MauBank | Financial Statements for the year ended 30 June 2020 Contents 2 Corporate Information 3 Directors’ Report 5 Corporate Governance Report 9 Statement of Compliance 22 Statement of Management’s Responsibility for Financial Reporting 23 Report from the Secretary 24 Independent Auditor’s Report 25 Statements of Financial Position 29 Statements of Profit or Loss and Other Comprehensive Income 31 Statements of Changes in Equity 33 Statements of Cash Flows 37 Notes to the Financial Statements 38 Management Discussion and Analysis 144 Administrative Information 156 Corporate Information Board of Directors 3 Non-Executive Directors Appointed on Resigned on Mr Sookun Gooroodeo 10 June 2020 (Appointed as chairman on 30 June 2020) Mr Sokappadu Ramanaidoo 03 October 2019 (Appointed as acting chairman on 20 December 2019 until 30 June 2020) Mr Burkutoola Mahmadally 29 March 2019 11 October 2019 (Chairman) Dr Paligadu Dharamraj 07 March 2015 06 August 2019 Mr Nicolas Jean Marie Cyril 13 March 2015 Mr Putchay Vassoo Allymootoo 20 January 2016 05 September 2019 Mr Gokhool Ashvin Jain 23 February 2016 Mr Nilamber Anoop Kumar 22 March 2016 Mr Codabux Muhammad Javed 10 March 2017 Mr Rampersad Rabin 19 September 2019 Executive Director Mr Mungar Premchand 23 November 2018 MauBank | Financial Statements for the year ended 30 June 2020 Corporate Information Key Management Team 4 Position Mr Mungar Premchand Chief Executive Officer Mr Vydelingum Vishuene Deputy Chief Executive (As from 05 August 2019) Executive Head Treasury, International Banking, Commercial Banking and SME Banking Mr Mohadeb Damodarsingh (Deepak) Officer in Charge – Finance Division (As from 01 October 2019) Mr Motee Ramesh Chief Risk Officer Mr Mardaymootoo Pillay Chedumbrum (Nanda) Executive Head – Operations Mr Rawoteea Yasdeo (Rajesh) Executive Head – Human Resources Mrs Luximon-Mathur Jessma Head of compliance (1 November 2016 to 27 September 2019) Mrs Acharuz-Sawoky Gayetree Sunita Head of compliance (As from 28 September 2019) Mr Kundan Anil Kumar Executive Head – SME Banking Miss Saddul Anouchka Head of Corporate Affairs, Brand Management and Marketing Mr Muhem Dharmarajan Acting Head – Information & Technology Services Mr Bhagavan Ramakrishna Head of Consumer Banking Mr Appadoo Yogendra Head of International Banking (15 July 2018 to 22 August 2019) Mr Carver Jean Clifford Eric Head of Asset Financing Mr Vyapooree Govinden Modeliar Head of Market Mr Albert Clint Head of Commercial Banking Mr Beebeejaun Muhammad Asif Head of Special Asset Management Mr Youell Peter Gregory Head of Credit Risk Internal Audit Mr Seebaruth Rakesh (B.K) Head of Internal Audit Secretary Mr Ramjunum Gauravsingh Company Secretary and Manager Legal Registered Office MauBank Building 25 Bank Street Cybercity Ebene 72201 Republic of Mauritius Auditor Deloitte 7th Floor, Standard Chartered Tower 19-21 Bank Street Cybercity Ebene 72201 Republic of Mauritius Directors’ Report 5 The Board of Directors of MauBank Ltd, the “Bank”, is pleased to present its Annual Report together with the financial statements of the Bank and its subsidiary for the financial year ended 30 June 2020. The financial statements have been prepared in accordance with the requirements set out in the Bank of Mauritius Guideline on Public Disclosure of Information, the International Financial Reporting Standards, the Financial Reporting Act 2004, the Companies Act 2001 and the Banking Act 2004. The Bank and its subsidiary are collectively referred to as the “Group”. GLOBAL ECONOMIC OUTLOOK Since the outbreak of the COVID-19 pandemic, the IMF has issued its World Economic Outlook (WEO) and its Global Financial Stability Report (GFSR) twice, in April 2020 and again in June 2020. The projection of global output in 2020 was brought down substantially to 4.9 percent; down by 3.3%. For the first time, all regions are projected to experience negative growth in 2020. There are, however, substantial differences across individual economies; reflecting the evolution of the pandemic and the effectiveness of containment strategies, variation in economic structure (for example, dependence on severely affected sectors, such as tourism and oil); reliance on external financial flows, including remittances; and pre-crisis growth trends. In China, where the recovery from the sharp contraction in the first quarter is underway, growth is projected at 1.0 percent in 2020, supported in part by policy stimulus. India’s economy is projected to contract by 4.5 percent following a longer period of lockdown and slower recovery than anticipated in April 2020. Inflation is expected to rise gradually in the coming year, consistent with the projected pickup in activity. Nonetheless, the inflation outlook remains muted, reflecting expectations of persistently weak aggregate demand. With the relentless spread of the pandemic, prospects of long-lasting negative consequences for livelihoods, job security, and inequality have grown more daunting. Most analyst believe that the recovery will start in 2021, and a