Every day, we will help make something happen

An overview of Mauritius’ largest bank

Presentation by: Jean-François DESVAUX DE MARIGNY Deputy Chief Executive - MCB Limited May 2014

Overview

Established 175 years ago… MCB

is today an integrated financial group

offering a wide range of products and services, including retail and business/corporate banking, global business, factoring, leasing, and various investor-related solutions. •

No. 1 on the Stock Exchange of Mauritius (23% of total market capitalisation)

• Serving over 1

million customers

• Workforce of around 3,000 Mauritius – Madagascar – Seychelles – Mozambique – Maldives – Mayotte – Réunion Island – France – South Africa

• Total assets of nearly USD

8 bn as at March 2014

Corporate philosophy

OUR VISION OUR MISSION

Everyday, we will help make

We will keep finding ways to meet the needs of our customers

something happen

We will listen to them and help them achieve their goals

We will help people with ideas to be entrepreneurs We will be worthy of our shareholders’ confidence We will do what we can to make the world a better, greener place And we will never go away

OUR CORE VALUES OUR CORE VALUES Honest and trustworthy at all times

Delivering unrivalled service

Working together towards a common goal

Proactively seeking out new opportunities

Believing in lifelong learning

Being the best we possibly can

Integrity

Customer care

Teamwork

Innovation

Knowledge

Excellence

Market positioning – Domestic Banking

Leading in Mauritius MCB is anbank integrated financial services provider. It offers state-of-the-art and comprehensive solutions to its Retail, Corporate and Institutional clients ... • Above 920,000 individuals and institutional clients

• Market shares of around 40% in respect of credit to the economy and local currency deposits and above 50% of cards issued • Network of 40 branches/kiosks redesigned as per world-class ‘store’ concept • 163 strategically-located ATMs, representing 36% of national park

• Above 6,400 point-of-sale terminals, many of which are multi-currency and wireless • Over 80,000 registered Internet Banking customers (market share of 34%) • Wide range of mobile services: SMS Banking, Airtime refill through mobile phones, Mobile Banking and Mobile Payments

Market positioning – Non Banking Broad involvement in the non-banking field

• Wide range of investor-related services through a network of subsidiaries in key areas such as stockbroking, corporate finance advisory, investment management and registrar & transfer agent as well as private equity financing

• Assets under management of around MUR 16 billion (>USD 530m)

• Major domestic player in the leasing and factoring spheres

Market positioning – Foreign involvement Increasingly prominent player in sub-Saharan Africa • Initiation of regional expansion in early 1990s • Presence in

8 countries abroad through subsidiaries, associate,

and representative offices

• Network of above 1,600 correspondent banks worldwide • Active involvement in sub-Saharan Africa, especially via its ‘Bank of Banks’ initiative and participation in major cross-border deals and transactions

• Over 50 regional clients being serviced via the ‘Bank of Banks’ axis with MCB handling trade finance, payments, card operations as

well as internal audit and project management related assignments on their behalf. Overseas subsidiaries/ Rep. Offices

MCB associate through BFCOI

Countries in which MCB is involved

Strong credentials Bank of the Year in Mauritius by The Banker in 2012, for the 4th time in the last 6 years

Best Local Bank in Mauritius in the EMEA Finance Banking Awards 2013

Ranked 672nd worldwide, 20th in the region & 1st in East Africa by The Banker Top 1000 Banks (July 2013) Ranked as the 3rd biggest company in East Africa in terms of market capitalisation

Ranked 50th by The Africa Report Top 200 banks in Africa 2013

Best Risk Management Disclosures, Best Corporate Governance Disclosures and overall winner in the SEM7 category as per the PricewaterhouseCoopers Corporate Reporting Awards 2014

Leading regional bank in terms of operating income & profitability as per the Top 500 de L’Océan Indien 2014 issue

Quality recognition awards for high straight-through processing rate for payments & transfers

Moody’s ratings

Foreign Currency Deposits

Foreign Currency Issuer

Local Currency Deposit

Bank Financial Strength

NSR Senior Debt – MTN Program (Foreign Currency)

