Profits of Rs 3,6 billion for the first quarter

The Group delivered a robust financial performance in the first quarter of the financial year to 30 september 2023, with profit attributable to ordinary shareholders increasing by 28.9% compared to the corresponding quarter in FY 2022/23 to Rs 3,559 million, reflecting the continuing growth of our international operations and the high-interest rate environment.

Operating income sustained its growth momentum to rise by 28.4% to Rs 8,312 million. Net interest income rose by 28.1% driven by improved yields on our interest-earning assets in foreign currency benefiting from the high interest rate environment and the expansion in our foreign currency loan book. Conversely, following successive increases in the key rate, net interest margins on rupee-denominated earning assets dropped mainly as a result of the cost of deposits rising more rapidly than the yield on investment securities which take longer to be repriced. Net fee and commission income grew by 16.5% to Rs 1 ,747 million, backed by enhanced contribution from regional trade financing, lending and payment activities in the banking cluster. ‘Other income’ rose by 58.9%, mainly due to an increase in forex profit and lower fair value losses on equity financial instruments.

Investment in technology and human capabilities, coupled with the impact of high inflation on the operating costs, resulted in an increase of 18.6% in non-interest expenses to Rs 3,064 million. However, given the higher growth in revenue, the cost-to-income ratio dropped to 36.9%, compared to 39.9% for the corresponding period last year. Impairment charges increased by 22.2% to Rs 871 million, representing an annualised cost of risk of 79 basis points and reflecting the increase in specific provision coverage to 72%. Gross NPL ratio remained relatively stable at 3.1%.

The share of profit of associates declined by Rs 60 million to Rs 157 million as a result of reduced contribution from both BFCOI and Promotion and Development Group.

The tax charge for the period increased by 59.3% to Rs 935 million, in line with increased profits and the impact of the recent changes in tax laws in Mauritius.

Our capitalisation level has improved with shareholders’ funds increasing to Rs 91 billion, contributing to a capital adequacy ratio of 19.7%, of which 17.1% in the form of Tier 1.

Going forward, the pace of growth of the Group’s net profits is expected to slow down over the next few quarters as net interest margins start to stabilise in the subsequent quarters of FY 2023/24 compared to the corresponding periods of the previous financial year. The global economic environment is set to remain challenging and volatile in view of the heightened geopolitical uncertainty caused by rising tensions in the Middle East. While cooling inflation trends have allowed most central banks to slow the pace of tightening, interest rates are set to stay higher for longer given the gradual disinflation pace. Economic activity is consequently expected to be subdued in key markets. Against this backdrop, African economies continue to face multiple pressures, namely on their exchange rates, debt levels and sovereign ratings although macroeconomic imbalances are gradually narrowing. Locally, the economy continues to sustain its growth path, supported by continued expansion in tourism, financial services and the construction sector but remains exposed to the testing global economic landscape. Notwithstanding the global uncertainties, the Board remains cautiously confident about achieving its expectations regarding the operating performance for the full year.

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