218
6,740,231 58,139,055 52,291,750
5,847,305
(3,158,304) (3,102,229)
(56,075) (3,270,487) (3,225,598)
(44,889)
60,939,145 54,254,989
6,684,156 54,868,568 49,066,152
5,802,416
Other
Deferred tax assets
Other assets
37(c)
229,201
229,201
-
314,138
314,138
-
2,449,780
2,449,780
-
2,193,777
2,193,777
-
15,096
15,096
-
31,647
31,647
-
1,771,334
1,587,482
183,852
1,600,962
1,435,052
165,910
4,465,411
4,281,559
183,852
4,140,524
3,974,614
165,910
94,516,015 75,588,994 18,927,021 88,003,572 74,086,114 13,917,458
37. Segmental Reporting - Bank (continued)
BALANCE SHEETS as at 30th June 2007
Note
BANK
Rs'000
2007
SEGMENT A SEGMENT B
Rs'000
Rs'000
2006
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
37(d)
Personal
57,229,612 52,441,861
4,787,751 53,748,473 50,250,558
3,497,915
Business
16,418,950 14,467,847
1,951,103 13,709,024 11,972,450
1,736,574
Governments
Banks
252,469
252,469
-
753,478
753,478
-
1,536,428
11,637
1,524,791
997,600
55,763
941,837
8,263,645 69,208,575 63,032,249
6,176,326
75,437,459 67,173,814
Borrowings
Subordinated debt
840,329
840,329
-
1,056,122
1,056,122
-
4,284,574
57,330
4,227,244
5,380,538
113,049
5,267,489
1,411,108
-
1,411,108
-
-
-
6,536,011
897,659
5,638,352
6,436,660
1,169,171
5,267,489
2,918,087
2,626,930
291,157
2,671,798
2,438,765
233,033
2,327
2,327
-
6,133
6,133
-
Other
Other liabilities
37(e)
Capital and reserves attributable to the ordinary equity
holders of the parent
Share capital
327,374
327,374
-
239,501
224,276
15,225
3,247,788
2,956,631
291,157
2,917,432
2,669,174
248,258
2,503,756
2,503,756
-
2,821,105
2,821,105
-
Reserves and surplus
2,738,331
2,672,914
65,417
2,406,662
2,406,662
-
Retained earnings
4,436,959
4,436,959
-
4,605,968
4,605,968
-
9,679,046
9,613,629
65,417
9,833,735
9,833,735
-
(384,289)
(384,289)
-
(392,830)
(392,830)
-
9,294,757
9,229,340
65,417
9,440,905
9,440,905
-
Less treasury shares
Total equity
94,516,015 80,257,444 14,258,571 88,003,572 76,311,499 11,692,073
CONTINGENT LIABILITIES
Acceptances, guarantees, letters of credit,
endorsements and other obligations on account
of customers, and foreign exchange contracts
Commitments
Assets pledged against facilities granted by the
Bank of Mauritius
Tax assessment
37(f)
24,663,631 16,787,824
4,366,559 3,193,110
Other
201,762
201,762
995,853
704,509
30,227,805 20,887,205
7,875,807 15,888,362
1,173,449 4,484,731
9,501,721
3,539,625
6,386,641
945,106
-
-
1,014,515
182,880
1,014,515
182,880
291,344
765,011
463,212
301,799
9,340,600 22,335,499 14,701,953
7,633,546
continued
INCOME STATEMENTS for the year ended 30th June 2007
Note
2007
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
BANK
Rs'000
2006
SEGMENT A SEGMENT B
Rs'000
Rs'000
Interest income
Interest on loans
6,475,536
5,967,545
Interest on investment in securities
1,012,713
1,012,066
579,994
71,290
8,068,243
7,050,901
1,017,342
507,991
5,057,539
4,642,811
414,728
647
994,082
994,082
-
508,704
211,544
38,455
173,089
6,263,165
5,675,348
587,817
Interest expense
(4,616,568) (4,233,456)
(418,632)
(91,774)
(6,457)
(6,457)
(383,112) (3,296,931) (3,109,268)
(187,663)
(326,858)
(296,272)
(95,396)
(200,876)
-
(12,230)
(12,230)
-
(5,041,657) (4,331,687)
(709,970) (3,605,433) (3,216,894)
(388,539)
3,026,586
2,719,214
307,372
2,657,732
2,458,454
199,278
37(g)
839,650
654,280
185,370
716,235
560,056
156,179
863,657
783,854
79,803
596,670
584,327
12,343
37(g)
221,374
111,422
109,952
149,875
82,789
67,086
Net interest income
Other income
Fee income and commissions
Profit arising from dealing in foreign currencies
Dividend income
Net gain on sale of securities
Other
Operating income
-
-
-
58,995
29,435
29,560
4,464
4,464
-
10,283
10,283
-
1,929,145
1,554,020
375,125
1,532,058
1,266,890
265,168
4,955,731
4,273,234
682,497
4,189,790
3,725,344
464,446
(42,296) (1,035,480)
(991,783)
(43,697)
Non-interest expense
(1,166,005) (1,123,709)
Employee benefits
Depreciation
(63,337)
(63,337)
-
(67,782)
(67,782)
-
(217,780)
(207,116)
(10,664)
(192,736)
(186,805)
(5,931)
(106,003)
(96,527)
(9,476)
(96,158)
(92,032)
(4,126)
Other
(720,655)
(700,208)
(20,447)
(603,366)
(571,810)
(31,556)
(2,273,780) (2,190,897)
(82,883) (1,995,522) (1,910,212)
(85,310)
2,681,951
2,082,337
599,614
2,194,268
1,815,132
379,136
(370,598)
(359,419)
(11,179)
(313,203)
(309,372)
(3,831)
Operating profit
37(h)
2,311,353
1,722,918
588,435
1,881,065
1,505,760
375,305
Exceptional items
-
-
-
37,800
-
37,800
Profit before tax
2,311,353
1,722,918
588,435
1,918,865
1,505,760
413,105
Income tax expense
(389,932)
(363,887)
(26,045)
(311,802)
(296,577)
(15,225)
Profit for the year
1,921,421
1,359,031
562,390
1,607,063
1,209,183
397,880
37(a) SECURITIES
Remaining term to maturity
2007
Within
3 months
Rs’000
3-6
months
Rs’000
6-12
months
Rs’000
1-5
years
Rs’000
Over
5years
Rs’000
TOTAL
Rs’000
BANK
Government stocks
Treasury bills
199,688
369,198
2,360,674
2,035,390
339,928
5,304,878
3,831,733
824,705
612,463
-
-
5,268,901
4,031,421
1,193,903
2,973,137
2,035,390
339,928 10,573,779
199,688
369,198
2,360,674
2,035,390
339,928
5,304,878
-
5,268,901
Segment A
Government stocks
Treasury bills
3,831,733
824,705
612,463
-
4,031,421
1,193,903
2,973,137
2,035,390
Within
3 months
Rs’000
3-6
months
Rs’000
6-12
months
Rs’000
339,928 10,573,779
2006
1-5
years
Rs’000
Over
5years
Rs’000
TOTAL
Rs’000
BANK
Government stocks
Treasury bills
-
-
96,768
4,309,838
607,730
5,014,335
4,290,561
2,281,117
2,915,746
373,078
-
9,860,502
4,290,561
2,281,117
3,012,514
4,682,916
607,730 14,874,837
-
-
96,768
4,309,838
607,730
5,014,335
-
9,860,502
Segment A
Government stocks
Treasury bills
4,290,561
2,281,117
2,915,746
373,078
4,290,561
2,281,117
3,012,514
4,682,916
607,730 14,874,837
OTHER INVESTMENTS
BANK
Rs'000
2007
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
2006
SEGMENT A SEGMENT B
Rs'000
Rs'000
Available-for-sale
Unquoted
Shares
1,334,009
579,734
754,275
622,177
580,866
41,311
11,626
7,388
4,238
15,930
15,930
-
Derivative financial instruments
Derivatives held-for-trading
Currency forwards
Currency swaps
12,169
9,623
2,546
195
195
-
23,795
17,011
6,784
16,125
16,125
-
100.00
100.00
Seychelles
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
MCB Seychelles Ltd
MCB Factors Ltd
MCB Properties Ltd
MCB Registry and Securities Ltd
Multipliant Management Co. Ltd
Subordinated loan
97.88
Mauritius
Mauritius
Blue Penny Museum
MCB Stockbrokers Ltd
100.00
62.22
100.00
Mauritius
Mauritius
MCB Investment Management Co. Ltd
MCB Capital Partners Ltd
75.00
Madagascar
MCB Madagascar SA
100.00
57.56
100.00
100.00
91.28
Mozambique
MCB Equity Fund Ltd
Effective
Holding
%
100.00
-
Effective
Holding
%
49.99
MCB Moçambique SA
Mauritius
Country
of
incorporation
France
Country
of
incorporation
Mauritius
INVESTMENTS IN SUBSIDIARIES
Subordinated loan
INVESTMENTS IN ASSOCIATES
37(a) SECURITIES (continued)
950
500
1,653,138
26,655
1,679,793
950
2,099,444
26,655
2,126,099
1,000
3,000
-
11,425
12,000
14,625
24,735
50,000
-
-
Rs'000
1,534,903
500
1,000
3,000
7,131
11,425
12,000
14,625
24,735
50,000
211,522
227,653
Rs'000
1,534,903
2007
-
875,530
BANK
-
447,184
428,346
Segment A
-
Rs'000
Segment A
-
2007
Rs'000
447,184
BANK
-
446,306
-
446,306
-
-
-
-
7,131
-
-
-
-
-
211,522
227,653
Rs’000
Segment B
875,530
428,346
447,184
-
Rs’000
447,184
Segment B
100.00
97.48
100.00
60.00
75.00
49.51
100.00
100.00
49.51
100.00
100.00
90.58
Effective
Holding
%
100.00
49.51
Effective
Holding
%
49.99
2006
2006
1,766,732
21,870
1,744,862
500
950
1,000
3,000
7,131
-
12,000
14,625
-
50,000
211,522
227,653
Rs’000
1,216,481
BANK
872,151
400,232
471,919
24,735
Rs’000
447,184
BANK
-
1,320,426
21,870
1,298,556
500
950
1,000
3,000
-
-
12,000
14,625
-
50,000
-
-
Rs’000
1,216,481
Segment A
24,735
-
24,735
24,735
Rs’000
Segment A
-
446,306
-
446,306
-
-
-
-
7,131
-
-
-
-
-
211,522
227,653
Rs’000
Segment B
847,416
400,232
447,184
-
Rs’000
447,184
Segment B
continued
37(b) LOANS
(i) Remaining term to maturity
2007
2006
BANK
SEGMENT A SEGMENT B
BANK
SEGMENT A SEGMENT B
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
Rs'000
24,753,592 22,724,049 2,029,543 22,585,034 20,928,928 1,656,106
Within 3 months
591,112
571,585
19,527
627,017
345,940
281,077
2,299,621
2,290,771
8,850
797,568
778,817
18,751
14,983,433 12,289,796
2,693,637 13,646,577 11,230,391
2,416,186
Over 5 years
21,469,691 19,481,017
1,988,674 20,482,859 19,007,675
1,475,184
64,097,449 57,357,218
6,740,231 58,139,055 52,291,750
5,847,305
(ii) Credit concentration of risk by industry sectors
2007
BANK
SEGMENT A SEGMENT B
Rs'000
Rs'000
Rs'000
2,612,091 2,612,091
-
2006
BANK
SEGMENT A SEGMENT B
Rs'000
Rs'000
Rs'000
2,553,588 2,553,588
-
Manufacturing
5,533,978
4,690,181
of which EPZ
Tourism
Transport
Construction/Property
5,533,978
-
4,690,181
-
2,700,609
2,700,609
-
2,687,849
2,687,849
-
2,679,985
2,387,410
292,575
2,889,520
2,544,481
345,039
832
832
-
19,709
19,709
-
1,359,659
1,359,659
-
568,516
568,516
-
Traders
6,647,451
6,647,451
-
2,332,708
2,332,708
-
Others
3,830,327
2,853,427
976,900
2,248,357
1,335,576
912,781
1,269,475 15,302,579 14,044,759
1,257,820
22,664,323 21,394,848
continued
37(b) LOANS (continued)
(iii) Movements in allowances for credit impairment
2007
Portfolio
Rs'000
Specific
Rs'000
Total
Rs'000
Specific
Rs'000
2006
Portfolio
Rs'000
Total
Rs'000
BANK
Amounts written off
Interest suspense
1,970,877
398,200
2,369,077
1,883,130
367,000
2,250,130
356,392
40,600
396,992
351,722
31,200
382,922
(33,978)
-
(33,978)
(68,224)
-
(68,224)
(356,781)
-
(356,781)
(195,751)
-
(195,751)