NSR Subordinated Debt – MTN Program (Foreign Currency)

Baa1/P-2

Baa1

Baa1/P-2

D+

Aa3.za

A3.za

Our tailored financial solutions

In a nutshell… Over the past decades … Financial liberalisation in the 90’s

MCB has taken due advantage of

Diligent strategic positioning

Sound business model

… to widen and deepen its reach across market segments and countries

Strategic orientations

Consolidate our domestic position • Refining value proposition • Tailoring to different customer segments • Adapting our financial solutions

Expand our non-bank activities • Broadening existing value proposition • Leveraging brand franchise, referrals & distribution capacity • Promoting non-bank activities

Grow our international footprint • Expanding operations in presence & untapped markets • Consolidating involvement with regional & international stakeholders • Further positioning the Group as a regional platform for handling trade finance, payments & cards operations, on behalf of banking counterparts

The consolidation of our position on the local front… Redesign of our entire branch network

Strategic drivers • Enrichment of value proposition to market segments & deepening of customer relationships and services • Continuous upgrade of capabilities for efficiency gains • Support to established sectors alongside contributing to the take-off of upcoming segments

MCB introduced ‘Juice’, a mobile banking service that enables customers to use their mobile phones to make purchases and money transfers as well as effect ATM withdrawals without a card.

• Underpinning the development of small and medium enterprises

Key achievements • Modernisation, broadening and segmentation of the range of channel offerings • Enlarged array of products and services

MCB UnionPay cards unveiled in August 2013

• Targeted promotional campaigns and business seminars/meetings • Financing of key projects notably in the hospitality and property development sectors whilst being a prime provider of green loans • Provision of tailored support to businesses amidst current testing economic context

‘Instakit’ allows customers opening an account to be equipped right away with financial solutions like debit card & IB services (with pin and access codes), SMS Refill and SMS Banking. All these facilities are processed in only 15 minutes!

Organisation of regular business meetings with MCB customers Peter Mulroy Secretary General - Factors Chain Int’l

… alongside the diversification of exposures across segments Jun 1990

Credit to the economy

Jun 1990

Traditional sectors* 53%

Retail sector 14%

Other corporate sectors 33%

Jun 2013 Mar 2014

Traditional sectors* 26%

Retail sector 22%

*comprise Sugar, Tourism and Textile sectors

Other corporate sectors 52%

… the bolstering of our non-bank activities Diversified product offerings

Strengthening of value proposition • New ventures have been set up • Investor solutions have been widened • Capabilities across market segments have been geared up Launch of the MCB Africa Bond Fund in February 2014

Range of services offered • Investment advisory services • Corporate financing • Leasing

• Factoring • Credit Insurance cover • Equity Fund

Finlease - Promotional campaign held in October 2013

5-yr capital guaranteed investment in a basket of funds investing principally in listed African equities, launched in May 2014

… and the expansion of our international footprint

Overall positioning

‘Bank of Banks’ strategy

• Widening activities and operations in

• Platform for providing trade finance services including LC re-issuance and

presence countries, African markets and beyond • Pursuance of the ‘Bank of Banks’

confirmation • Dedicated subsidiary for cards outsourcing services • Comprehensive SWIFT and Payments Hub service line-up

initiative and enhancement of the

• Internal audit and project management services

visibility of MCB’s holistic product

• Involvement in road-shows to present MCB’s services to prominent players in

offering on the regional market place

the region, with our participation as an exhibitor at SIBOS 2013 in Dubai (Sept. 2013) to promote our SWIFT services

• Hosting of the ‘Africa Forward Together’ seminar – an annual event

Key market involvement • Participation in various trade and

Exhibitor at SIBOS 2013 in Dubai

project finance deals • Gateway for direct corporate funding and partaking of big-ticket structured cross-border transactions ‘Africa Forward Together’ held in November 2013

… contribute to a diversified earnings base

Contribution to Group profit for FY 2012/13

Other focus areas Building internal capacity

Contributing to sustainable development

Left: MCB’s new building at St. Jean, which was the 1st in the Southern Hemisphere to achieve a BREEAM rating

Left: MCB is the prime provider of ‘Green Loans’, in partnership with the Agence Française de Développement. The 2nd line of credit was signed in March 2014.

