Commenting on the results, Pierre Guy Noël (Chief Executive - MCB Group Ltd) said: “Group attributable profits for the nine months ended March 2021 reached Rs 6,066 million, similar to the level achieved last year, with domestic banking contributing 39% thereof. Profits increased significantly in the third quarter of the current financial year, up from Rs 827 million for the three months to March 2020 to Rs 2,282 million for the quarter to March 2021. This contributed to the reversal of the 28.1% contraction in profits recorded for the six months to December 2020. The outbreak of the Covid-19 pandemic at the beginning of 2020 significantly impacted the third quarter results of the last financial year with a higher level of Expected Credit Losses and fair value losses incurred on the Group’s equity investments during that quarter.
Operating income grew by 5.0% for the nine months to March 2021 to Rs 16,768 million. Net interest income rose by 2.9% to Rs 11,033 million, driven by higher investment in Government securities amidst the high liquidity situation in Mauritius, whilst the impact of the expansion in the international loan book on our net interest income was negated by lower margins as a result of the drop in Libor rates. Notwithstanding lower revenues from MCB Capital Markets Ltd and from our foreign banking subsidiaries, net fees and commission income increased by 6.4%, with higher income from regional trade financing and wealth management activities at the level of MCB Ltd more than offsetting lower receipts from its Cards activities. ‘Other income’ increased by 13.4% to reach Rs 2,393 million in spite of MCB Real Assets Ltd not receiving any rental income, having benefited from a reversal of fair value losses on financial instruments accounted last year.
Growth in operating expenses stood at 4.3%, resulting in a slight drop in the cost to income ratio to 37.1%. Impairment charges recorded a growth of 21.8% to Rs 3,430 million, representing an annualised cost of risk of 137 basis points of gross loans and advances, down from 184 basis points as at June 2020. Gross and net NPL ratios declined further to 3.4% and 1.9% respectively as at March 2021 driven by the growth of our loans and advances portfolio.
The share of profit of associates dropped by Rs 122 million principally due to lower contribution from BFCOI.
Shareholders’ funds grew by 10.7% to Rs 67.8 billion, on the back of a rise of Rs 7.2 billion in retained earnings, contributing to a capital adequacy ratio of 17.0%, of which 15.8% in the form of Tier 1 ratio. The Group also continues to display healthy liquidity positions, with a loans to deposits ratio of 65.7% and a loans to funding base ratio of 56.2%. At the level of MCB Ltd, the Liquidity Coverage Ratio in US dollar remained comfortably above the minimum regulatory requirement.
Looking ahead, we expect our international operations to continue to be resilient and well positioned to benefit from the improved global economic outlook amidst progress of the vaccination rollout and gradual removal of lockdown restrictions in key markets. The operating context locally is, however, likely to remain challenging with the impact of the recent lockdown expected to be moderate. The pace of the recovery will critically hinge on the easing of travel and border restrictions, which remains dependent on the speed of implementation of the vaccination programme.
No dividends having been declared for the financial year ended June 2020, the current interim dividend of Rs 7.25 per share has been determined taking into consideration both the actual profits of the financial year 2019/20 and forecast for financial year 2020/21. Overall payout was, however, reduced in view of the ongoing pandemic.
As part of the implementation of a Rs 10 billion Multi-Currency Note Programme, the Board approved a first issue of Notes of Rs 2 billion, the proceeds of which to be used to invest in the capital of MCB Ltd with a view to supporting the latter’s international expansion.”