1,936,510
438,800
2,375,310
1,970,877
398,200
2,369,077
782,994
-
782,994
901,410
-
901,410
2,719,504
438,800
3,158,304
2,872,287
398,200
3,270,487
1,961,989
362,199
2,324,188
1,883,130
367,000
2,250,130
-
-
-
(8,888)
(32,170)
(41,058)
1,961,989
362,199
2,324,188
1,874,242
334,830
2,209,072
350,068
35,738
385,806
351,722
27,369
379,091
Segment A
As restated
Amounts written off
Interest suspense
(33,978)
-
(33,978)
(68,224)
-
(68,224)
(356,781)
-
(356,781)
(195,751)
-
(195,751)
1,921,298
397,937
2,319,235
1,961,989
362,199
2,324,188
782,994
-
782,994
901,410
-
901,410
2,704,292
397,937
3,102,229
2,863,399
362,199
3,225,598
8,888
36,001
44,889
-
-
-
Segment B
-
-
-
8,888
32,170
41,058
6,324
4,862
11,186
-
3,831
3,831
15,212
40,863
56,075
8,888
36,001
44,889
(iv) Allowances for credit impairment by industry sectors
Gross amount
of loans
Rs’000
Non performing
loans
Rs’000
2007
Specific
provision
Rs’000
Portfolio
provision
Rs’000
Total
provision
Rs’000
BANK
4,651,286
120,101
39,031
44,100
83,131
Manufacturing
8,215,950
757,944
441,505
67,600
509,105
of which EPZ
Tourism
3,611,280
367,681
198,042
42,500
240,542
9,734,493
128,802
100,330
14,000
114,330
Transport
1,246,237
25,983
12,156
6,100
18,256
Construction
9,314,223
779,881
428,942
63,000
491,942
11,015,428
1,155,837
780,759
95,800
876,559
642,740
15,356
9,462
8,400
17,862
4,070,176
88,718
37,821
5,700
43,521
Traders
Infrastructure
2,317,647
65
35
3,100
3,135
Personal
6,720,941
1,213,070
644,737
97,300
742,037
Professional
424,520
90,900
75,810
16,700
92,510
295,560
157,234
77,997
2,700
80,697
161,797
53,357
51,520
5,400
56,920
583,044
89,973
15,104
1,100
16,204
5,127,927
138,876
80,105
24,500
104,605
64,097,449
4,725,197
2,719,504
438,800
3,158,304
4,651,220
120,035
38,965
44,100
83,065
Others
Segment A
Manufacturing
8,215,828
757,927
441,489
67,599
509,088
of which EPZ
3,611,280
367,681
198,042
42,500
240,542
Tourism
7,864,683
124,437
100,257
11,202
111,459
Transport
1,076,831
25,310
12,156
5,256
17,412
Construction
9,213,209
778,925
428,718
62,715
491,433
Traders
9,127,017
1,154,739
780,264
76,927
857,191
224,570
15,217
9,325
2,130
11,455
3,418,959
85,328
37,808
2,461
40,269
Infrastructure
2,317,596
65
35
3,100
3,135
Personal
6,675,489
1,197,026
631,430
96,932
728,362
424,520
90,900
75,810
16,700
92,510
Professional
280,694
157,143
77,906
2,405
80,311
161,797
53,357
51,520
5,400
56,920
583,044
89,973
15,104
1,100
16,204
3,546,281
135,283
79,315
16,610
95,925
57,357,218
4,694,765
2,704,292
397,937
3,102,229
Others
continued
(iv) Allowances for credit impairment by industry sectors (continued)
Gross amount
of loans
Rs’000
Non performing
loans
Rs’000
2007
Specific
provision
Rs’000
Portfolio
provision
Rs’000
Total
provision
Rs’000
Segment B
66
66
66
-
66
Manufacturing
122
17
16
1
17
of which EPZ
-
-
-
-
-
1,869,810
4,365
73
2,798
2,871
Tourism
Transport
169,406
673
-
844
844
Construction
101,014
956
224
285
509
1,888,411
1,098
495
18,873
19,368
Traders
418,170
139
137
6,270
6,407
651,217
3,390
13
3,239
3,252
51
-
-
-
-
45,452
16,044
13,307
368
13,675
-
-
-
-
-
14,866
91
91
295
386
-
-
-
-
-
Infrastructure
Personal
Professional
Others
1,581,646
3,593
790
7,890
8,680
6,740,231
30,432
15,212
40,863
56,075
Gross amount
of loans
Rs’000
Non performing
loans
Rs’000
2006
Specific
provision
Rs’000
Portfolio
provision
Rs’000
Total
provision
Rs’000
BANK
5,195,600
77,864
33,318
47,500
80,818
Manufacturing
8,307,454
814,252
579,049
75,400
654,449
3,760,338
471,699
331,787
55,200
386,987
8,538,005
110,177
67,240
12,400
79,640
of which EPZ
Tourism
Transport
1,300,322
17,192
7,359
5,800
13,159
Construction
8,091,950
765,755
433,231
52,900
486,131
Traders
9,644,300
1,104,726
739,828
82,100
821,928
803,316
10,857
5,690
12,000
17,690
3,597,364
104,576
56,662
16,200
72,862
Infrastructure
1,636,018
4
4
2,400
2,404
Personal
5,566,506
1,190,338
623,784
70,200
693,984
256,721
87,400
78,400
8,500
86,900
253,395
140,707
57,257
1,800
59,057
148,081
145,602
144,284
200
144,484
273,178
2,212
2,181
2,700
4,881
Professional
4,783,566
167,458
122,400
16,600
139,000
58,139,055
4,651,720
2,872,287
398,200
3,270,487
5,195,550
77,814
33,272
47,500
80,772
Others
Segment A
Manufacturing
8,307,262
814,117
578,985
75,399
654,384
of which EPZ
3,760,251
471,638
331,758
55,200
386,958
7,080,251
104,193
67,178
10,264
77,442
993,469
15,172
6,806
4,422
11,228
Tourism
Transport
Construction
7,864,563
762,611
433,231
51,281
484,512
Traders
8,292,959
1,103,432
739,542
69,120
808,662
208,945
10,746
5,588
3,001
8,589
2,072,603
104,568
56,655
9,128
65,783
Infrastructure
1,636,018
4
4
2,400
2,404
Personal
5,522,898
1,173,304
616,064
69,774
685,838
254,715
86,616
78,045
8,439
86,484
Professional
240,101
140,707
57,257
1,587
58,844
148,081
145,602
144,284
200
144,484
273,173
2,212
2,181
2,700
4,881
4,455,876
167,315
122,352
15,423
137,775
52,291,750
4,621,797
2,863,399
362,199
3,225,598
Others
continued
Gross amount
of loans
Rs’000
Non performing
loans
Rs’000
2006
Specific
provision
Rs’000
Portfolio
provision
Rs’000
Total
provision
Rs’000
Segment B
50
50
Manufacturing
192
of which EPZ
87
1,457,754
Tourism
46
-
46
135
64
1
65
61
29
-
29
5,984
62
2,136
2,198
Transport
306,853
2,020
553
1,378
1,931
Construction
227,387
3,144
-
1,619
1,619
1,351,341
1,294
286
12,980
13,266
594,371
111
102
8,999
9,101
Traders
Personal
Professional
Others
1,524,761
8
7
7,072
7,079
43,608
17,034
7,720
426
8,146
2,006
784
355
61
416
13,294
-
-
213
213
5
-
-
-
-
327,690
143
48
1,177
1,225
5,847,305
29,923
8,888
36,001
44,889
37(c) OTHER ASSETS
2007
BANK
SEGMENT A SEGMENT B
Rs'000
Rs'000
Rs'000
380,818
380,818
-
Balances due in clearing
Accrued interest receivable
781,800
689,588
92,212
2006
BANK
SEGMENT A SEGMENT B
Rs'000
Rs'000
Rs'000
464,613
464,613
526,121
462,781
63,340
Employee benefits asset
230,165
230,165
-
198,362
198,362
-
Others
378,551
286,911
91,640
411,866
309,296
102,570
1,771,334
1,587,482
183,852
1,600,962
1,435,052
165,910
37(d) DEPOSITS
BANK
Rs'000
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
SEGMENT A SEGMENT B
Rs'000
Rs'000
Demand deposits
17,667,775 14,589,669
3,078,106 14,827,472 12,194,294
2,633,178
Savings deposits
36,350,470 35,007,120
1,343,350 33,715,621 32,719,747
995,874
Up to 3 months
5,675,406
4,635,568
1,039,838
5,220,168
4,335,813
884,355
1,507,490
1,343,863
163,627
1,280,357
1,143,116
137,241
2,589,613
2,315,441
274,172
2,475,128
2,298,545
176,583
8,677,629
8,134,856
542,773
9,305,014
8,897,756
407,258
1,432,648
1,135,660
296,988
1,387,215
Over 5 years
1,387,215
-
19,882,786 17,565,388
2,317,398 19,667,882 18,062,445
1,605,437
73,901,031 67,162,177
6,738,854 68,210,975 62,976,486
5,234,489
(ii) Banks
Demand deposits
1,246,228
11,637
1,234,591
823,033
5,763
817,270
290,200
-
290,200
-
-
-
124,567
-
124,567
50,000
50,000
-
1,536,428
11,637
1,524,791
997,600
55,763
941,837
8,263,645 69,208,575 63,032,249
6,176,326
Up to 3 months
Over 5 years
75,437,459 67,173,814
Total
continued
37(e) OTHER LIABILITIES
Accrued interest payable
MCB Superannuation Fund
2007
BANK
SEGMENT A SEGMENT B
Rs'000
Rs'000
Rs'000
1,237,336 1,125,839
111,497
186,806
186,806
MCB Foundation
12,750
12,750
-
12,750
12,750
-
Derivative financial instruments
14,103
9,663
4,440
23,931
23,931
-
Interest suspense, impersonal & other accounts
Interest suspense
-
2006
BANK
SEGMENT A SEGMENT B
Rs'000
Rs'000
Rs'000
992,598
863,950
128,648
364,303
364,303
-
2,250,086
2,074,866
175,220
2,179,626
2,075,241
104,385
3,701,081
3,409,924
291,157
3,573,208
3,340,175
233,033
(782,994)
(782,994)
-
(901,410)
(901,410)
-
2,918,087
2,626,930
291,157
2,671,798
2,438,765
233,033
37(f) CONTINGENT LIABILITIES
BANK
Rs'000
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
SEGMENT A SEGMENT B
Rs'000
Rs'000
(i) Instruments
Guarantees on account of customers
10,531,399
7,967,194
2,564,205
9,376,142
7,131,063
2,245,079
Letters of credit and other obligations on account of customers
6,707,885
5,817,784
890,101
2,910,558
2,099,825
810,733
Foreign exchange contracts
7,029,518
2,956,820
4,072,698
3,273,555
-
3,273,555
394,829
46,026
348,803
Other contingent items
24,663,631 16,787,824
328,107
270,832
57,275
7,875,807 15,888,362
9,501,721
6,386,641
1,173,449
4,484,731
3,539,625
945,106
(ii) Commitments
Loans and other facilities, including undrawn credit facilities
4,366,559
3,193,110
(iii) Assets pledged against facilities granted by the Bank of Mauritius
The carrying amount of assets that have been pledged to secure the liabilities of the Bank are as follows:
Securities issued by Government of Mauritius
(iv) Tax assessment
-
-
-
1,014,515
1,014,515
-
201,762
201,762
-
182,880
182,880
-
(v) Other
Inward bills held for collection
375,853
298,352
77,501
380,129
348,158
31,971
Outward bills sent for collection
620,000
406,157
213,843
384,882
115,054
269,828
995,853
704,509
291,344
765,011
463,212
301,799
9,340,600 22,335,499 14,701,953
7,633,546
30,227,805 20,887,206
Total
37(g) OTHER INCOME
BANK
Rs'000
2007
SEGMENT A SEGMENT B
Rs'000
Rs'000
2006
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
(i) Fee income and commissions
Trade finance
210,571
172,648
37,923
152,831
130,281
22,550
Corporate finance
218,124
192,685
25,439
195,998
186,645
9,353
Credit card fees
193,313
161,707
31,606
156,349
129,740
26,609
Guarantees
102,450
77,554
24,896
120,206
66,208
53,998
Management and other fees
115,192
49,686
65,506
90,851
47,182
43,669
839,650
654,280
185,370
716,235
560,056
156,179
(ii) Dividend income
Income from quoted investments:
Subsidiary