Right: Acquisition of a renowned software solution, Skillsoft Leadership Advantage, to provide e-learning training bank-wide Right: MCB sponsors the local Eco-TV programme, to promote good environmental practices. Left: State-of-the-art training facilities available at MCB Development Centre at St. Jean. Facilities offered there include an auditorium, training rooms & a library backed by latest technologies

Right: MCB launched its ‘Rainwater harvesting scheme’ in February 2013, to encourage rain water recycling amidst the local population

Support to education Left: Adopted by MCB in May 2012. The Equator Principles is a globally-recognised financial industry benchmark for determining, assessing & managing social & environmental risk in project financing ‘MCB Foundation Scholarship’ Scholarship scheme for tertiary students

Group Restructuring

To better support the deployment of its strategic orientations in a changing operating context… …MCB has set out to separate its banking and non-banking operations This will equip MCB with a more flexible and autonomous structure to better cope with the challenges and tap into the opportunities characterising the environment in which it operates. To that effect, the listing of MCB Group Limited shares on 03 April 2014 on the local bourse marked the first step of the restructuring process. MCB GROUP LIMITED

BANKING 1

NON-BANKING FINANCIAL 1

OTHER INVESTMENTS 1

MCB INVESTMENT HOLDING LIMITED

MCB Capital Markets Ltd

Fincorp Investment Limited

MCB Equity Fund Limited

MCB Properties Limited

MCB Moçambique SA

MCB Factors Limited

International Card Processing Services Limited

MCB (Maldives) Private Limited

Credit Guarantee Insurance Co. Limited (Associate)

MCB Seychelles Ltd Note: Details of the restructuring are in the process of being finalised MCB MCB Madagascar SA Limited

1

Refers to business segment

BFCOI (Associate)

Note: Details of the restructuring are in the process of being finalised

MCB Forward Foundation Blue Penny Museum

Funding our growth

As part of the Group’s proposed restructuring and to provide adequate capacity for future growth, MCB has implemented a plan to increase its funding resources and strengthen its capital base.

August 2013 • Rs 4.5 billion raised in the form of Tier 2 capital subordinated notes listed on the Stock Exchange of Mauritius.

September 2013 • Agreement for a USD 150 million financial facility package with African Development Bank, including a USD 120 million senior line of credit and a USD 30 million subordinated loan. • Increase in the size of its Medium Term Note Programme listed on the Bond Exchange of South Africa from ZAR 1 billion to ZAR 2 billion.

Despite recent improvements, the global context remains challenging and is impacting the Mauritian economy… Difficult conditions in key export markets persist

Global economic activity IMF World Economic Outlook Projections Percentage change

2012

2013(e)

2014(f)

2015(f)

3.2

3.0

3.6

3.9

1.4 2.8 -0.7 0.9 0.0 -2.4 -1.6 0.3

1.3 1.9 -0.5 0.5 0.3 -1.9 -1.2 1.8

2.2 2.8 1.2 1.7 1.0 0.6 0.9 2.9

2.3 3.0 1.5 1.6 1.5 1.1 1.0 2.5

Real GDP growth World output1 Advanced economies United States Euro area2 Germany France Italy Spain United Kingdom (e) estimates (f) forecasts Notes: 1

The quarterly estimates and projections account for 90 percent of the world purchasing power

2

Excludes Latvia

Source: IMF World Economic Outlook, April 2014

… yet, the country has sustained a generally appreciable macroeconomic performance… Real GDP growth

Inflation 6

5 4.2 3.6

5 3.4

3.6

3.2

%

4

4

%

3

3

2

2

1

Headline

(e) estimates (f) MCB forecasts

Core 1

Mar-14

Feb-14

Jan-14

Dec-13

Nov-13

Oct-13

Sep-13

Aug-13

2014(f)

Jul-13

2013(e)

