Message from the Group Chief Executive

Introduction

I am proud and honoured to have been appointed as Group Chief Executive. I would like to thank the Board of Directors for their trust and express my sincere gratitude to Pierre Guy Noel for his instrumental role in steering MCB into the successful and diversified organisation it is today. I am fully conscious of the responsibilities and challenges that this position entails. At the same time, I am comforted to have a team of talented people who have helped to foster a long string of achievements for the Group.

As I reflect upon how we continued to provide value to our stakeholders during the year in review, let me start by acknowledging the exceptionally volatile economic landscape to which Group entities have been exposed. In addition to creating a more uncertain geopolitical backdrop, the war in Ukraine has resulted in historically-high inflation that was followed by rapidly rising interest rates and instability in global financial markets, with ripple effects on the operating environment across countries where the Group is present. African countries have grappled with foreign currency shortages and constrained fiscal capacities, putting pressures on sovereign ratings. Locally, we are encouraged by the pickup in tourism and the recovery in economic activities, although the high inflation environment and difficulties facing key export markets continue to warrant attention. We also had to cope with the downgrade, by Moody’s Investors Service, of the sovereign credit rating of Mauritius to Baa3 in July 2022. Nevertheless, the affirmation of MCB Ltd’s long-term deposit and issuer ratings at Baa3 in spite of the country’s downgrade testifies to the resilience of our financial profile.

“ Remaining focused on our core values and executing our strategy has supported strong organic growth in recent years.”

A strong financial performance

Indeed, in spite of the constantly shifting and volatile landscape, profits attributable to ordinary shareholders have demonstrated remarkable resilience and growth, increasing by 46.7% to Rs 14,133 million driven by an improvement in core earnings across operating entities. Operating income continued its uptrend, growing by 33.3%. Net interest income rose by 30.3%, driven by the increase in interest rates and the resulting improved margins on our interest-earning assets in foreign currency, as well as an expansion in our foreign loan book and investment securities portfolio. Non-interest income displayed a robust growth of 38.7% to Rs 12,002 million on the back of a 12.9% increase in net fee and commission income notably from trade financing and payment activities as well as a solid growth of 92.4% in other income pertaining to foreign currency dealings and fair value gains from equity financial instruments. Our relentless efforts to strengthen our human capital and technological capabilities have resulted in operating expenses increasing by 23.3%, with, our cost to income ratio, nevertheless, declining to 35.4% compared to 38.3% for FY 2021/22. Preserving our financial soundness has been paramount in these challenging times. Our asset quality metrics improved, with the gross NPL ratio falling to 3.2%. We sustained strong funding and liquidity positions which were upheld by various funding initiatives during the year. We maintained our capital buffers, with the BIS and Tier 1 ratios standing at 19.2% and 16.7% respectively. To further consolidate our capital base, the Bank successfully closed its first Basel III compliant Tier 2 bond issuance of USD 147 million with the African Development Bank in March 2023. This capital and funding instrument will help us to finance high impact projects in the sub-Saharan African and Indian Ocean regions.

This excellent performance underscores the effectiveness of our strategy execution and the dedication of our team. I remain proud of our resilience and what our employees have achieved, collectively and individually. We have always been and will remain committed to fostering the growth and prosperity of the people, families, businesses and communities we serve. Our success is not just about financial gains, it is also about how well we serve the evolving needs of our customers and empower them to reach their full potential and achieve impactful goals. This has always been the case and is where we shall continue to focus.

Delivering on our strategy

Remaining focused on our core values and executing our strategy has supported strong organic growth in recent years. We will continue to champion the communities we serve and be driven by our purpose, Success Beyond Numbers. Our financial discipline, ongoing technological investment and the development of our people are key enablers to further boost our impact.

Amidst the unsteady landscape, Group entities have, during the course of the last financial year, pursued the execution of their business expansion strategy. Within the banking cluster, in spite of the highly competitive environment, MCB Ltd maintained its leadership position in Mauritius on the basis of its refined and more personalised value proposition and upgraded channel capabilities. It assisted domestic entrepreneurs and corporates to effectively deal with the challenges arising from the prevailing context. On the international front, we pursued

As we look to the future, it is clear that our universal banking model will remain core to our strategy as it gives us a remarkable platform to support our customers at every stage of their lives. The goals and challenges of our customers are continuously evolving and our approach to delivering exceptional customer experience requires ongoing focus and attention. We are working hard to build deeper and more meaningful relationships with our customers to ensure:

• our innovations in new products and services meet and exceed fast-evolving demands;

• we can provide individualised and tailored options from our vast palette of products and services in the most efficient and easy-to-access way; and

• we target our investments in innovation, technology and people so that they have maximum customer impact.people so that they have maximum customer impact.