projection of global output in 2021 to be around 5.4 percent. This may sound good, but it is 0.4 percent lower than April forecast of 5.8 percent, and combined with the sharp contraction in 2020, it implies a cumulative loss to the global economy over two years (2020–21) of over USD 12 trillion from this crisis. Hotels, tourism, the travel industry, among others, will be particularly impacted. Asia, in 2021 is projected to pick-up 6.6 percent, with China growing at 8.2 percent. This too has been revised downward from the April forecast (by 1 percent), leaving the level of Asia’s real GDP 5 percent lower in 2021 compared to pre-crisis projections. In other words, we expect output losses in Asia from the pandemic to be persistent. And, unfortunately, some of this will be permanent. We are assuming a recovery of the private sector in 2021, but the pace is slower than previously expected. Moreover, the assumptions regarding this private-sector–led recovery may turn out to be somewhat too optimistic. In short, we are facing a complex situation, with major tasks and serious challenges ahead. Only by working together can we ensure that the global economy continues to move toward a greener, smarter, and fairer path of recovery. Source: IMF World Economic Outlook (April 2020 and June 2020) REVIEW OF THE MAURITIAN ECONOMY The economy of Mauritius shrank by 2% year-on-year in the first quarter of 2020, following an upwardly revised 2.5% growth in the previous period. It was the first economic contraction since the first quarter of 2005, as the coronavirus pandemic disrupted severely domestic activities. Main declines were seen in accommodation & food services (-13.6%); transportation & storage (-5%); wholesale & retail trade (-3.8%); construction (-6.9%) and manufacturing (-3.7%). In addition, growth slowed mostly in information & communication (3.3%); finance & insurance (4.7%); real estate activities (2.5%) and administrative & support services (1.7%). On a seasonally adjusted quarterly basis, the GDP contracted 3.6%, after an upwardly 1.5% expansion in the previous period. The unemployment rate, which has constantly fallen, from 7.9 percent in 2015 to 6.7 percent in 2019 is expected to rise in 2020 due to more layoffs as a result of the negative impact of COVID-19 on most businesses in Mauritius. The budget deficit, which has evolved in a stable range of 3–3.5 percent of GDP since 2013, is estimated to explode to 13.6 percent in 2020; largely due to higher expenditure and lower revenue. Prices are expected to increase, causing a headline inflation of 4 percent projected for the coming year. Public debt is believed to be around 78.2% of the GDP. Foreign Exchange Reserves in Mauritius increased to 7194.10 USD Million in June from 6864.30 USD Million in May of 2020; representing approximately 13 months of imports. Outlook The forecast of 2020 has been worked out amid a high level of uncertainties around the economic impact of the global COVID-19 outbreak. According to the IMF, all regions worldwide are projected to experience negative growth in 2020. Mauritius being a very open economy will be severely impacted, with a projected GDP contraction of 11%. The necessary lockdown measures have succeeded in slowing down the spread of the virus but have also frozen business activity in many sectors of the economy. Although restrictions begin to ease, the path to early economic recovery remains highly uncertain. The economic outlook presents itself with a bleak outlook; with major contraction expected in most sectors in Mauritius; Textile Manufacturing (-45%), construction (-20%), wholesale and retail (-12%), Accommodation and food services (-70%). We are, however, anticipating a growth in the financial sector and insurance activities. Overall economic growth is expected to be much slower in 2021 and a more gradual pick up is expected from 2022 onwards. Source: EY, KPMG, The Mauritius Chamber of Commerce and Industry, International Monetary Fund, Statistics Mauritius, Bank of Mauritius MauBank | Financial Statements for the year ended 30 June 2020 Directors’ Report 6 Banking Sector In Mauritius Banks in Mauritius enjoyed relatively high capital and liquidity buffers prior to the COVID-19 pandemic. The loan portfolio of banks was relatively more skewed towards financial services prior to the pandemic and Non-Performing Loans (NPLs) in affected sectors such as tourism were low and well covered. Furthermore, banks were primarily funded through deposits and enjoyed relatively high Liquidity Coverage Ratios. The Bank of Mauritius (Bank) conducted a survey on risks facing banks during the lockdown in early April 2020. So far, it can be concluded that resilience of the banking system can be supported by three main mechanisms: (a) bold measures that were, both, targeted and timely taken by the authorities; (b) adequate capital and liquidity buffers in the banking system; and (c) prudential measures already followed by banks to deal with ‘black swan’ contingencies, e.g., liquidity and capital restoration plans.