23,796
23,796
-
-
-
-
Associate
11,898
11,898
-
29,745
29,745
-
150,057
47,081
102,976
90,058
24,666
65,392
Income from unquoted investments:
Subsidiaries
Others
35,623
28,647
6,976
30,072
28,378
1,694
221,374
111,422
109,952
149,875
82,789
67,086
37(h) ALLOWANCE FOR CREDIT IMPAIRMENT
BANK
Rs'000
Provisions for bad and doubtful debts
Bad debts written off for which no provisions were made
Recoveries of advances written off
2007
SEGMENT A SEGMENT B
Rs'000
Rs'000
BANK
Rs'000
2006
SEGMENT A SEGMENT B
Rs'000
Rs'000
396,992
385,806
11,186
382,922
379,091
3,831
9,590
9,590
-
2,015
2,015
-
(33,978)
(33,978)
-
(68,224)
(68,224)
-
(2,006)
(1,999)
(7)
(3,510)
(3,510)
-
370,598
359,419
11,179
313,203
309,372
3,831
A Review of
the Economic
Environment
“ On the basis of the continuing development of
infrastructure and technological access, the ICT
industry sustained a double-digit growth.”
21 September 2007
The International Context
revisions of 30 basis points compared to previous forecasts,
Strong economic performances across the globe have led to
these projected growth rates are inferior by a similar margin
a notable improvement in annual world output growth from
to that of last year mostly on account of a decline in the
4.9% in 2005 to 5.5% in 2006, underpinned by a favourable
expected annual expansion of the US economy in 2007
financial environment as well as some relief in oil markets
by more than a percentage point to 2.0% in line with
as from August 2006 following reduced tensions in the
the marked slowdown earlier this year. In the euro area,
Middle-East and improved demand-supply conditions at
though anticipated to fall largely as a result of the gradual
the time. As such, the gross domestic product (GDP) of the
withdrawal of monetary stimulus, growth should remain
US economy grew by an appreciable rate of 3.3%, largely
appreciable this year at 2.6% given favourable cyclical
anchored on robust consumption patterns associated with
conditions linked to the positive impact of broad-based
improved job creation, particularly in the services sector,
reforms on economic activity. Other advanced economies
despite a softening of the housing market. For its part,
would also depict resilience with Japan projected to witness
the euro area registered its highest expansion rate in six
an economic recovery in 2007 mainly due to upbeat bank
years at 2.8% as a consequence of economic restructuring
lending, corporate investment and exports, while the
programmes, enhanced business confidence and improving
acceleration of domestic demand in the UK would contribute
labour market conditions which contributed to reduce the
to strengthen growth to 2.9% this year despite inflation
joblessness rate in the region to 7.5% as at December
worryingly hovering above the 2% target in recent times. On
2006, the lowest in more than a decade. Moreover, emerging
their part, emerging economic powerhouses notably India
market economies made a significant contribution to
and China would outperform earlier expectations and post
the healthy global performance on the back of bullish
impressive expansion rates in 2007 and 2008 underpinned
investment and solid export performances, with China and
by solid domestic and external demand associated with
India, in particular, posting remarkable expansion rates of
market reforms and increased international openness. At
11.1% and 9.7% respectively.
other levels, groups of countries that are likely to uphold
their robust growth momentum this year include the ‘Newly
Latest economic releases indicate that growth in the euro
Industrialised Asian Economies’ (4.8%) reflecting strong
area, particularly in Germany, has remained above trend
export revenues in the electronics sector in particular
during the first half of 2007. As for the US, after a bleak
and the ‘Commonwealth of Independent States’ (7.6%)
first quarter characterised by an annualised growth rate
on account noticeably of sturdy growth performances of
of 0.6% prompted by a slump in the sub-prime mortgage
energy-exporting countries, especially Russia.
sector, it rebounded to expand by 3.4% year-on-year
during the second quarter. Hence, based on recent trends
Notwithstanding an overall optimistic prognosis, the
and geared up noticeably by outturns of emerging market
balance of risks to global expansion is somewhat inclined
economies, the world economy should pursue its sturdy
on the downside. In the first place, in case the projected
growth momentum with a projected expansion rate of
soft landing does not satisfactorily materialise, the US sub-
5.2% in both 2007 and 2008 as per the IMF July updates
prime mortgage crisis could have large-scale contagious
to its World Economic Outlook. Though representing upward
effects on the local economy as a whole and on global
IMF World Economic Outlook Projections
Annual percent change
2004
2005(e)
2006(e)
2007(f)
2008(f)
World output
5.3
4.9
5.5
5.2
5.2
Advanced economies
3.3
2.6
3.1
2.6
2.8
United States
3.9
3.2
3.3
2.0
2.8
Euro area
2.0
1.5
2.8
2.6
2.5
Germany
1.2
0.9
2.8
2.6
2.4
France
2.0
1.7
2.0
2.2
2.3
Italy
1.2
0.1
1.9
1.8
1.7
Spain
3.2
3.5
3.9
3.8
3.4
Japan
2.7
1.9
2.2
2.6
2.0
United Kingdom
3.3
1.8
2.8
2.9
2.7
7.7
7.5
8.1
8.0
7.6
Sub-Saharan Africa
6.0
6.0
5.5
6.9
6.4
Commonwealth of Independent States
8.4
6.6
7.7
7.6
7.1
7.2
6.4
6.7
7.0
6.8
8.7
9.2
9.7
9.6
9.1
China
10.1
10.4
11.1
11.2
10.5
India
7.8
9.0
9.7
9.0
8.4
Oil
30.7
41.3
20.5
(0.8)
7.8
Nonfuel
18.5
10.3
28.4
14.5
(7.8)
Advanced economies
2.0
2.3
2.3
2.0
2.1
Other emerging market and developing countries
5.6
5.4
5.3
5.7
5.0
Other emerging market and developing countries
Russia
Developing Asia
Commodity prices (U.S. dollars)
Consumer prices
(e) estimates (f) forecasts
Source : IMF World Economic Outlook - April 2007 and July 2007 Update
financial markets, particularly in line with recent indications
prices following the sustained increase in food prices due
that projections for US and global economic expansions for
to supply scarcity and growing use of biofuels as well as
2008 could be brought down on the basis of the persistence
in energy prices amidst geopolitical tensions in several
of credit market woes. Moreover, although inflation on a
regions of the world. As regards advanced economies in
worldwide scale has generally been kept under check last
particular, the tightening of labour markets and downward
year despite strong global demand, upward risks do currently
pressures on productivity growth could accelerate the
exist in various forms notably at the level of commodity
rise in consumer prices, while, in emerging market and
167
continued
Evolution of Brent Oil Prices
80
75
USD per barrel
70
65
60
55
50
45
Sep 07
Aug 07
Jul 07
June 07
May 07
Apr 07
Mar 07
Feb 07
Jan 07
Dec 06
Nov 06
Oct 06
Sep 06
Aug 06
Jul 06
40
developing economies, inflation is anticipated to worsen on
ahead, upside risks to oil prices prevail due to recurrent
average this year, owing mostly to high prices of non-fuel
factors like supply deficiencies and other disruptions in
commodities like metals and agricultural products linked
major oil-producing countries. At another level, on a longer-
to their growing demand. For their part, after receding in
term basis, lingering global imbalances could continue to
the second half of 2006, oil prices resumed a sharp upward
hinder global expansion despite continuing improvements
trend early this year, even reaching all-time highs recently,
therein in the form, amongst others, of trade liberalisation,
on the basis of the Lebanon conflict and disruptions to
downward pressures on the real effective value of the US
Nigerian and North Sea output as well as apprehensions
dollar and a more balanced domestic demand growth in
that strong demand would outstrip inventories. Looking
economies at different levels of development.
Evolution of key interest rates
%
7
6
Bank of England repo rate
5
Federal funds rate
4
ECB rate
3
2
1
Sep 07
Jul 07
May 07
Mar 07
Jan 07
Nov 06
Sep 06
Jul 06
May 06
Mar 06
Jan 06
Nov 05
Sep 05
Jul 05
0
In the financial markets, the generally benign and healthy
the US economy, to prolong the average weakening of the
environment observed during 2006 has facilitated the
US dollar. This is expected particularly against the euro and
creation of ideal economic conditions, thus contributing
the pound sterling unless the ongoing economic recovery
to curtail spillovers from the correction in the US housing
process in the US economy proves to be faster and stronger
market on both the local and global economies. This year,
than expected.
worrying concerns have emerged in the form of a tightening
of financial conditions due to the credit and housing market
Exchange Rates on World Markets
crisis in the US as well as observed systemic repercussions
Value as at
Annual average
on financial markets in several parts of the world including
30-Jun-06 29-Jun-07
FY
FY
2005/06 2006/07
downturns in debt and equity markets, credit crunch
USD/GBP
1.8491
2.0063
1.7793
1.9333
in monetary systems and sustained retrenchment from
USD/EUR
1.2779
1.3520
1.2178
1.3060
risky assets by investors. However, the financial sector
JPY/USD
114.51
123.39
114.90
118.56
is anticipated to eventually overcome these fears and
ZAR/USD
7.1650
7.0440
6.4128
7.1949
exhibit resilience as demonstrated previously by the
successful containment of the financial market turbulence
The Regional Context
that occurred during the February – March 2007 period.