Jun-13

2012

May-13

2011

Apr-13

2010

Mar-13

1

0

Core 2

Sources: Statistics Mauritius & MCB Staff estimates Notes: (i) Headline inflation is measured by comparing the average level of prices, as measured by the CPI, during a twelve month period with the average level during the corresponding previous twelve-month period. (ii) Core 1: excludes 'Food, Beverages and Tobacco' components and mortgage interest on housing loan from headline inflation (iii) Core 2: excludes Food, Beverages, Tobacco, mortgage interest, energy prices and administered prices from headline inflation Source: Bank of Mauritius

… supported by underlying foundations and enablers… Sector contribution to GDP, 2013

Sugar 1%

Non-sugar agriculture 2%

Others 20%

Textile 5%

Public admin., defence and compulsory social security 7%

Other manufacturing 5% Construction 5%

Education 5%

Mauritius is withstanding the difficult external context thanks to the: • Consolidation of established sectors • Diversification of the economic base • Broadening/diversification of our

Wholesale & retail trade 11%

Real estate activities 6% Other financial services 1% Monetary intermediation 6% Insurance, reinsurance and pension 3%

Food manufacturing (excl. sugar) 6%

Information and communication 4%

Transport & storage 6%

Accommodation and food service activities 6%

involvement in the region and beyond

… an attractive business environment

Mauritius establishing itself as the best performer in subSaharan Africa in respect of most key indices …

Global Ranking

Regional Ranking in Sub-Saharan Africa

Rank (out of no. of countries)

Rank (out of 46 countries)

World Bank Doing Business Index 2013

19 th(out of 185)

1st

Global Competitiveness Index 2013-14

45 th(out of 148)

1st

8th(out of 178)

1st

47 th(out of 122)

1st

Indicator

Index of Economic Freedom 2014 Human Capital Index 2013 Global Innovation Index 2013 Networked Readiness Index 2014

th

53 (out of 142) th

48 (out of 148) th

1

st

1

st

nd

Travel & Tourism Competitiveness Index 2013

58 (out of 140)

2

Global Enabling Trade Index 2014

29 th(out of 138)

1st

… with its conducive business environment being mainly supported by:

•

Attractive fiscal regime, institutional framework and legal set-up

•

Close ties and preferential access to international markets in Europe, Asia and Africa; strategic time zone

•

Adherence to international best practice norms and standards

•

Wide and diversified range of financial products and services

•

Competitive business operation costs

•

Pool of qualified professionals, reliable infrastructure and support services

… and relatively favourable regional performances/prospects Sustained expansion projected for SSA

Trade evolution for SSA

Real GDP Growth Selected countries

2012

2013(e)

2014(f)

12

2015(f) 10

Sub-Saharan Africa

4.9

4.9

5.4

5.5

5.2

5.7

6.6

6.5

3.4

2.7

3.0

3.3

6.2

6.8

6.9

6.8

Mauritius

3.3

3.1

3.7

4.0

Seychelles

2.8

3.6

3.7

3.8

Madagascar

2.5

2.4

3.0

4.0

Mozambique

7.2

7.1

8.3

7.9

Maldives

0.9

3.7

4.2

4.5

Oil exporters1 Middle-Income

2

Low-Income 3

% change

Annual % change

8

6 4

MCB presence countries 2 0 2011

2012

2013(e)

Volume of imports of goods

2014(f)

2015(f)

Volume of exports of goods

1

Includes Chad

(e) estimates (f) forecasts

2

Includes Cape Verde, Lesotho, Mauritius, Namibia, Seychelles, Swaziland and Zambia

Source: IMF World Economic Outlook, April 2014

3

Includes Benin, Burkina Faso, Burundi, Central African Republic, Comoros, Eritrea, The Gambia, Guinea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Niger, Rwanda, Sao Tome and Principe, Sierra Leone, South Sudan, Togo and Zimbabwe (e) estimates (f) forecasts Source: IMF World Economic Outlook, April 2014

Mauritius – A member of key regional trade blocs: SADC, COMESA, IOC

Banking sector performance As per the latest Financial Stability Report of the Bank of