Our Group has a rich history and is proud of the critical role it has played over the years in powering economic growth in the countries where we are present. In Mauritius, despite the highly competitive environment, MCB Ltd maintained its domestic market shares – 48% for local currency deposits and 41% for domestic credit to the economy. At the same time, our diversification strategy over the years has been instrumental to the development and resilience of the Group and today more than 60% of our profits are generated from activities outside of our banking activities in Mauritius.

Going forward, our strategy will continue to be focused on

• Becoming more diversified and international;

• Becoming more digital; and

• Becoming more sustainable.

Becoming more diversified and international

During the year, we made further inroads regarding our strategic goal of becoming more international by pursuing our expansion agenda in selective markets and niche segments while capitalising on the Mauritius International Financial Centre (MIFC) and our regional hubs in Paris, Johannesburg, Nairobi and Dubai. We are also expanding our physical presence in Africa through a new Representative Office in Nigeria given our notable involvement in the energy sector of the country and the commercial opportunities in West Africa.

We progressed on our quest to help position Mauritius as a prominent International Financial Centre and further cemented our position as a crucial player in the ecosystem of investment and private equity funds, multinational enterprises, regional and international corporates, management companies, advisors and other partners doing business in Africa. We are going beyond the provision of traditional banking services and becoming a trusted solution provider offering bespoke and specialised solutions that promote the MIFC and serve trade and investment corridors between Asia, Africa and Europe. These solutions typically include structured financing solutions, financial risk and treasury management solutions, transactional banking and securities solutions.

Our expertise, established brand and track record have also been instrumental to help us nurture relationships with bestin- class operators within the African oil and gas industry and support their transition efforts. We continued to accompany clients in their infrastructure projects in key geographical markets, including projects contributing to the transition towards cleaner energy and improving electrification rates on the continent. For example, we acted as joint Mandated Lead Arranger in a major financing deal for Infinity Power’s acquisition of Lekela Power, the largest renewable energy deal in Africa. MCB Capital Markets successfully completed sizeable corporate finance advisory transactions and, in collaboration with MCB Ltd, acted as the co-lead arranger of a EUR 135 million acquisition debt finance deal in West Africa. Additionally, the MCB Equity Fund collaborated with South Suez Capital Ltd to invest in a consortium led by Development Partners International, a prominent Africa-focused private equity manager based in London.

To underpin our international diversification strategy, MCB Ltd also undertook several important funding initiatives in addition to the aforementioned Tier 2 instrument. In June 2023, the Bank signed a three-year USD 500 million syndicated loan, which was exceptionally well supported in the market and attracted commitments from investors globally. After having established its USD 3 billion Global Medium Term Note Programme on the International Securities Market of the London Stock Exchange in October 2022, MCB launched its inaugural USD 300 million five-year senior unsecured notes issuance under the Programme in April this year. This landmark transaction marked the first investment grade-rated senior bond issued by a commercial bank out of Africa at the time of issuance and the first international bond by any Mauritian non-sovereign issuer.

Becoming more digital

We remain committed to enhancing our value proposition and enriching the customer experience through digitalisation. Our flagship mobile banking application for individual customers, MCB Juice, which celebrated its 10th anniversary this year, has been further endowed with additional functionalities with its subscriber count crossing the 500,000 mark in Mauritius. In Madagascar, ‘MCB Juice Madagascar’ has been exceeding enrollment and usage expectations, while in Seychelles, we launched an upgraded MCB Juice application. For our Business Banking clients in Mauritius, we capitalised on our collaborative digital platform, PUNCH, now integrated within MCB JuicePro, to foster synergies among local entrepreneurs.

We furthered our efforts to support the country’s transition to a cash-lite society by providing additional digital solutions to our customers, including merchants. We introduced Pay+ in Mauritius, a payment acceptance solution which has been designed for merchants, to facilitate seamless cashless payments. Such initiatives led to a 51% increase in contactless transactions, and a 30% rise in the number of merchants offering digital payments. As regards our corporate clients, we partnered with Backbase to launch IB Pro, our new Internet Banking platform for non-individuals. Additionally, we unveiled the MCB Global Trade Portal, a dedicated platform for international trade connecting buyers and suppliers across markets.

Becoming more sustainable

MCB Group steadfastly continued its journey towards fostering a sustainable future. We are working hard to reduce our own environmental impact while supporting our clients in their transition to a low-carbon economy.