At the regional level, in line with the strong global
Regarding specific financial segments, advanced economy
economic performance, sub-Saharan Africa sustained
equity markets reached close to record highs earlier this
its notable growth momentum in 2006 with an expansion
year owing to strong earnings growth, while emerging
rate of above 5% for the third year in a row. However, GDP
bond and equity markets bounced back during the year
growth in the region was half of a percentage point lower
to substantially high levels notably on indications of a
than in 2005 following temporary difficulties faced by
prospective loosening of monetary policy in the US. On the
oil-exporting countries to expand production in order to
interest rate front, while the key official rate in the euro area
meet growing world demand while oil-importing nations
was raised from 2.0% towards the end of 2005 to 4.0%
have benefited from satisfactory harvest and high prices
by June 2007 on the basis of a solid recovery, the Bank of
of non-fuel commodities as well as an appreciable pick
England lifted up its reference rate from 5.50% to 5.75%
up in consumption and investment against the backdrop
in July last in an attempt to rein in inflation. Conversely,
of socio-economic reforms. The growth forecast for 2007
responding to the housing market downturn and ongoing
has been noticeably increased from 5.5% to 6.9%,
worries over its potentially damaging impact on economic
being mainly attributable to healthy performances in
growth, the US Federal Reserve reduced the federal funds
oil-exporting countries given for instance the coming
rate by 50 basis points to 4.75% in September 2007. As
on stream of new production facilities in Angola and
such, the expected narrowing interest rate differential
Equatorial Guinea. Moreover, other member states would
between the US and EU – where further monetary tightening
take advantage of prudent macroeconomic management
is expected this year and early 2008 due to medium term
and growing demand especially for non-fuel commodities
inflationary pressures associated with buoyant activity –
whose prices have swollen during 2006. Overall, the
would contribute, in concurrence with uncertainty faced by
economic perspectives for sub-Saharan Africa appear
169
continued
bright even though some downside risks prevail notably in
rebounded in Madagascar, Mozambique, Seychelles and
respect of a potential slowdown of global economic growth
Maldives in 2006 and is projected to remain appreciable
and its consequences on oil and other commodity prices
this year. The inflation outlook for 2007 is also generally
as well as any changing private investor sentiment. With
favourable despite some worrying signs this year for
regard to the Indian Ocean region in particular, GDP growth
Madagascar and Seychelles.
Regional Economic Outlook Projections
Annual percent change
Real GDP Growth
Consumer Price Inflation
2005(e)
2006(e)
2007(f)
2005(e)
2006(e)
2007(f)
Botswana
6.2
4.2
4.3
8.6
11.3
6.0
Kenya
5.8
6.0
6.2
10.3
14.1
4.1
Madagascar
4.6
4.7
5.6
18.4
10.8
9.6
Mauritius
2.3
5.0
5.7
4.9
8.9
9.0
Mozambique
7.8
8.5
6.8
6.4
13.2
5.9
Namibia
4.2
4.6
4.8
2.3
5.1
5.9
Nigeria
7.2
5.3
8.2
17.8
8.3
7.9
Seychelles
1.2
4.5
5.0
1.0
(0.5)
11.0
South Africa
5.1
5.0
4.7
3.4
4.7
5.5
Tanzania
6.8
5.9
7.3
4.4
5.8
5.5
Uganda
6.7
5.4
6.2
8.0
6.6
5.8
Zambia
5.2
6.0
6.0
18.3
9.1
8.0
(4.5)
16.1
4.0
3.3
3.5
7.0
Sub-Saharan Africa
Maldives
(e) estimates (f) forecasts
Sources:
CSO and MCB staff estimates for Mauritius
IMF World Economic Outlook April 2007 Database for other countries
The Mauritian Economy
addressed by the authorities, it might take some time
Against the background of upbeat growth performance in
before a material reduction in the unemployment rate is
our main export markets and a favourable evolution of the
achieved. As regards inflation, after stabilising at some 5%
euro vis-à-vis the dollar boosting domestic activity, the
during most of the first semester of last year, it took on a
Mauritian economy staged a notable recovery in 2006, with an
sharp upward trend since June 2006 to reach 8.9% as at
expansion rate of 5.0% as compared to 2.3% in the previous
December last and 10.7% as at June 2007. Some of the
year. Meaningfully, a relative stabilisation was observed in
main contributors to this significant rise are the removal
the textile and clothing industry after years of decline which,
of price subsidies, adverse weather conditions and the
together with a sustained solid performance in the seafood
segment, contributed to a major turnaround in the exportoriented manufacturing sector. Business and financial
Sectoral contribution to GDP
(Year 2006)
services and transport, storage and communications
Others incl.
Government 3.9%
were, as in previous years, major contributors to economic
growth while a healthy performance was also achieved in
construction on the strength of investments in Integrated
Resort Scheme (IRS) and tourism related projects, despite a
rather subdued outturn in the latter due to the Chikungunya
scare. In fact, continued strong interest by investors in
tourism underscores the high growth potential of the
sector notwithstanding its multiple vulnerabilities. On the
other hand, another contraction was observed in the sugar
Sugar 3.6%
Non-sugar agriculture 2.8%
Export-oriented industry 7.6%
Social and general public
services 14.8%
Domestic-oriented
industry 11.6%
Business activities 5.5%
Other financial
intermediation 1.2%
Electricity,
gas & water 2.0%
Banking 6.3%
Construction 5.6%
Insurance 2.8%
Transport, storage &
communications 12.2%
Wholesale & retail trade 11.6%
Hotels & restaurants 8.5%
sector in 2006 following adverse weather conditions and a
reduction in area harvested in line with loitering difficulties
knock-on effects of high commodity prices on international
in the sector. The expansion rate of the economy excluding
markets amidst strong global demand and major supply
sugar stood at 5.3% last year, up from 2.8% in 2005.
disruptions coupled with rupee depreciation year-on-year.
Growth momentum should be maintained this year on the
Whilst inflation should subside in the latter half of 2007,
back of a noticeable upturn in the tourism sector and added
to a large extent reflecting base effects, it is expected to
buoyancy in construction as well as textile and clothing.
remain elevated partly due to price shocks on international
Continued strong performances in business and financial
markets with our forecast being further raised to around 9%
services and in transport, storage and communications
as at December 2007. Although remaining at high levels,
should further support economic activity whereas the sugar
the budget deficit as a proportion of output is encouragingly
sector is projected to post another year of contraction.
on a downward trend, contributing to a decline in the public
sector debt to GDP ratio. On the external front, despite a
Despite the economic recovery, labour market conditions
significant increase in gross tourism receipts, the current
are expected to remain soft notably on account of lingering
account deficit worsened considerably in FY 2006/07 owing
structural rigidities. Whilst some related concerns are being
mainly to a rapidly rising import bill against the backdrop
171
GDFCF
6.9
mid-year, %
-2.3
FY, Rs bn
FY, % exports
annual avg., mid-rate
External debt service ratio
Exchange rate (Rs/USD)
23.977
6.8
22.5
25.183
7.9
21.7
895
+0.7
-1.5
-16.6
-
7.7
6.9
7.9
12.66
13.2
75.9
4.1
27.3
23.3
3,651
5.7
2.1
108
1,175
1999
26.251
7.7
23.8
966
+2.1
-1.3
-14.0
6.7
8.8
4.2
5.3
10.65
10.9
78.0
3.8
22.9
25.6
3,860
7.9
9.7
120
1,187
2000
29.012
9.7
29.4
1,091
+5.1
+3.4
-10.4
6.9
9.1
5.4
4.4
11.14
9.9
78.1
6.7
22.7
26.6
3,795
4.9
5.2
132
1,200
2001
Main economic indicators
29.888
8.5
34.9
1,356
+5.9
+5.4
-10.7
7.3
9.7
6.4
6.3
10.01
13.0
80.6
6.1
21.8
25.2
3,938
3.3
1.8
142
1,210
2002
28.108
8.0
38.0
1,666
+9.1
+2.4
-12.9
7.7
10.2
3.9
5.1
8.26
11.7
82.3
6.2
22.6
24.7
4,578
4.5
4.4
157
1,223
2003
Sources: CSO, MoF, BoM and MCB staff estimates
(b) Based on financial year imports of goods
Notes:
(a) As from 2004, a new method of calculation has been adopted for measuring unemployment on a quarterly basis using results of the Continuous Multi-Purpose Household Survey.
Figures for 2000 to 2003 have been reworked on the basis of results obtained in the 2004 survey.
2) MCB forecasts
end June, weeks
Import cover(b)
1) revised estimates
end June, USD m
Net International Reserves
880
-9.7
-2.8
CY, Rs bn
FY, % GDP
Balance of visible trade
Current account balance
Overall BOP
-
5.4
avg., %
Unemployment rate (new basis) (a)
Unemployment rate (old basis)
6.8
FY, %
CY, %
CPI inflation
CPI inflation
9.03
end June, %
Bank rate
75.7
17.4
end June, % GDP
end June, %
3.7
22.9
% GDP
FY, % GDP
M2 growth
M2
Budget deficit
3,595
24.9
USD
% GDP
GDP per capita
GDS
6.1
5.8
%
%
Real GDP growth
100
1,161
1998
Rs bn
mid-year, '000
Unit
Real GDP growth (excl. sugar)
GDP at market prices
Population
Indicators
27.468
6.5
37.4
1,788
+3.2
+0.8
-21.5
8.4
-
4.7
3.9
4.74
14.4
85.1
5.4
21.6
22.0
5,182
4.5
4.8
176
1,234
2004(1)
29.220
6.5
33.2
1,854
-3.1
-3.5
-30.1
9.6
-
4.9
5.6
6.13
13.1
88.2
5.0
21.4
16.5
5,101
2.8
2.3
185
1,244
2005(1)
31.153
8.4
31.8
2,035
-3.0
-5.3
-41.4
9.1
-
8.9
5.1
7.30
11.2
90.7
5.3
24.4
15.0
5,272
5.3
5.0
206
1,253
2006(1)
31.580
6.7
37.6
2,710
+6.6
-7.3
-43.8
9.1
-
9.0
10.7
10.98
9.1
89.6
4.3
24.0
14.4
5,690
6.2
5.7
227
1,261
2007(2)
continued
of the purchase of aircraft, rupee depreciation on an
gradual reduction in the area of land under cultivation to
annual average basis and high commodity prices globally.
some 63,000 hectares, the centralisation of factories and
Nonetheless, support from the capital and financial account
the rightsizing of its labour force would contribute towards
contributed to a re-established surplus on the balance
the transformation of the sector into a cost-effective
of payments, thereby reinforcing the country’s already
and internationally competitive cane cluster that should
comfortable reserves position. Regarding monetary policy, a
progressively strengthen the multifunctional role and hence
tightening stance has been adopted over the financial year
the viability of the sugar-producing segment over time.
under review in line with a general increase in interest rates
in key global markets and mounting inflation domestically.
