Commenting on the results, Pierre Guy Noël (Chief Executive - MCB Group Ltd) said: “Profit attributable to ordinary shareholders increased by 23.3% for the quarter ended September 2022 to Rs 2,762 million, reflecting a continuing improvement in core earnings within the banking cluster.
Operating income grew by 14.2% to Rs 6,473 million. Net interest income rose by 13.1%, reflecting the expansion in our foreign currency loan book and investment securities portfolio as well as rising interest rates globally contributing to improved yields on our interest-bearing assets. A drop in margins has been recorded on our investment securities locally in the wake of interest rate hikes by the Central Bank, giving rise to an increase in the cost of our deposits while yields on our investment securities take longer to be repriced. Net fee and commission income grew by 17.0% to Rs 1,559 million, supported by higher revenues across banking subsidiaries, with a strong performance recorded in payment activities and regional trade financing. In spite of fair value losses on equity investments due to market volatility, ‘other income’ went up by 15.1% mainly due to enhanced performance by MCB Real Assets and increased profit arising from dealing in foreign currencies.
Operating expenses increased by 14.9% as a result of continued investment in human capital and technological capabilities, as well as the impact of higher inflation. The cost to income ratio edged up to 39.9% compared to 39.7% for the corresponding period last year. Impairment charges fell by Rs 113 million to Rs 713 million, representing an annualised cost of risk of 67 basis points of gross loans and advances, compared to 86 basis points in June 2022. Gross NPL ratio remained relatively stable at 3.6%.
The share of profit of associates rose by Rs 30 million due to improved results by Promotion and Development Ltd and Société Générale Moçambique.
The Group continues to be well capitalised with a capital adequacy ratio of 18.1%, of which 16.8% in the form of Tier 1 and keeps displaying healthy liquidity positions, with a total loans to deposits ratio of 66.4% and a total loans to funding base ratio of 55.3%, when including borrowings. At Bank level, the US dollar Liquidity Coverage Ratio remained well above the regulatory norm.
Whilst economic activity across presence countries gained further traction mainly on the back of the rebound in tourism, the operating environment is likely to be challenging in the period ahead. The impact of the war in Ukraine and aggressive monetary policy tightening amidst the persistently high inflationary environment are expected to contribute to a broad-based and significant slowdown in the world economy, with the IMF having further downgraded growth prospects in 2023. As we continue to assess the implications of this difficult context for our operations, we remain focused on pursuing the implementation of our strategic pillars alongside gearing up our enablers for growth.’