Operating income maintained its uptrend and grew by 6.4%, supported by the Group’s diversification strategy and the pick-up in economic activity. Notwithstanding a significant rise in earning assets, net interest income rose by only 3.6%, being impacted by lower yields on Government securities locally and reduced margins on our international loan book amidst a shift in its mix toward the shorter tenor loans. Non-interest income rose by 11.8% to Rs 8,654 million in spite of fair value losses of Rs 518 million on equity investments compared to a gain of Rs 919 million in the previous year. This performance was driven by an increase of 36.1% in net fee and commission income, reflecting higher revenues across banking subsidiaries, notably from trade financing and payment activities, as well as a strong growth in profit arising from dealings in foreign currencies and the resumption of rental income at the level of MCB Real Assets following the reopening of the borders.

 

Sustained efforts to reinforce our human capital and technological capabilities led to operating expenses increasing by 10.4%, thus contributing to a rise in the cost-to-income ratio from 36.9% to 38.3%. On the other hand, in spite of an increase in specific provisions net of recoveries, net impairment charge of financial assets declined by 27.0% to Rs 3,481 million. As a result, cost of risk in relation to loans and advances declined by 53 basis points to reach 0.86%.

 

The share of profit of associates rose by 115% to Rs 799 million, mainly due to enhanced performance of Promotion and Development Ltd and our banking associates,

BFCOI and Société Générale Moçambique.

 

The Group preserved its financial soundness in the face of the difficult operating context. Whilst the gross NPL ratio edged up slightly to 3.7%, the Group maintained healthy funding and liquidity positions alongside further strengthening its capital buffer, with the BIS and Tier 1 ratios improving to 18.1% and 16.8% respectively.

 

The operating environment remains highly uncertain, with the risk of a global recession having increased amidst simultaneous and aggressive interest rate hikes worldwide in response to heightened inflationary pressures resulting from the Ukraine war. Against this backdrop, the economic outlook for countries where we operate remains subject to notable downside risks, although the positive momentum observed on the back of the recovery in tourism is encouraging. Notwithstanding the challenging context and pressures on our cost base linked to the high inflation level, we expect a further improvement in results in FY 2022/23, supported by improving yields on the international markets and the diligent execution of our diversification strategy across markets and products