Sugar output and price
‘000 tonnes
Rs’000 per tonne
Sectoral Analysis
700
20
Sugar
600
18
500
16
400
14
300
12
Following a drop in the area of land harvested to 66,732
hectares, unfavourable climatic conditions and a decline in
cane productivity per hectare, sugar production decreased
to 504,857 tonnes in 2006 leading to a contraction of 2.9%
in the sector. Notwithstanding this poor performance and
200
2002/03
2003/04
Sugar production
2004/05
Crop year
2005/06
2006/07
10
Price (right scale)
the decrease of 5% of sugar prices on the EU market,
export revenue rose by 5.7%, underpinned by the fall in the
The successful reengineering of the sugar industry in the
exchange rate of the rupee against the euro. For FY 2007/08,
short to medium term is rendered all the more critical
owing to detrimental climatic conditions combined with
given that, in addition to the effective price cut on the EU
a further reduction in the cultivation base, sugar output
market, competitive pressures are likely to emanate from
is anticipated to decline further to 465,000 tonnes,
the scheduled dismantling of the sugar protocol following
representing a 7.9% fall as compared to FY 2006/07 and
negotiations on the Economic Partnership Agreements
a shortfall of 12.4% with respect to the average annual
between EU and ACP states that pertain to liberalisation
production of some 531,000 tonnes registered over the past
arrangements spanning the period January 2008 to October
five years. However, export revenue could be upheld by the
2015. A major reassuring development in view of the
expected depreciation of the rupee against the euro on an
significant outlays required to finance the restructuring
annual average basis, the more so that no price reduction
of the industry has been the EU’s decision to increase the
associated with the EU sugar regime reform is scheduled
share of accompanying measures accruing to Mauritius
for the period. Globally, after shedding some 500 jobs and
from 15.0% to 19.4%. Presently, in addition to some
witnessing a fall in its share of GDP from 4.2% in 2005
EUR 6.5 million that has already been disbursed as sugar
to 3.6% in 2006, the economic importance of the sugar
sector budgetary support, the scheduled payout of a variable
industry, in its present form, would further decline this
quantum of about EUR 4.5 million under the European
year in terms of its contribution to output and employment.
Development Fund would hinge on a set of performance
Nonetheless, measures linked inter alia to the targeted
indicators being met, namely the closure of non-economic
173
continued
factories, the application of a Voluntary Retirement Scheme
hosted a noticeable recovery in 2006 with a growth rate of
as well as the development of a training programme for
4.6%, mirroring both improved performances by the textile
retiring workers, and the de-rocking of land. As such, efforts
and clothing segment as well as a diversification of the
should be upheld to ensure the frontloading and timely
export base. In particular, led by continuing Government
disbursement of funds with a view to enabling the proper
support and private sector investment, exports of fish and
sequencing and swift realisation of projects. Moreover,
fish-related products rose by an impressive 57.8% last
given persistent difficulties encountered by stakeholders
year after significant growth rates of 11.8% and 40.9%
to agree on issues vital to the effective implementation of
achieved in 2004 and 2005 respectively, as such adding
the reform programme, consultations should be maintained
further credence to the ambition of turning the seafood
and agreement reached without undue delays. The risks of
hub into a robust economic pillar. Besides, total exports of
altogether missing targets set by the EU are very real and
textile and clothing products increased by 13.6% in 2006,
the costs thereof hefty indeed.
thus possibly evidencing the success of reforms such as
an upgrade in productive capacity encompassing quality
Export-Oriented Industry
improvement as well as successful vertical integration
Despite preferences obtained under the AGOA, the
and consolidation strategies, greater product and market
competitive pressures and uncertainty linked to the
diversification, and better supply chain management.
liberalisation of the international market environment
Despite the appreciable overall growth performance, net
have elicited a four-year decline for the export-oriented
job loss in the export-oriented sector accelerated to attain
industry which ended with a peak contraction rate of 12.3%
2,322 between December 2005 and December 2006, driven
in 2005 in the wake of the phasing-out of the Multi-Fibre
by the sizeable reduction in workforce of the wearing apparel
Agreement. Nevertheless, with net exports rebounding
segment in a context where the rationalisation process has
to post an expansion rate of 9.1% mostly flowing from a
led to a net closure of 34 enterprises.
substantial upturn in revenue collection on EU markets
pepped up by a strong euro, the export-oriented sector
Though the export-oriented industry is projected to pursue
its recovery this year, a number of issues – that could
Export-oriented industry :
Employment & exports
materially hurt the optimistic outlook in the short to medium
term if materialised – still warrant attention. In the first
Dec; ‘000
Rs bn
place, downside risks to exports of seafood products
100
35
to EU markets exist in the form of concerns expressed
80
32
over product quality licensing, continuing freeing up of
60
29
global access to markets and depleting sea stocks, while
40
26
20
23
0
2002
2003
Mauritian workers
2004
Expatriates
2005
2006
Exports (right scale)
20
steadfast adaptation to increasingly stiff price and quality
competition on the EU and US markets in particular is
required from the textile and clothing segment, the more so
considering the scheduled termination in the coming years
of the safeguard mechanisms imposed by these entities to
limit the shipments of certain categories of Chinese clothing
emerging markets like Italy, Sweden and Malaysia due
and apparel products. Overall, provided these concerns are
to the further opening up of air access and reinforced
duly addressed and in line with the prospective launch of
marketing efforts. Notwithstanding the relatively poor
the land-based oceanic industry in 2009, the continuing
arrivals performance, gross tourism receipts increased by
diversification and strengthening of the economic base
a considerable 24.3% to reach some Rs 32 billion in 2006
provides a formidable opportunity for employment creation
on the back of a general depreciation of the rupee against
and increasing the resilience of economic activity to
currencies of our major markets.
idiosyncratic shocks.
Tourist arrivals and receipts
Tourism
‘000
Rs bn
Against the backdrop of year-on-year contractions in
800
40
tourist arrivals in March, May, June and November last
600
30
year compared to corresponding periods in 2005 as well
400
20
as generally restrained achievements in other months,
200
10
the tourism industry grew at a below par rate of 3.5% last
0
year with total arrivals reaching 788,276. By and large,
2002
2003
Tourist arrivals
2004
2005
2006
0
Receipts (right scale)
this subdued performance was mainly engendered by the
Chikungunya episode that affected foreigners’ view of the
For the first six months of 2007, a 20% increase in arrivals
island as a health-safe destination notably in the case
has been noted compared to the corresponding period in
of our major markets namely France and Reunion Island
2006 with peaks of 37.5% and 28.6% year-on-year in
from where tourist arrivals declined by 17.3% and 10.0%
March and May respectively. Based on these trends and
respectively in 2006. However, some relief emanated from
considering the expected stimulating impact of the air
access liberalisation process on both established and
Tourist arrivals by country
of residence (Year 2006)
Others 3.6%
emerging markets, the tourism industry is expected to post
a double-digit growth this year with arrivals estimated
at more than 900,000. As such, barring large exogenous
France 23.1%
shocks, the tourism sector looks set to firmly position itself
Asia 7.6%
as a major driver of long term economic growth and, hence,
Other African 3.7%
of employment and income creation particularly considering
Reunion Island
11.3%
its significant ripple effect across the economy. In the short
UK 13.0%
to medium term, a high-calibre performance could be
South Africa 9.0%
Other European 12.6%
buttressed by recent Budget proposals in favour of enhanced
Italy 8.8%
strategies including a branding exercise for the Mauritian
destination worldwide, diversified tourism products and
Germany 7.3%
the development of a more coherent national strategy for
Europe 64.8%
tourism development. Proper and prompt attention should
175
continued
however be given to infrastructure development as well as
banking institutions and further market diversification of
law and order on the basis of recurrent concerns regarding
existing ones. Regarding other segments, insurance and
capacity and security, issues to which the tourism sector is
business activities maintained notable growth rates of
highly sensitive.
5.0% and 8.1% respectively last year, with even better
performances anticipated in 2007.
Business and Financial Services
Growth in the business and financial services sector –
As regards the stock market, in line with the economic
of which nearly two-thirds is made up of the financial
recovery and improved investor confidence, a bullish trend
intermediation segment and the rest by business
was maintained with the SEMDEX soaring by 70.3% over
activities consisting inter alia of consultancy, engineering,
FY 2006/07 to reach 1,433.07 as at 29 June 2007, and the
accountancy and other professional activities – increased
total return index, SEMTRI, rising by a hefty 77.4% in rupee
by nearly one percentage point last year to attain 7.3%.
terms over the financial year to close at 3,691.60. Likewise,
Underpinned by a more gratifying business environment
the Development & Enterprise Market, which was set up in
linked to the economic recovery process, the banking sector
August 2006 for companies quoted on the Over-The-Counter
was a key contributor to this appreciable performance,
market, small and medium enterprises (SMEs) and newly
expanding by 7.1% in 2006. It should sustain its growth
set up companies with good growth potential, observed an
momentum this year, the more so considering enhanced
uptrend with the DEMEX and DEMTRI growing by 45.4%
business sentiment following budgetary measures. In the
and 48.0% respectively from the starting date to the end of
longer term, the sources of growth could prove more varied
June 2007. Moving forward, on account of various initiatives
and resilient on the basis of the prospective launch of new
aimed at raising both the knowledge of and interest for the
Daily evolution of SEMTRI (in rupee terms)
3700
3500
3100
2900
2700
2500
2300
2100
1900
1700
Jun 07
May 07
Apr 07
Mar 07
Feb 07
Jan 07
Dec 06
Nov 06
Oct 06
Sep 06
Aug 06
1500
Jul 06
Index: 5 July 1989=100
3300
stock exchange among the population as well as a generally
communications sector, expansion in 2006 attained a
favourable short to medium term outlook for the major listed
noteworthy, albeit declining, rate of 7.3% in line with the
companies amidst an enhanced economic environment, the
purchase of aircraft and the buoyant performance of the ICT
various stock market indices can be expected to prolong
sector. Indeed, on the basis of the continuing development of
their healthy performances.
infrastructure and technological access, the ICT industry –
whose contribution to GDP reached 5.8% – sustained a
Other Main Sectors
four-year period of double-digit growth. However, there
Strong consumer demand and expanding Freeport activities
remains much scope for more effectively tapping into
largely accounted for the notable growth rate of 5.1% in the
the substantial socio-economic benefits attached to the
trade sector in 2006 but a relatively inferior performance
deployment of technologies.
is expected this year due to a slowing down of the real
growth of consumption expenditure against the backdrop
Savings and Investment
of high consumer price inflation. For its part, the domestic-
The Gross Domestic Fixed Capital Formation (GDFCF) to
oriented industry, after stagnating in 2005, posted a
GDP ratio improved from 21.4% in 2005 to 24.4% last
noticeable recovery last year as translated by a growth rate
year, largely due to significant outlays in the acquisition of
of 4.1% prompted by growing economic activity nationwide,
aircraft and marine vessel. When excluding this item, the
including at the level of SMEs within the context of a more
investment ratio almost stagnated at a below par 21.6%.
stimulating incentives set-up. In the foreseeable future,
Nonetheless, some comfort can be taken from the fact
while downside risks to the performance of the domestic-
that last year’s performance was driven by a significant
oriented sector relate to increasing competition from
recovery in private sector investment on the back of the
imported products as well as likely tightening pressures
implementation of large scale projects notably related
on the consumer market linked to price hikes, planned
to tourism and hospitality. As such, the ratio of private
market liberalisation in various sectors could stimulate its
investment to output improved perceptibly in 2006, albeit
development over the medium term.