I am pleased with the way our new Transition Taskforce is delivering value, both from a value creation and a risk management perspective, with three main streams identified:

(i) the first stream relates to climate risk and we are currently working at full speed to better understand the vulnerabilities of our existing credit portfolio to climate risk while integrating climate risk considerations in financing our customers’ businesses;

(ii) the second stream relates to the deployment of our Sustainable Loan offering in Mauritius with a credit line of Rs 10 billion for local entrepreneurs and corporates transitioning to a low-carbon business model. The Group will aim to play a central role in helping to achieve the national objectives as set out in the “Mauritius Renewable Energy Roadmap 2030” and the “Roadmap and Action Plan to help Mauritius accelerate its shift to a circular economy”.

(iii) the third stream relates to the development of our Sustainable Finance strategy on the international scene, thus contributing at the same time to the effective development of Mauritius as a prominent and sustainable International Financial Centre. Through an assessment of the dynamics underlying the energy transition, this stream is helping to determine the future trajectory for MCB’s Energy and Commodities activities, which is compelling, realistic and progressively realised.

To raise awareness on climate change, we pursued several initiatives for the benefit of our stakeholders. We hosted ‘La Semaine Klima’, which included brainstorming, awareness and training sessions with clients, NGOs, teachers, students, and our employees. Besides, in our ongoing journey to foster gender equality, we have put several initiatives in place to ensure a workplace that operates on the principles of fairness and inclusivity. A key initiative in this respect has been our commitment to uphold the principles of equal pay for equal work, a pledge fortified through the collaboration between Group entities in Mauritius and a globally-recognised organisation specialising in equal salary certification. Building on our Gender Equality Charter, we continued to empower our leadership to advance gender equality and women’s empowerment within the organisation.

The road ahead

Moving forward, whilst we expect the positive momentum in tourism to continue in Mauritius, Seychelles and Maldives, we know we will navigate a complex world characterised by uncertainties, heightened competition and increasingly stringent regulatory demands. Yet, I remain confident in our business model and in the guiding principles that have underpinned the Group’s progress. We aim to consolidate our local positioning by supporting the transition to a more digital and greener economy, while pursuing our diversification strategy. Alongside widening our involvement in presence countries through enhanced Group synergies, we will pursue our international strategy with Africa remaining our prime market. We also aim to expand our non-interest income by enriching our value proposition in areas such as transactional banking, wealth management and non-banking activities.

Our future growth plans will continue to be underpinned by our commitment to building an enduring business that is a trusted and chosen partner of our customers. The Group will continue to develop robust operational capabilities by strengthening our risk management, internal control and compliance frameworks to effectively identify and respond to core and emerging risks. We will remain focused on harnessing data and digital capabilities to improve operational agility across Group entities and enrich our offerings to deliver a differentiated and superior customer experience. To this end, we will scale existing and build new partnerships, including with tech disruptors, to design and offer innovative value propositions across segments.

Central to everything that we do is our purpose, Success Beyond Numbers, with sustainability remaining a focal point in our strategy while paying key attention to the nurturing of our people. Winning in the market place starts with winning in the workplace. Our revamped career architecture is a testament to this commitment, embodying a modern and flexible approach to career development. It lays a robust foundation for attracting and retaining key talents while promoting greater mobility within the Group to enhance professional and personal growth. To further reinforce our people-centred organisational culture, we introduced a Corporate Culture Alignment project, with a cornerstone thereof being the delineation of our Shared Ways of Working, a set of guiding principles encouraging simplicity, responsibility, and fostering positive impacts. This will help to embed a culture which ensures that everything we are doing internally will connect to the evolving needs of our stakeholders.

Concluding note

I would like to end by expressing my sincere gratitude to every member of our team across all Group entities: your dedication, resilience and unwavering commitment have been the cornerstone of our success during another challenging year. As I express this gratitude, my thoughts lean towards Xavier Bathfield, the Head of our Mauritian and Regional Corporates unit of MCB Ltd, who sadly passed away in August last. We are truly privileged to have had the opportunity to work alongside such a thoughtful and passionate colleague and friend.

“ Our future growth plans will continue to be underpinned by our commitment to building an enduring business that is a trusted and chosen partner of our customers.“

To the members of the various Boards of the Group, thank you for your steadfast guidance and wisdom in steering the organisation forward. I must extend our deepest appreciation to Alain Law Min, the Chief Executive Officer of MCB Ltd, who will soon retire. He has been key in strengthening MCB’s franchise and revenue streams in the face of challenging times. My sincere thanks also go to our customers for partnering with us and to our shareholders for trusting our ability to create sustainable value for them.

As we move forward, I am confident that we will continue to execute our strategy with dedication and focus. As we do, we will continue to make a meaningful contribution to our valued stakeholders across countries and deliver on our purpose.

Jean Michel NG TSEUNG

Group Chief Executive