MCB Group recorded profits of Rs 8 billion for the year ended 30 June 2021, representing an increase of 1.4% compared to the same period last year.
Commenting on the results, Pierre Guy Noël (Chief Executive - MCB Group Ltd) said:
“Notwithstanding the particularly difficult economic and market conditions which exerted pressures on revenue lines across segments and prompted us to maintain a prudent stance by building additional provisions, in the form of Expected Credit Losses, the Group posted a resilient performance, with profit attributable to ordinary shareholders edging up by 1.4% to reach Rs 8,019 million.
Operating income increased by 2.0% compared to last year. Net interest income rose by 3.1%, driven primarily by increased investment in Government securities as a result of the persisting excess liquidity situation prevailing in most of our markets. Our diversification strategy led to a healthy expansion of the Bank’s international loan book, helped further by the weakness of the Mauritian Rupee. However, net interest income in foreign currency declined marginally due to the drop in LIBO R rates. Net fee and commission income recovered from its contraction in the previous year to grow by 13.3%, supported by higher revenues from regional trade financing and wealth management activities. In contrast, ‘other income’ bore the brunt of the challenging context and declined by 14.5%. Lower volumes of trading in foreign exchange coupled with high volatility in money and foreign exchange markets, contributed to a drop of Rs 459 million in net gain from financial instruments. On the other hand, other operating income remained stable, the profit of Rs 356 million realised on the disposal of our shares in ICPS Ltd being largely offset by the absence of rental income at the level of COVIFRA, as a result of our borders being closed throughout the whole financial year.
Operating expenses increased by 6.1% on the back of ongoing investment in capacity building initiatives, notably linked to our digitalisation efforts, thus leading to a rise in the cost-to-income ratio from 35.5% to 36.9%. However, impairment charges declined by 6.1% to Rs 4,766 million. The cost of risk in relation to loans and advances, while decreasing from 1.84 % to 1.39%, remained high as we continued to increase our Expected Credit Losses (ECL) which reached Rs 8,854 million as at June 2021. Excluding ECL provisions, cost of risk for the year decreased from 64 to 55 basis points.
The share of profit of associates fell by Rs 29 million, principally due to lower contribution from BFCOI more than offsetting improved results at the level of Promotion and Development Ltd.
The Group continued to display strong capitalisation levels with capital adequacy ratios remaining comfortably above minimum requirements. The BIS and Tier 1 ratios stood at 17.4% and 16.1% respectively despite a significant growth of 21.1% in risk-weighted assets. Furthermore, asset quality improved slightly with NPL declining from 4.2% to 3.9% while healthy liquidity and funding positions were maintained.
After a year during which no dividend was paid by the Group as a result of the substantial uncertainty resulting from the outbreak of the pandemic, we have resumed payment of dividend this year, albeit at a reduced rate compared to previous years. In addition to the interim dividend of Rs 7.25 per share paid in July 2021, a dividend of Rs 9.50 per share has today been declared and will be payable in December 2021. The total dividend payable this year will thus amount to Rs 16.75 per share, equivalent to 25% of profit attributable to ordinary shareholders in relation to Financial Years 2020 and 2021. The Board of Directors has also approved, subject to regulatory approval, a Scrip Dividend Scheme. This scheme will provide to the shareholders of the Group an option to convert a designated portion of their future dividends into shares of the Group. The successful implementation of this scheme will potentially enable the Group to consolidate its capital base in order to support its future expansion and/or, alternatively, provide it with additional capacity to increase its dividend payout.
The operating context is still subject to uncertainties, with the global economic recovery remaining uneven and fragile. Notwithstanding some encouraging trends in Seychelles and Maldives on the tourism front, the future evolution of long haul travel is yet to be firmly ascertained, while further adverse dynamics, especially amidst market volatilities and supply chain constraints, could continue to impact the domestic economy. However, progress made on the vaccination front and the opening of the borders should help economic recovery, with further support expected, should the country promptly exit the FATF and EU caution lists. On the basis of our strong fundamentals and continued execution of our diversification strategy, the Group is well equipped to reap the benefits of economic recovery, with prospects on the international front in particular being encouraging.’’