remaining subdued at 16.7%, and is expected to increase
further this year amidst enhanced investor confidence
The construction sector rebounded strongly from the 4.4%
largely generated by an improvement in the business
contraction in 2005 with a growth rate of 5.2% last year
framework through lower taxes, streamlined regulations
following major works undertaken with regard to residential
and stronger institutions, amongst others.
buildings as well as the construction/renovation of hotels
and the development of IRS projects. Notwithstanding
For its part, the ratio of Gross Domestic Savings (GDS) to
general supply intricacies regarding raw materials and
GDP went down by 1.5 percentage points to stand at 15.0%
human resources, the upturn in the construction sector
last year in line with high nominal growth in consumption
should be pursued this year, mainly driven by the hotel and
expenditure. The abnormally low savings rate, which is
hospitality industry, with extra support expected from the
projected to decline even further this year, has resulted in
expansion and launch of textile and clothing enterprises
a large domestic resource gap of nearly 10% of GDP. This
amongst others. In respect of the transport, storage and
highlights the importance of attracting foreign investment
177
continued
to finance capacity building at the level of physical capital,
Inflation
a prerequisite for enhanced future growth. Encouragingly,
The general price level shot up by a significant margin
economic reforms embarked upon by the authorities to foster
during the year ending June 2007 reflecting pressures
a more business-friendly environment coupled with a broader
stemming from developments within the domestic
array of opportunities at sectoral level have contributed to a
economy as well as in global markets. As such, the sharp
substantial rise in foreign direct investment flows. Provided
upward trend in inflation in FY 2006/07 has to some
that the restructuring programme is not derailed, these
extent been triggered by the budgetary measures linked
funds should support the upward trend in GDFCF, thereby
to the increase in excise duties and the replacement of
upholding the economic recovery process and providing an
generalised subsidies on rice and flour by targeted income
adequately solid platform for boosting domestic financing.
support which contributed to a substantial rise in the
sub-index relating to food and alcoholic beverages as
Resource gap & FDI
illustrated in the table below. These pressures have been
compounded by the sustained high level of oil prices and
% GDP
30
the surge in other commodity prices internationally. Further
25
20
fuelling imported inflation has been the depreciation of
15
the effective exchange rate of the rupee on an annual
10
average basic albeit tempered by the relative strength of
5
0
-5
2002
2003
2004
2005
2006
the local currency particularly against the greenback since
early 2007. On the whole, headline inflation increased at
-10
Gross Domestic Savings
GDFCF
Resource surplus/gap
FDI
an uninterrupted pace to reach 10.7% as at June 2007
compared to 5.1% one year earlier.
Movement in CPI
Description
% Change (FY 2006/07)
Average
Point-to-point
Food and non-alcoholic beverages
299
14.5
19.9
Alcoholic beverages and tobacco
86
16.8
4.4
Clothing and footwear
60
6.9
5.9
Housing, water, electricity, gas and other fuels
96
9.0
4.5
Furnishings, household equip & routine household maint.
80
7.7
6.9
Health
28
5.6
4.0
Transport
139
7.6
4.2
Communication
31
(2.0)
1.9
Recreation and culture
53
6.5
4.4
Education
24
5.9
9.0
Restaurants and hotels
50
17.1
10.3
Miscellaneous goods and services
54
8.2
10.0
1,000
10.7
10.0
TOTAL
1 7 8 Weight in CPI basket
ANNUAL REPORT 2007
Even on excluding factors that are inherently prone to
volatility, the inflation rate witnessed a considerable
Labour force and unemployment
‘000
%
575
12
525
10
475
8
excluding movements in prices of food and energy items as
425
6
well as in administered prices went up steeply from 4.5%
375
4
rise as gauged by the hike in core inflation over the last
financial year though a relative stabilisation has been
observed during the last months. For instance, core inflation
in June 2006 to 7.9% in June 2007. A further indication
of underlying inflationary pressures is the increase in the
GDP deflator by 6.9% in 2006 as compared to 4.3% in
325
2002
2003
Mauritian employed
Expatriates
2004
2005
2006
2
Mauritian unemployed
Unemployment rate (right scale)
the previous year. Looking ahead, inflation should, barring
major disturbances, adopt a declining course largely due
therein and related restructuring initiatives undertaken,
to a strong statistical effect but also reflecting monetary
notable job creation occurred in the construction sector
policy tightening. Nonetheless, the rate should remain high
and in the domestic-oriented industry, reflecting their
on account of more pronounced risks to price stability linked
reinvigorated economic performances, as well as in the
inter alia to regained volatility in oil markets and heightened
tertiary sector. In fact, the latter cemented its position as
pressures on other commodity prices as a result of tight
the predominant source of employment in the economy
supply conditions and strong global demand.
with remarkable net employment gains of more than 7,000
driven by contributions from the business and financial
Inflation
services, tourism, trade and education sectors. Overall,
%
with the relative improvement in the labour market
12
being reflected by net job creation exceeding the rise in
10
the labour force by 1,900, the unemployment rate, whilst
8
remaining high, declined from 9.6% in 2005 to 9.1% last
6
year, the first downward movement since the early 1990s.
4
In spite of some encouraging signs of improvement, the
Headline
Core 1
Jun 07
May 07
Apr 07
Mar 07
Feb 07
Jan 07
Dec 06
Nov 06
Oct 06
Sep 06
Aug 06
Jul 06
2
labour market conditions are projected to remain soft for
some time on account of inherent inefficiencies and would
Core 2
thus warrant close scrutiny in the periods ahead. Indeed,
Core 1: e xcludes “Food, Beverages, Tobacco” components from
Headline inflation
Core 2: e xcludes Food, Beverages, Tobacco, energy prices and administered
prices from Headline inflation
despite some progress towards reducing information
asymmetries, initiatives to tackle job mismatch and other
structural rigidities linked to the transformation of the
Employment and Wages
economy will take time to materialise and their success
As opposed to the sugar and export-oriented manufacturing
will hinge upon the timely and effective implementation of
sectors where a net employment contraction of some 1,000
specific human development and legal reforms in addition
was observed in 2006 in line with lingering difficulties
to that of broad-based economic programmes.
179
Sectoral breakdown of
employment (Year 2006)
Others 7.2%
Sugar 3.9%
Non-sugar agriculture,
forestry and fishing 5.9%
Social & general public
services 16.1%
EPZ 12.6%
continued
expenditure. The improvement in public finances has
been translated by a year-on-year decline in the share of
public debt to GDP to below 55% in June 2007. Likewise,
after providing for the closing of the Consolidated Sinking
Fund and the inclusion of the domestic debt of public
corporations as per its revised definition, public sector debt
Business & financial services
and real estate 5.9%
Domestic-oriented
industry 10.4%
Transport, storage &
communications 7.1%
Construction 9.4%
Hotels & restaurants 6.2%
Trade 15.3%
declined by six percentage points to reach 62.8% of GDP as
at June last.
Breakdown of Government
expenditure (FY 2006/07)
Economic affairs 9.5%
The overall wage rate index grew by 3.8% from September
2005 to September 2006 compared to a 5.0% rise over
Defence, public order
& safety 8.5%
Social security
& welfare 21.6%
the corresponding period one year earlier. Increases in the
respective sub-indices of all industry groups were recorded
with the largest wage rate hike of 9.5% registered in the
construction sector, followed by expansions of 8.3%, 7.0%
and 6.2% in the utilities, tourism, and real estate, renting
and business activities sectors respectively. Conversely,
wages in the health and social work segment witnessed the
Public debt
interest 17.4%
Education 13.8%
General public
services excluding
public debt interest 12.9%
Recreation,
culture & religion 1.1%
Health 8.3%
Housing and community
amenities 6.9%
lowest expansion rate at a mere 0.3%. With regard to the
contribution to the increase in the general wage rate index,
In the context of the National Budget 2007/08, alongside
the manufacturing, mining and quarrying industry group
measures to enhance tax collection and compliance, major
took top spot in view of its significant weight, accounting
fiscal announcements included the accelerated reduction
for 1.2 points within the total rise of 5.2 points.
in personal and corporate income taxes to 15% and the
imposition of a special levy on profitable banks as from
Public Finance
the current financial year. Reflecting the commitment
In spite of a reduction in corporate and personal income tax
towards reinforced fiscal discipline against the backdrop
rates, the authorities managed to reduce the budget deficit
of the high, albeit declining, public sector debt as well
by one percentage point to 4.3% of GDP in FY 2006/07.
as its momentous restraint on fiscal manoeuvring, the
Nonetheless, this still constitutes an underperformance of
budget deficit is projected to further decline to 3.8%
30 basis points as compared to the announced estimates
of GDP in FY 2007/08, while the primary balance would
owing, amongst others, to a lower than expected increase
encouragingly shift to a positive figure. In particular, the
in tax revenue, delay in the disbursement of grants by
revenue account is likely to register an elevated growth
the EU and higher than anticipated expansion in current
rate of 18.5% due principally to substantial proceeds
Social 51.7%
Budget revenue, expenditure
& deficit
Rs bn
60
50
40
30
20
10
0
Looking ahead, to better release resources for enhanced
economic activity, high focus should be placed on tackling
% GDP
2002/03
2003/04
2004/05
Total derived revenue & grants
2005/06
2006/07
7
6
5
4
3
2
1
the still high public sector debt situation. Fiscal adjustment
initiatives should therefore be continuously deployed to
trim down the budget deficit to more sustainable levels by
means of a judicious mix of pro-growth initiatives as well
as a bold and more extensive range of budgetary savings.
These may include a rigorous application of the Medium
Term Expenditure Framework and a far more active search
Budget deficit (right scale)
for ‘value for money’ public services.
Total derived expenditure & net lending
of Rs 2.9 billion mostly from the EU representing grants
External Front
for general budget and sugar sector support as well as
External Trade
the anticipated buoyancy effect of purported improved
Symptomatic of an improving export-oriented industry despite
economic activity with upshots being estimated increases
competitive threats linked to world trade liberalisation,
of 12.1% in receipts of personal income and corporate
total merchandise exports expanded by 16.9% in 2006. In
taxes and of 9.9% in inflows relating to value added tax.
particular, after worsening in 2005, the textile and clothing
On the expenditure side, a 15.3% increase is expected
industry achieved an upturn last year as translated, for
with recurrent expenditure rising by 13.2%, driven in
instance, by a growth of 12.3% in exports of articles of apparel
large part by expenses on wages and salaries, and capital
and clothing, while the seafood hub upheld its remarkable
expenditure surging by a notable 28.1% mostly due to
robustness through a rise of 48.8% in revenue associated with
major public infrastructure works. It is thus reassuring to
both EPZ and Freeport transactions. For its part, cane sugar
take cognisance of the firm commitment of the authorities
exports expanded despite reduced production and a price cut,
to boost the capacity of the country as a consequence
fuelled by the relative strength of the euro. Comparatively,
of its insfrastructure reaching its stretch limit following
imports swelled by a larger proportion than exports at a rate of
more buoyant activity. For instance, while the worryingly
23.9% mostly on account of a soaring bill for refined petroleum
large fleet of vehicles – 326,501 as at June 2007 – is
products, the purchase of aircraft and upward commodity price
fuelling congestion problems in a context where the road
movements linked to international market conditions as well
network has improved only moderately in recent times, the
as the depreciation of the effective exchange rate of the rupee
international competitiveness of the port as well as its
on an annual average basis. Overall, notwithstanding the
strategic positioning as a regional transshipment hub are
substantial rise of some 37.0% in net exports of the Freeport
apparently being impaired by capacity constraints linked
Zone, uplifted by buoyant trade in seafood and manufactured
to its increasing utilisation by operators – total container
articles, the balance of trade deficit significantly deteriorated
traffic rose by 10.2% over FY 2006/07 – coupled with the
from Rs 30.1 billion in 2005 to Rs 41.4 billion last year,
related underdevelopment of underlying infrastructure
representing an increase in its proportion to GDP from 16.2%
support despite ongoing projects.
to 20.1% over the corresponding period.