Financial soundness – Banking sector

Mauritius, the banking sector remained well-capitalised and profitable

Selected financial stability indicators Core set of financial soundness indicators (%)

Sep 12 Mar 13 Jun 13 Sep 13

•

pace, with a slight deterioration observed in asset quality

Capital-based Regulatory capital to risk-weighted assets

17.2

17.4

16.4

16.9

Regulatory Tier 1 capital to risk-weighted assets

15.7

15.9

15.0

14.8

lately •

The capitalisation level stayed comfortably above the regulatory minimum of 10% of risk-weighted assets

Asset quality Non-performing loans to total gross loans

3.8

3.9

4.0

4.1

•

Domestic banks continue to source most of their funding from customer deposits, which are generally considered

Earnings and profitability Return on assets

1.5

1.2

1.2

1.1

Return on equity

19.6

15.7

15.2

13.5

as a stable source of funding

•

Liquidity Liquid assets to short-term liabilities

Private sector credit continued to grow, albeit at a slower

High liquidity conditions prevail in the domestic money market

25.1

Source: Bank of Mauritius, Financial Stability Report February 2014

27.9

28.0

26.5

•

The Central Bank has introduced a set of macro prudential policy measures to strengthen the soundness of banks

•

Stress tests carried out by the Bank of Mauritius and the IMF indicated that the Mauritian banking system is wellcapitalised and resilient against a range of shocks to its credit portfolios

Summary

Despite being confronted by a challenging context, MCB Group pursued its progress by …

•

Sustaining its balance sheet growth

•

Maintaining its stable and appreciable profitability performance

•

Preserving its financial soundness

… underpinned by the following: •

Strong brand image and solid franchise

•

Sound and dependable business model

•

Sensible risk management

•

Ambitious market diversification

•

Solid economic base domestically and business openings regionally

Key indicators – MCB Group

- MCB Group Income Statement

Year ended to

Growth

Nine months to

30-Jun-13

USD m

USD m

%

USD m

USD m

%

Net interest income

213

235

10.4

177

184

4.1

Interest income

371

390

5.1

292

303

3.9

Interest expense

158

155

(2.0)

115

119

3.5

Non-interest Income

121

133

9.7

97

106

8.9

Net fee and commission income

74

88

18.1

64

67

4.8

Other income

47

45

(3.5)

33

39

16.7

Non-interest expense

154

167

8.3

129

137

6.0

Operating profit before provisions

180

201

11.8

145

153

5.7

Allowance for credit impairment

17

36

108.4

21

34

59.6

Net profit

137

144

4.9

107

105

(1.9)

30-Jun-12

30-Jun-13

Growth

USD m

USD m

%

USD m

USD m

%

Total Assets

6,380

7,214

13.1

7,182

7,961

10.8

Gross Loans

4,697

5,172

10.1

5,263

5,403

2.7

Total Deposits

5,029

5,537

10.1

5,483

6,132

11.8

871

950

9.1

941

1,043

10.9

Balance Sheet as at:

Equity

Note: Reference rate: USD = MUR 30

31-Mar-13 31-Mar-14

Growth

30-Jun-12

31-Mar-13 31-Mar-14

Growth

Financial soundness metrics – MCB Group

Mar-13

Jun-13

Mar-14

Gross NPL/Gross loans

4.7

5.0

5.7

Net NPLs/Net loans

2.8

3.0

3.5

47.1

45.3

47.2

19.3

20.5

24.4

96.0

93.4

88.1

88.1

86.4

81.6

Return on average total assets 3

2.1

2.1

1.8

Return on average equity 3

15.7

15.8

14.0

13.3

13.5

16.4

12.3

12.6

13.3

Asset Quality

Efficiency Cost-to-income Liquidity Liquid assets1/Total assets Loans to deposits Loans to deposits and borrowings

2

Profitability

Capital adequacy BIS risk adjusted ratio4 o/w Tier 14 1 In

the computation, liquid assets comprise cash, balances with BoM, placements, T-Bills and Government securities subordinated debt 3 Figures for March have been annualised 4 Provisional for March 14 figures 2 Borrowings include

