Moody's Investors Service ("Moody's") has today affirmed the ba1 baseline credit assessment (BCA) and Baa3/P-3 deposit ratings of Mauritius Commercial Bank Limited (SEM:MCBG), and also changed the outlook on the long-term ratings to positive from stable. Further, the rating agency has affirmed MCB's adjusted BCA of ba1, as well as the Baa2/P-2 counterparty risk ratings and Baa2(cr)/P-2(cr) counterparty risk assessment.
Today's rating action is driven by the improvements in MCB's overall financial profile, and the positive prospects for the bank's performance stemming from its disciplined strategy in expanding prudently in the region notably through short-term unfunded business.
RATINGS RATIONALE
MCB's ratings affirmation and outlook change to positive from stable reflects the improving trends in the bank's underlying financial fundamentals, on the back of a benign operating environment in Mauritius (GDP likely to grow by around 3.9% in 2018 from 3.8% in 2017) as well as profitable business opportunities that the bank leverages in the region, mainly in the African continent. Accordingly, the rating agency believes that these developments exert upward pressure on the bank's credit profile.
Robust performance and profitability metrics
The bank's performance has been favourable in recent quarters, with its pre-provision income for the nine-months ending in March 2018 increasing by 7.5% year-on-year, and its bottom-line profitability higher by 6.5% year-on-year. The bank's net interest income has benefited from the 25% year-on-year expansion of its foreign-currency loan book, as well as from its excess liquidity invested in government securities offering higher yields in recent quarters. In addition the 6.3% year-on-year increase in the bank's net fees and commissions was underpinned by its increased loan disbursements and trade finance related operations during the period.
In general, the bank exhibits a strong earnings/profitability performance with an annualised 1.9% net income over tangible assets ratio as of March 2018. Moreover, Moody's acknowledges MCB's low cost-to-income ratio of 38% in March 2018, which is expected to improve further underpinned by the bank's digitalization initiatives and its digital factory concept that will start bearing fruit from 2019 onwards. The rating agency expects the bank's favourable performance to be sustained over the next 12-18 months, driven by its high growth in international business.