181
Balance of trade
continued
markets since the beginning of the year and pressures
Rs bn
on the cost of some food items and raw materials amidst
120
100
80
60
40
20
0
-20
-40
-60
supply-side disruptions and growing world demand.
Looking forward, a favourable balance of trade position in
the medium term would hinge on measures to expand the
export base and strengthen its competitiveness. Moreover,
it might be judicious, albeit challenging, to define a long2002
2003
Exports (f.o.b)
2004
Imports (c.i.f)
2005
2006
Balance of trade
term strategy to reduce our dependence on imported food
and energy items given increasingly recurrent price shocks
on international markets.
The balance of trade deficit is projected to broaden this
year as gauged by first semester results depicting its
widening to Rs 21.1 billion from Rs 17.7 billion in the
Exports by country of destination
(Year 2006)
corresponding period of 2006. Export growth would be
driven by appreciable achievements expected in the
seafood and the textile and clothing industries, supported
Others 13.7%
Malagasy Rep. 4.8%
UK 32.4%
by a strong euro. On the import side, while a much lower net
outlay in respect of the purchase of aircraft should provide
USA 8.3%
some relief to the overall bill, excluding Freeport activities,
a sizeable rise should again be registered considering the
UAE 11.4%
general upward movement in oil prices on international
France 12.6%
Other European Countries 16.7%
Imports by country of origin
(Year 2006)
Balance of Payments
Notwithstanding a solid rise of some 27% in gross tourist
Australia 2.7%
Others 6.2%
South Africa 7.3%
remittances to more than Rs 36 billion during FY 2006/07
India 13.6%
USA 2.0%
income account, the current account deficit is estimated to
Other European
countries 7.0%
China 8.6%
UK 2.5%
Finland 2.4%
Hungary 3.5%
Italy 2.6%
France 14.2%
to 7.3% of GDP in the last financial year, largely on account
UAE 2.9%
of a strong rise in imports on the back of the purchase of
Japan 2.8%
aircraft in the last quarter of 2006. However, the impact
Other Asian
countries 11.7%
on the balance of payments has somewhat been tempered
by notable investment inflows partly linked to IRS projects
and purchases of securities. Overall, a surplus of around
Asia 45.6%
ANNUAL REPORT 2007
have widened significantly from 5.3% of GDP in FY 2005/06
Saudi Arabia3.4%
Malaysia 2.6%
Germany 4.0%
1 8 2 as well as a significant increase in the surplus on the
Rs 6.6 billion is estimated on the balance of payments in
FY 2006/07. This has led to a consolidation of our reserves
over the last financial year. In contrast to Government
position to some Rs 85.3 billion as at June 2007, representing
and private sector debt which rose by 46.3% and 19.4%
an import coverage of 8.7 months based on imports of
respectively over the period, external debt held by public
goods for FY 2006/07, compared to 7.3 months a year
corporations dwindled by 14.0%, causing its share of total
earlier. In the foreseeable future, the likelihood of sustaining
stock to decline from 59.7% to 47.5%. For its part, external
a surplus on the balance of payments would, in the first
debt servicing fell by 10.4% to reach Rs 8.8 billion in
place, be boosted by projected large net inflows related
FY 2006/07, with capital repayments of Rs 7.7 billion and
to capital investment projects while additional support
the remainder comprising interest payments as well as
could over time emanate from a healthier current account
management and service charges. Consequently, the debt
balance if efforts for enhanced national competitiveness
service ratio, expressed as a percentage of exports of goods
are effectively and promptly materialised.
and services, decreased from 8.4% to 6.7%, thus easing
an already low external debt burden.
Current account
4
2
0
-2
-4
-6
-8
-10
-12
-14
-16
-18
Interest Rates and Currency
Major reforms contributing towards greater flexibility and
effectiveness of the monetary framework were brought about
during the last financial year. Effective at a rate of 8.5% per
annum in December 2006 when it replaced the Lombard
rate, the Repo rate now acts as the underlying signalling
2002/03
2003/04
Balance (Rs bn)
2004/05
2005/06
2006/07
% GDP
mechanism for the monetary policy stance, backed by a twopillar approach based on an analysis of short-run economic
Balance of payments
and import cover
and long-run monetary risks to medium term price stability
as well as sustainable economic growth. In the same breath,
10
the Monetary Policy Committee was launched in April 2007
8
and was thereafter granted independence through the
6
Finance Act 2007 for the formulation and determination of
4
monetary policy.
2
0
-2
-4
An overall monetary tightening stance was adopted by the
2002/03
2003/04
BOP (Rs bn)
2004/05
2005/06
2006/07
Bank of Mauritius in 2006 as reflected by dual increases
of the Lombard rate by 50 basis points in July and by one
Import cover (months)
percentage point to 13% in September against a general
External Debt
background of heightened inflationary pressures, monetary
Although expanding by 8.2% year-on-year to reach
tightening bias in international markets and continued
Rs 28.4 billion as at June 2007, the total external debt stock
decline in the value of the rupee. In the same vein, the Repo
declined as a percentage of GDP from 13.4% to 13.2%
rate was raised by 75 basis points to 9.25% in July 2007,
183
continued
Evolution of Lombard rate, Repo rate, Bank rate
and MCB Prime Lending rate
%
16
14
12
Lombard rate
10
MCB Prime Lending rate
Repo rate
Bank rate
8
6
4
2
Sep 07
Jul 07
May 07
Mar 07
Jan 07
Nov 06
Sep 06
Jul 06
May 06
Mar 06
Jan 06
Nov 05
Sep 05
Jul 05
0
attributable to delicate short to medium term inflationary
and downside risks to the recovery process as well as by
pressures mostly triggered by rising commodity prices and
the foreseen decline in inflation.
the anticipated pressures on domestic currency linked
to likely hikes in comparable benchmark rates abroad.
Money supply (end of period)
Partly reflecting the tighter monetary stance, the Bank
Rs bn
%
200
95
160
90
120
85
rate increased from 6.94% in FY 2005/06 on an annual
average basis to 10.72% in the last financial year with
a peak of 13.38% in February last following a continued
80
80
surge therein in late 2006 and early 2007. It nonetheless
40
75
pursued a downward trend in recent months – namely
0
fuelled by short-supply of treasury bills – despite the
2002/03
M2
2003/04
2004/05
2005/06
2006/07
M2/GDP (right scale)
upward movement in the Repo rate, implying declining
cost of Government debt as opposed to higher interest
Despite being relatively contained on account of policy
rates on credit to the economy. Moving forward, a more
tightening, broad money supply, M2, increased by a notable
neutral monetary policy stance should be maintained
9.1% over FY 2006/07 backed by a rise of 10.0% in banking
over the short term at least, with influences for tightening
sector claims on the private sector in line with expanding
such as relatively high inflation expectations, improving
economic activity and by a hike of 38.3% in net foreign
economic growth and rising interest rates abroad being
assets. As such, as at June 2007, M2 stood at Rs 193.6
fairly balanced by concerns over a still low investment level
billion, representing 89.6% of GDP.
70
Selling rates of main currencies
vis-à-vis the rupee
Value as at
imports as well as perceived speculative activity, the
rupee recouped part of the loss vis-à-vis major currencies
Annual average
30-Jun-06 29-Jun-07 FY 2005/06 FY 2006/07
USD
31.00
32.02
30.59
32.64
GBP
56.98
64.13
54.48
63.54
EUR
39.72
43.04
37.30
43.04
JPY(100)
27.08
26.06
26.69
27.89
ZAR
4.47
4.61
4.89
4.64
over the January to May 2007 period, being supported
by inflows related to FDI as well as portfolio investment
to a large extent prompted by high yields on Government
securities. With the general intrinsic strength of the euro
and pound sterling on international markets subsequently
contributing to an appreciation of these currencies against
the rupee, the effective exchange rate of the domestic
After depreciating significantly during the first half of
currency should depreciate on an annual average basis
FY 2006/07 against the backdrop of tight liquidity in the
this year despite the relative weakness of the dollar and
foreign currency market mostly linked to large merchandise
substantial capital inflows.
Evolution of the rupee
USD
GBP
Euro
115
110
105
100
95
Jun 07
May 07
Apr 07
Mar 07
Feb 07
Jan 07
Dec 06
Nov 06
Oct 06
Sep 06
Aug 06
90
Jul 06
Index: 3 July 2006 = 100
120
185
continued
Conclusion
With Mauritius bearing the brunt of a triple trade shock in the form first of a loss of relative preferences of exportoriented industries on international markets, second the reform of the EU sugar regime and third unrelentingly high oil
prices, macroeconomic fundamentals started to deteriorate some time back, triggering apprehensions about potentially
systemic and longer-term repercussions on the socio-economic environment at large. The mounting international
openness of the Mauritian economy, whilst carving out solid growth-enhancing avenues notably through FDI inflows
and related knowledge spillovers in addition to the usual benefits of free trade, implies higher complexity in mitigating
macroeconomic risks given the increased induced interplay of numerous exogenous parameters. Reassuringly, the
authorities have responded with a comprehensive reform programme starting noticeably with the National Budget
2006/07 which included pro-business measures with for instance a strengthening of the institutional base, the move
towards a milder fiscal regime and economic diversification initiatives. Though economic growth was somewhat
re-ignited last year, associated policy trade-offs and the persistence of other macroeconomic imbalances tempered the
overall favourable sentiment.
Reminiscent of pledges expressed to transform Mauritius into a resilient multi-pillar economy, the 2007/08 Budget
upheld the philosophy of its predecessor and even accelerated the scheduled implementation of some measures,
thereby perceivably improving business sentiment and enhancing short- and medium-term macroeconomic growth
prospects. On the fiscal side, in addition to salutary major infrastructure outlays scheduled to rejuvenate the physical
ability of the country to uphold its growth ambitions, ongoing fiscal consolidation programmes, though requiring
reinforcement, would facilitate the transition towards a less burdensome public debt position and thus a more efficient
participation of the Government in the creation of wealth. Besides, structural reforms geared towards the expansion
and strengthening of economic activity should contribute to enhance business prospects, thus yielding considerable
support to the sustainable job creation objective as well as to a material improvement in living standards.
