Interview

Mauritius Commercial Bank: Regional Player

The Mauritius Commercial Bank (MCB) is the leading domestic bank in Mauritius and is steadily developing new business on the African continent in areas such as trade finance, project finance and wealth management.

Established in 1838, it is fair to say that MCB helped develop the country – and literally – grew up right alongside it. Today, MCB is one of the strongest banks in Mauritius with a balance sheet size of €6.7 billion, after tax profit of €125 million and shareholder funds of €754 million. It has earned a long list of titles and accolades, with one of the latest being ‘Bank of the Year 2015’ awarded by ‘The Banker’ magazine – the fifth time in the last eight years it has received this award. In Mauritius, MCB has a market share of over 40% in respect to both domestic loans and deposits and a market share of 50% in respect to the issuance of debit and credit cards, a commercial position that financial institutions elsewhere can only dream of. CEO Antony Withers is quick to point out MCB’s sound financial standing to anyone who thinks of the term ‘too big to fail’. “We have an unbroken record of profitability and a very strong balance sheet. The bank has a capital to asset ratio of 15%, which is well above, and a cost to income ratio of 40%, which is well below, the comparable ratios of many European banks.”

In particular Withers is proud of MCB’s performance in the past 10 years, which saw the bank’s revenues grow consistently by about 10% year after year. Over the years, MCB has developed its strong retail and corporate banking franchise and enhanced its reputation for being the number one savings bank in the country, and is in some ways similar to the German Sparkassen Banks. “MCB has also been largely immune to the effects of the financial crisis, and in fact, over the last 10 years the bank’s annual profit has more than doubled to reach more than 5 billion Rupees(Rs), or €127 million, in 2015.” The share price of the parent company, the MCB Group Ltd, which is listed on the Stock Exchange of Mauritius, has quadrupled from Rs 50 a share to Rs 210 a share over the same period, taking market capitalisation up to Rs 50 billion (€ 1.3 billion). Driven by the strong desire to bring technological innovation to the financial marketplace, MCB has always had a strong track record in product innovation. “We were the first bank to bring ATMs, cards, and Teller Cash Recyclers to the island, and are also pioneers in internet and mobile banking.” As the only bank in Mauritius with both Internet Banking and Mobile Payment platforms, MCB launched its mobile app ‘Juice’ two years ago, and it can be used for a variety of transactions, to pay merchants or utility bills, and also to withdraw cash from an ATM.

A Focus on Africa

As well as being a heavyweight on the local banking scene, MCB has long been following a regional expansion strategy and a business model with a strong focus on sub-Saharan Africa. “Our international operations today account for 30% of our revenues and 50% of our results,” says Withers, highlighting that MCB is today the largest bank in East Africa and the 18th biggest on the continent. While Africa is now on almost everyone’s business agenda, MCB has gradually increased its operations on the continent since the 1990s. The bank has been very active in the syndicated loan market as well as in the trade finance market for the purchase and sale of petroleum import related risks, while also positioning itself as a privileged partner in structured finance in respect of regional commodity trade financing business.

In addition to Mauritius, MCB is present in South Africa, Kenya, Seychelles, Madagascar, Maldives, Mozambique, Réunion, Mayotte and France through a network of branches, associate companies and representative offices. “We also have a vibrant network of correspondent banks across Africa and the rest of the world. In fact, we have been pursuing a bank-to-bank strategy in Africa for a number of years, providing outsourcing services to a number of financial institutions in Africa. Over the years, we have built strong business relationships

with some 75 banks in sub-Saharan Africa.” Although African economies are facing some economic headwinds at the moment, Withers is convinced about the long-term prospects for the continent. “The economies of sub-Saharan Africa have changed a lot over the last few months, as the oil price and related commodity prices like copper and platinum have come down in value. Their currencies and fiscal positions have come under pressure too, and many countries are struggling to adjust to this new reality. However, overall the growth prospects remain positive due to positive demographic trends and the need to upgrade infrastructure.”

Mauritian Marketplace

In this context, Mauritius shines as an example of economic success. “It is a stable country and has done extraordinarily well as a middle to upper income emerging market country in recent years. GDP per capita in Mauritius is over US $10,000, which compares very favourably to most African countries. Our tourism sector has performed very well, breaking through the 1 million annual tourist arrivals mark.” He also thinks that the current drive to diversify the economy further is very promising and will potentially strengthen the island’s position as a gateway to the African continent. Mauritius has a resilient, strongly capitalised and profitable financial services sector, with a sound regulatory framework. The island’s financial infrastructure is very well developed, offering investors all the support that they require, including accountants, legal firms and offshore management companies in addition to banking services. “We also have a very strong legal system. It is an interesting mix of the French civil code and the English criminal code. In addition, we have a strong international network of investor protection agreements and double taxation treaties,” he explains. Mauritius is also a member of all the important trade groups, including the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). “This means Mauritius has a strong standing in all these countries, and companies doing business in, through or from Mauritius can benefit from our membership in all these trade groupings.” There is also only a handful of African countries that have an investment grade rating, with Mauritius being one of them – this is of added benefit to the country.

Moving Forward

MCB itself is also one of only two domestic banks in Mauritius with an investment grade rating, which is important as the bank looks to expand its regional international customer base. “We are in growth mode and open for business. I believe this is something that cannot be said about many banks, with job cuts and increased fees for customers making the international headlines.” However, Withers says, MCB is not chasing volumes to hit targets. “We want to keep our balance sheet strong and maintain our reputation for providing excellent customer service. Being a local bank with a strong international network also means that customers can benefit from a normally quick decision-making process. Our lines of communication and approval are relatively compact compared with many other banks.”

Going forward, MCB will be placing an emphasis on wealth management as well as infrastructure and project finance. “Sub-Saharan Africa has substantial demand in these areas as everybody knows.” MCB is in consequence looking at growing its private banking business. “We think that there is a proposition that MCB can make to the African middle and upper middle class to open up an account in Mauritius and use

the island for their wealth management needs. We already have a successful private wealth management business locally, and in recent years our custody business has grown significantly. This has given us the confidence to think that we can use the MCB brand to develop our private client business in an African context further.” MCB is also seeking to expand its international footprint by opening representative offices in Dubai and possibly Singapore within the next one or two years. In addition, the bank will continue to work with partner banks in various countries in order to provide an excellent service to local and international companies seeking to participate in the enormous opportunities that Africa offers.