annual report 2010 © Yann Arthus-Bertrand / Altitude. www.yannarthusbertrand.org © Yann The futures of mankind and nature are interwoven on a planet where everything and everyone is connected. When the environment, the economy and society work harmoniously, meeting the needs of the present without compromising the ability of future generation to meet theirs becomes an achievable goal. Through Initiative 175, the MCB Group is motivating all its stakeholders to look forward together by following its commitment to sustainable development. Inspiration is not far, as witnessed from above by Yann Arthus-Bertrand, the world-famous photographer, in an exclusive series for the MCB. 226 THE 234 INTRODUCTION 252 THE FINANCIAL 2010 129 STATEMENT OF INTERNATIONAL 236 THE REAL SECTOR SECTOR IN RETROSPECT CHANGES IN CONTEXT 251 THE FISCAL 255 THE EXTERNAL EQUITY (GROUP) 231 THE REGIONAL SECTOR SECTOR ADMINISTRATIVE GROUP CORPORATE MCB CORPORATE MANAGEMENT STATEMENT OF REPORT OF STATEMENTS STATEMENTS OF 130 STATEMENT OF GENERAL INDEX TO NOTES A REVIEW OF THE MAURITIAN REPORT OF INCOME PERFORMANCE 260 CONCLUSION INFORMATION FINANCIAL PROFILE BOARD AND THE DIRECTORS GOVERNANCE DISCUSSION MANAGEMENT’S THE AUDITORS OF STATEMENTS COMPREHENSIVE CHANGES IN INFORMATION TO THE FINANCIAL THE ECONOMIC ECONOMY ENVIRONMENT LOCAL SUMMARY MANAGEMENT REPORT AND ANALYSIS RESPONSIBILITY FINANCIAL INCOME EQUITY (BANK) STATEMENTS FOR FINANCIAL POSITION 131 STATEMENTS OF 137 NOTES TO THE BRANCH NETWORK REPORTING CASH FLOWS FINANCIAL STATEMENTS This report has been prepared to assist shareholders to assess the Board’s strategies and their potential of success. The statements contained herein may include declarations of future expectations and other forward-looking statements that are based on management’s current views and assumptions. These involve risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Readers are advised not to place undue reliance on the forward-looking statements relating to the Group’s business strategy, plans, objectives and financial positions as these statements rely on assumptions and hypotheses which inherently represent an accuracy risk. Actual results, performance and events may differ from those in such statements due to general evolution of economic, political and industry conditions, interest rate levels, currency exchange rates as well as changes in laws and regulations and the extent of competition and technological factors. In addition, the MCB Ltd. does not undertake to update any forward-looking statement that may be made from time to time by the organisation or on its behalf. MCB Group Annual Report 2010 group financial summary 2010 2009 2008 2007 2006 Income Statement (Rs m) The MCB Group: Confidently facing up to testing challenges Operating profit 3,817 4,406 3,820 2,693 2,052 Profit after tax 3,420 4,046 3,886 2,547 2,013 Profit attributable to shareholders 3,413 3,964 3,694 2,461 1,986 Profitability levels have been impacted by the difficult environment, though remaining contextually resilient … Statements of Financial Position (Rs m) Total assets 162,739 150,476 132,972 110,143 99,410 Profit attributable to shareholders Recurring earning power Total loans (net) 109,442 96,859 77,552 65,768 58,026 5 25 5 3.5 % Total deposits 132,484 121,241 105,487 84,624 76,736 Rs bn Rs bn 4 20 4 3.0 % Shareholders' funds 20,319 18,574 16,346 13,475 12,334 Rs bn Tier 1 Capital 18,851 17,517 14,704 *11,913 *10,139 3 15 3 2.5 Profit Risk-weighted assets 146,928 135,222 110,301 91,965 78,471 2 10 2 2.0 Rs bn Rs Earnings per share - Performance Ratios (%) 1 5 (Rs - right scale) 1 1.5 Pre-provision profit % Return on average total assets 2.2 2.8 3.0 2.3 2.2 0 0 Return on equity - 0 Rs bn 1.0 Recurring earning Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 (% - right scale) Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 power (right scale) Return on average equity 17.6 22.7 24.8 19.1 17.6 Return on average Tier 1 capital 18.8 24.6 27.8 22.3 21.1 Recurring Earning Power = Pre-provision profit excluding net income Non-interest income to operating income 35.6 39.0 44.0 38.5 34.6 from sale of securities and financial instruments to average assets Loans to deposits ratio 84.9 82.7 76.5 81.6 80.0 Cost to income ratio 46.5 42.1 42.9 47.5 49.8 Amidst sustained balance sheet growth, supported by healthy funding and liquidity positions … Capital Adequacy Ratios (%) Capital & reserves/Total assets 12.5 12.3 12.3 12.2 12.4 Loans and assets Liquid assets to deposits BIS risk adjusted ratio 14.9 15.1 16.9 *17.2 *15.2 of which Tier 1 12.8 13.0 13.3 *13.0 *12.9 200 150 50 % Asset Quality Rs bn Rs bn 120 40 Non-performing loans (Rs m) 4,336 4,809 4,692 4,833 4,750 150 Rs90 bn %30 NPL ratio (%) 3.9 4.8 5.8 7.0 7.7 100 60 20 Allowance for