However, the nation-wide restructuring strategy will not attain optimal economic efficiency unless more effective
and efficient measures are implemented to address lingering macroeconomic hiccups and imbalances. For instance,
despite comforting developments on the legal front with regard to the recent public disclosure of the Employment
Relations Bill and the Employment Rights Bill, the tight labour market environment necessitates in-depth and broadbased corrective measures materialising in an opportune way if the overriding objective of shoring up human capital
development and improving the quality of the business environment is to be achieved. Moreover, following recurrent
concerns pertaining to the deficiency of the national physical infrastructure to adequately support ambitious growth
objectives, pledges expressed by the authorities to invest substantially in capital resources should be fulfilled without
undue delays, the more so bearing in mind the generally non-negligible lag period between the execution of projects
and the harvest of desired outcomes. At another level, further progress in achieving market efficiency is required
on several fronts by inter alia striving for public sector efficiency and revitalising the domestic market through its
responsible liberalisation. From a more generic perspective, given various impediments to the successful roll-out of
declared policy intentions lately, the authorities should ensure that the implementation agenda spreads out without
undue delays, policy reversals or contradictory signals, and instead be accompanied by clear targets and milestones
with the underlying objective of preserving, or even better, stimulating higher levels of investor confidence and, hence,
upholding the recovery momentum.
Overall, notwithstanding positive strides in the bid to re-engineer the economy back to a high growth pathway, it
is essential that all-encompassing remedies be uncompromisingly focused on strategies to address enduring
endogenous limitations to growth. This should facilitate the restitution of economic fundamentals to a more solid state
and thereby alleviate their vulnerability to exogenous shocks, particularly within an increasingly hostile international
trade environment. Simultaneously, in order to spur the endorsement of the complex and often sensitive reforms by the
population at large and thus to reap maximum dividends from a smooth execution process, flexible and tailor-made
social adjustment programmes, including training and welfare schemes, should duly support the agents involved in
the socio-economic development process. All in all, hefty challenges should be continuously matched by responses of
a similar mould.
187
continued
SOURCES
Bank of Mauritius, Annual Report and various publications
Central Statistics Office, Economic and Social Indicators and Reports
Energy Information Administration
International Monetary Fund, World Economic Outlook
Mauritius Chamber of Agriculture, Various statistics
Ministry of Finance and Economic Development, Budget Speech, Draft Recurrent & Capital Budgets, various publications
and pronouncements
Stock Exchange of Mauritius, Various publications
MCB Strategy, Research and Development SBU, Staff estimates
ABBREVIATIONS
ACP
African, Caribbean and Pacific
AGOA
Africa Growth and Opportunity Act
CPI
Consumer Price Index
DEM
Development & Enterprise Market
DEMEX
DEM Price Index
DEMTRI
DEM Total Return Index
EPZ
Export Processing Zone
FDI
Foreign Direct Investment
GDFCF
Gross Domestic Fixed Capital Formation
GDP
Gross Domestic Product
GDS
Gross Domestic Savings
ICT
Information and Communication Technology
IMF
International Monetary Fund
IRS
Integrated Resort Scheme
SEM
Stock Exchange of Mauritius
SEMDEX
SEM Price Index
SEMTRI
SEM Total Return Index
SME
Small and Medium Enterprise
Administrative
Information
“ The MCB Group has been actively diversifying its
range of services locally and regionally.”
A Review of theInformation
Administrative
Economic Environment
The Mauritius Commercial
Bank Ltd. - Mauritius
Head Office - Port Louis
9-15 Sir William Newton Street - Port Louis
Postal Address: P.O. Box 52 - Port Louis
Republic of Mauritius
Telephone: (230) 202 5000
Fax: (230) 208 7054
Swift Code: MCBLMUMU
Email address: mcb@mcb.co.mu
Website: www.mcb.mu
Representative Office - Paris
5 Rue des Mathurins - 75009 Paris
Telephone: (33) (1) 41 45 95 50
Telefax: (33) (1) 41 45 99 88
Email address: paris@bfcoi.com
Local Subsidiaries
6th Floor Travel House
Sir William Newton Street
Port Louis - Republic of Mauritius
Telephone: (230) 202 5515
Telefax: (230) 210 5260
Email address: mcbim@mcbim.com
Website: www.mcbim.com
continued
MCB Factors Ltd.
MCB Centre
9-15 Sir William Newton Street
Telephone: (230) 202 6150
Telefax: (230) 208 5082
Email address: mcb.factors@mcb.co.mu
Telephone: (230) 202 5522
Telefax: (230) 211 3592
Email address: multipl@intnet.mu
Website: www.thepennyunittrust.com
Telephone: (230) 213 5959
Telefax: (230) 213 5961
Email address: contact@mcbcapitalpartners.com
Website: www.mcbcapitalpartners.com
Raymond Lamusse Building
Telephone: (230) 202 5397 - Telefax: (230) 208 1167
c/o MCB Capital Partners Ltd.
Telephone: (230) 213 5959
Telefax: (230) 213 5961
Email address: contact@mcbcapitalpartners.com
Website: www.mcbcapitalpartners.com
Blue Penny Museum
Raymond Lamusse Building
Email address: mcbstockbrokers@mcb.co.mu
Le Caudan Waterfront
Email address: bluepennymuseum@mcb.co.mu
Website: www.bluepennymuseum.com
MCB Properties Ltd.
The Mauritius Commercial Bank
(Madagascar) SA
Head Office - Antananarivo
Rue Solombavambahoaka Frantsay 77
Antsahavola - B.P. 197 - Antananarivo 101
Telephone: (261 20 22) 272 62
Telefax: (261 20 22) 322 82
Swift Code: MCBLMGMG
Email address: mcb.intnet@mcbmadagascar.com
Website: www.mcbmadagascar.com
General Manager: Mr. Marc de Bollivier
Finlease Co. Ltd.
Foreign Associate
Email address: finlease@mcb.co.mu
Banque Française Commerciale
Océan Indien
Head Office - Réunion
60 Rue Alexis de Villeneuve
97400 Saint Denis
Telephone: (262) 40 55 55
Telefax: (262) 21 21 47
Swift Code: BFCORERX
Email address: reunion@bfcoi.com
Website: www.bfcoi.com
Foreign Banking Subsidiaries
(Seychelles) Ltd.
Head Office - Victoria
Caravelle House - Manglier Street - P.O. Box 122
Victoria - Mahé - Seychelles
Telephone: (248) 284 555
Telefax: (248) 322 676
Swift Code: MCBLSCSC
Email address: contact@mcbseychelles.com
Website: www.mcbseychelles.com
Managing Director: Mr. Jocelyn Ah-Yu
Paris Branch
5 Rue des Mathurins - 75009 Paris
Telephone: (33) (1) 41 45 95 95
Telefax: (33) (1) 41 45 99 88
Swift Code: BFCOFRPP
Email address: paris@bfcoi.com
(Moçambique) SA
Mayotte
Head Office - Maputo
Route de l’Agriculture - 97600 Mamoudzou
Telephone: (269) 61 10 91
Telefax: (269) 61 17 40
Swift Code: BFCOYTYT
Email address: mayotte@bfcoi.com
400 Ave Friedrich Engels - C.P. 2063
Maputo - Mozambique
Telephone: (258 21) 49 99 00 and
(258 21) 48 19 00 - Telefax: (258 21) 49 86 75
Swift Code: MCBLMZMA
Email address: contact@mcbmozambique.com
Website: www.mcbmozambique.com
General Manager: Mr. Robert Cantin
191
A Review
Branch
Network
of the Economic Environment
continued
Key
Satellites
Pereybère
Main Branches
Mont Choisy
Counters
Grand Bay
Bureaux de Change
Goodlands
Triolet
Plaine des Papayes
Pamplemousses
Caudan
Bell Village
Port Louis
SSR
Plaine Verte
Edith Cavell
Jules Koenig
Beau Bassin
Réduit
Rivière du Rempart
Lalmatie
Flacq
Saint Pierre
Rose Hill
Trianon
Quatre Bornes
Candos
Pont Fer
Phoenix
La Caverne
Vacoas
Curepipe Road
Floréal
Curepipe
Stanley
Flic en Flac
Rivière Noire
Belle Mare
Bel Air
Montagne Blanche
Mauritius
Rose Belle
Mahebourg
Plaine Magnien
Le Morne
SSR
International Airport
Port Mathurin
Rivière des Anguilles
Chemin Grenier
Mahebourg
Rodrigues
Plaine Corail
2007 in
Retrospect
2007 in Retrospect
Rodrigues Scholarship
Jean Patrick Nancy won the MCB
Rodrigues Scholarship 2006. MCB
is sponsoring his studies at the
University of Mauritius.
Teller Cash Recyclers
The MCB is proud to pioneer the use of
De La Rue Teller Cash Recyclers (TCR) in
Mauritius. TCRs reduce waiting times in
branches as they can swiftly deposit, count,
verify, authenticate, secure, dispense and
balance all denominations of notes a first in Mauritius.
Tonga Soa MCB Madagascar
MCB Madagascar replaces Union Commercial
Bank and broadens the horizons of our
customers in Madagascar.
MCB Tour de Maurice Cycliste 2006
The MCB was the Main Sponsor of the 25th edition
of Tour de Maurice Cycliste.
MCB Foundation
MCB Foundation 2007 has been endorsed to
Ms. Arvinda Angeli Pem former student of the
Queen Elizabeth College. She will be studying
Management (Accounting and Finance) at the
University of Manchester, UK.
2007 in Retrospect
Anou Koze - Winners
Always close to our customers: the first of Anou Koze,
the MCB Retail roadshow, was held simultaneously at
10 Winners supermarkets in March 2007.
Cash Express
MCB launched Cash Express in collaboration with ATM
Solutions. This fee-paying ATM brings convenience literally
to the doorstep of our customers and the public at large,
including tourists.
Cyclo Tour 2007
Sponsored by MCB, the
Cyclo Tour 2007 was
organized by The Ministry
of Youth and Sports in
conjunction with the
National Youth Council
to encourage youngsters
to care about the
environment.
Cpe Scholarship
The welfare of our staff is of utmost importance. Sumaiya,
Aniqa, Didier, Annabelle, Aurélien, Velena, Sandrine and
Nicholas won the MCB CPE Scholarships reserved for
children of employees with the best results at the CPE
exams in 2006.
Moving Customer Boundaries
The entire MCB staff followed the culture development
programme lead by Managing The Service Business (MSB),
a British company, between May and June 2007.
Jeux des Iles De L’ocean Indien 2007
The MCB Group was an official sponsor
of the Jeux des Iles de l’Océan Indien 2007
in Madagascar, of Club Mauritius
and Team Seychelles.
2007 in Retrospect
Mauritius For Africa
MCB sponsored the Mauritius
For Africa International Trade
Fair held in June 2007 - yet
another way of putting forward
our regional stature and our
commitment of transforming
Mauritius into a hub for the
Indian Ocean.
MCB Curepipe /
Anou Kozé
Throughout the year,
the public has had the
opportunity to know more
about our products and
services by visiting our
branches during Anou
Kozé open days. Photo
illustrates Anou Kozé at
MCB Curepipe.
Management Workshop - Culture Programme
A busy week-end for the management at Le Maritim Hotel in April kick-starts
the Culture Development Programme.
MCB Majunga (Inauguration)
Our latest branch: MCB
Madagascar opened an outlet in
Mahajanga in March 2007.
Mauritius Golf Open 2006
Sponsored by MCB, the 13th edition of Mauritius
Golf Open held at Belle Mare Plage Hotel in
December 2006 was a success.
Self service lobby
Another market first: our Self Service lobby
blends all our remote channels, namely ATMs,
Internet and Phone Banking.
SME FAIR
MCB confirmed its reputation as a major
backer of SMEs by becoming the Main
Sponsor of the SME Fair for the second
consecutive year.
Concept and Design: MOSAIC ADVERTISING
Printed by: PRECIGRAPH LTD.

MCB 2007 Annual Report

Transcription

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