Resilient performance amidst difficult context

6

24

5

20

4

16

1.1 1.1

3

0.7 1.4

2 1

1.1

1.0

1.7

2.0

1.0 2.0

1.0 2.2

0.7 2.5

8 4

0

0 FY 10

Profit H1

12

ROE & ROA; %

Profit; Rs bn

Profitability indicators - MCB Group

Profit Q3

FY 11 Profit Q4

FY 12

FY 13

Return on avg. equity

FY 14 Return on avg. total assets

Note: Non-recurrent gains in June 2011 (Rs 410 million) refer to an out-of-court settlement and an exit from an equity investment, and are included in Q3 results Profits in June 10 were affected by a non-recurring charge of Rs 190 million. Return ratios for FY 14 are annualised.

Sustained business growth

Loans

Deposits

200

200

160

160

120

120

Rs bn

Rs bn

Deposits

80

80

40

40

0

0

Jun 11

Jun 12 Loans - MUR

Jun 13

Dec 13 Loans - FCY

Mar 14

Jun 11

Jun 12 Deposits - MUR

Jun 13

Dec 13

Mar 14

Deposits - FCY

Funding and liquidity Funding strategies

Expanding deposits

Mauritian rupee

growing

our

deposits

base,

comprising mostly retail savings which are generally sticky

Loans, deposits and borrowings

Foreign currency

•

Careful selection and monitoring of exposures

•

Ensuring availability of ample cushion

Rs bn

• Sufficient level of reserves consistent with our risk appetite

200

100

160

80

120

60

80

40

40

20

%

• Organically

• Are our primary funding source • Serve as a stable, solid and low cost foundation for asset financing

• Increased borrowings to support growth

Liquidity

0

0 Jun 11

• The Group ensures sufficient funds are available at reasonable cost to meet obligations on a timely basis

Jun 12

Subordinated debt Deposits - FCY Loans - FCY Loans to deposits ratio

Jun 13

Dec 13

Mar 14

Borrowings Deposits - MUR Loans - MUR Loans to funding base ratio

Asset quality

Despite deteriorating lately, asset quality metrics have stayed at relatively manageable levels.

4

8

3

6

2

4

1

2

0

0 Jun 11

Jun 12

Jun 13

Total provision to gross loans

Dec 13

%

%

Provision and credit quality

Mar 14

Net NPLs to net loans (right scale)

NPLs to gross loans (right scale)

Collateral more than adequately caters for NPLs that are not covered by provisions

Capital adequacy Suitable capital levels are assigned to mitigate exposure to potential shocks

40

20

30

15

20

10

10

5

0

0

Jun 11

Jun 12

Shareholders' funds

Jun 13

Dec 13

BIS ratio

BIS & Tier 1 ratios; %

Shareholders' funds; Rs bn

Capital resources

Mar 14 Tier 1 ratio

Bank of Mauritius regulatory limit (10%) Basel minimum requirement (8%)

Prominence of MCB stock on the local bourse

Value ofshares shares traded Value of traded*

Performance of MCB’s share price vis-à-vis the market

200

160

Rs bn

Index: 05 Jan 09= 100

180

05 Jan 09: MCB Share Price = MUR 119

140 120 100

80 60 2009

12

48

10

40

8

32

6

24

4

16

2

8

0

0 FY FY FY FY FY 2008/09 2009/10 2010/11 2011/12 2012/13

2010

2011

2012

2013

2014

MCB

Other shares

MCB market share (%)

* Excluding one-off transactions

MCB share price index

SEMDEX (rebased)

Note: Value of shares traded excludes one-off transactions

MCB market share (%)

13 May 14: MCB Share Price = MUR 214.50

Way forward

MCB has a solid and dependable business model …

•

Financial soundness metrics remain appreciable, broad-based and sustainable

•

Enhanced internal capabilities

… which leaves the Group suitably poised to tap into new business opportunities and to pursue its

strategic orientations namely:

•

Consolidation of position in the domestic banking sector

•

Further expansion of activities into non-bank financial services

•

Increase in regional and international footprint