loan impairment losses (Rs m) 3,054 3,377 3,196 3,246 3,359 Deposits 50 30 10 Provision coverage ratio (%) 70.4 70.2 68.1 67.2 70.7 Borrowings 2 Investor Data 0 Gross loans 0 0 Liquid assets ratio 3 Earnings per share (Rs) 14.38 16.71 15.58 9.74 7.40 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Total assets Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 (right scale) Earnings yield (%) 10.1 13.3 9.1 9.5 13.2 Price earnings ratio (times) 9.9 7.5 11.0 10.6 7.6 Net assets value per share (Rs) 85.61 78.29 68.90 56.87 45.95 While financial soundness metrics with regard to capitalisation and asset quality remain at comfortable levels Dividends per share (Rs) 5.25 5.25 4.55 2.90 2.12 Capital adequacy NPLs to loans Dividend yield (%) 3.7 4.2 2.6 2.8 3.8 24 24 % % 10 Dividend cover (times) 2.7 3.2 3.4 3.4 3.5 Rs bn Market Data 20 20 8 Market capitalisation (Rs m) 35,553 31,547 43,065 25,789 15,798 16 16 % 6 Market price per share (Rs) :- 12 Rs bn 12 High 151.00 172.00 195.00 109.00 58.00 4 8 8 Low 119.00 82.00 101.00 56.00 40.30 4 4 2 Closing (Year end) 142.00 126.00 172.00 103.00 56.00 Shareholders' funds 0 0 Tier 1 ratio (right scale) 0 NPLs to gross loans * Comparatives have been reinstated with a view to ensuring comparability except for Risk-weighted assets. Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 BIS ratio (right scale) Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Net NPLs to net loans Strength and power So strong, so magnificent, so powerful. It’s so easy to forget that nature’s survival is actually in our hands and vice-versa. © Yann Arthus-Bertrand / Altitude. www.yannarthusbertrand.org © Yann MCB Group Annual Report 2010 corporate profile About the MCB Group Awards and recognition Anchored on a 172-year history of accomplishments, the Mauritius Commercial Bank Limited (MCB) is firmly established as the leading bank in Mauritius and a key financial services institution in sub-Saharan Africa. Besides playing an influential role in the in terms of capital and profits socio-economic development of the country, the MCB relied on its sound business model to successfully embark on a sensible 1ST BANK African Business diversification strategy alongside consolidating its domestic banking operations. Apart from tapping into the potential of non- IN EAST AFRICA bank financial and investment services, the Group has established a widening foothold beyond local shores, notably in regional markets. Reflective of its corporate philosophy, the MCB remains intent on providing ever-improving levels of customer experience as well as state-of-the-art financial solutions to individual and corporate clients on the strength of dedicated business segments BANK OF THE 2009 award and extensive delivery channels. Epitomising its prominent brand, the MCB keeps on building long-lasting relationships with its The Banker shareholders, customers, staff and the society at large. YEAR Our core values QUALITY for high straight-through Integrity Our Vision RECOGNITION processing rate for payments and transfers Customer Care To be the obvious choice for financial services AWARDS Citibank and Commerzbank Teamwork in the region and beyond Innovation ACCOLADES FOR overall winner Knowledge ANNUAL REPORT best SEM-7 company Key facts and figures • Highest market capitalisation of around USD 1.2 billion on best website Excellence the local stock exchange, representing a share of some 22% 2009 PricewaterhouseCoopers A rich tradition and strong track record • Extensive network of 40 branches, 150 ATMs (representing 39% Corporate Reporting Awards 6 • Established since 1838 of the local ATM park) and above 4,300 point of sale terminals 7 • Initiation of regional expansion in the early 1990s • Diversified and entrenched participation in non-bank • Listed on the Stock Exchange of Mauritius, a member financial services like leasing and factoring as well as of the World Federation of Exchanges (WFE), since 1989 a comprehensive range of investor services Unmatched domestic franchise Increasingly prominent player regionally and beyond Global Rankings (The Banker - July 2010) Moody’s ratings • Only Mauritian bank in The Banker’s Top 1000 Banks • Presence in 8 countries through subsidiaries, associates and • 743rd among the Top 1000 Banks; 25th in sub-Saharan Africa • Foreign Currency Deposits Baa2/P-2 • Market shares of around 40% in respect of bank credit representative offices • 134th worldwide in terms of soundness • Foreign Currency Issuer Baa1 to the economy & local currency deposits and of over 50% of • Bolstered regional market presence via participation • 42nd – Return on assets • Global Local Currency Deposit Baa1/P-2 cards issued in Mauritius in major deals and agreements as well as reinforced business • 116th – Profits on average