State Bank of Mauritius sees profits dip as bad debts rise
Bad debts witnessed an increase during the period under review with net impaired advances to net advances as at June 30, 2014 standing at 1.01%. (Image: intnet.mu)
The island economy’s second largest bank, State Bank of Mauritius (SBM), saw group profits after tax dip 7.96% for the six months ended 30 June 2014 to Rs 1.37 billion, on the back of a substantial increase in credit impairment, lower fee income and rise in non-interest expenses.
Bad debts witnessed an increase during the period under review with net impaired advances to net advances as at June 30, 2014 standing at 1.01%.
However, SBM managed to increase interest income by Rs 47.58 million to Rs 3.21 billion.
SBM management noted that ‘advances continue to stagnate in the current economic climate and large corporates are resorting to capital as well as forex markets for refinancing bank debts accompanied by lower yields in our increasing government securities portfolio.’
Besides, a net decrease was also registered for net fee and commission income which went down 16% to Rs 430.5 million compared to last year.
Also, interest expense increased slightly by Rs 22.44 million to Rs 1.16 billion during the six months ended June 2014 compared to the corresponding period in June 2013.
Overall, the group’s net interest margin to average assets dropped from 3.90% for the six months ended June 30, 2013 to 3.60% for the six months ended June 30, 2014.
Furthermore, a slight dip in non-interest income was noted by 1.88% to Rs 754.97 million compared to Rs 769.48 million for the corresponding period last year.
This decrease in non-interest income is mainly due to lower fee and commission income, cross border card income and forex income. However, the bank has signed up with Union Pay International (UPI) over new credit cards and expects to improve card income from this partnership.
On the other hand, even as non-interest income dipped, non-interest expenses increased by 5.90% to reach Rs 916.68 million, mostly due to higher system, business transformation and personnel costs.
Accordingly, cost to income ratio rose to 35.46% for the six months ended June30, 2014 from 32.48% for the corresponding period in 2013.
The public offer for the issue of Class A MUR Bond of Rs 1.00 billion launched on 20 December 2013 was oversubscribed and a maximum amount of Rs 1.50 billion was retained. Similarly, an amount of USD 65.04 million was retained for the issue of Class B USD Bond of USD 50 million launched on 15 February 2014.
The group capital adequacy ratio under Basel II was 24.38% as at 30 June 2014, which is comfortably above the minimum regulatory requirement of 10% whereas under the Basel III, the capital adequacy ratio stood at 24.26%.
Besides, an interim dividend of 1.3 cents has been declared for the third quarter of the financial year ending 31 December 2014.
The group’s gross advances increased by Rs 1.93 billion from December 2013 to reach Rs 73.06 billion as at June30, 2014 and Group deposits increased by Rs 1.68 billion to Rs 84.70 billion over the same period.
On future outlook, management noted that SBM remains prudent in its approach to doing business, particularly with regards to risk management, and focused on pursuing its business-aligned technology transformation initiatives. Besides, SBM is progressing in respect of its strategic initiative to diversify geographic-wise.
The State Bank of Mauritius Group (SBM) is a leading financial services group in Mauritius with a growing international presence. It provides all services of a universal bank within a diversified business model.
SBM is well entrenched in the domestic banking landscape with a diversified and loyal customer base, serviced through a large branch network by employees who are being made more responsive to evolving client needs.
Finally, in line with the group’s diversification strategy and in view of market trends, the group is now looking to further develop its Small and Medium Enterprise business as well as Wealth Management & Private Banking services.