Mauritius Commercial Bank Expects Net to Drop 10% Amid Bad Loans

Mauritius Commercial Bank (MCB), the island nation’s biggest lender by market value, expects net income to shrink 10 percent this fiscal year as it increased provisions for bad loans, according to the head of its banking unit.

The lender will boost provisions for non-performing loans to 4 percent of its 125.7 billion rupees ($4.2 billion) loan portfolio, up from 3.4 percent, Antony Withers said in an interview in Port Louis, the nation’s capital. Net income should surpass 4 billion rupees for fiscal 2012, compared with 4.52 billion rupees last year, and profit excluding one-time items should be little changed, he said.

The sovereign-debt crisis in Europe, the Indian Ocean island nation’s main trading partner, is hurting Mauritian companies as the rupee appreciates versus the euro and constrains tourism. The lender’s net income last year was boosted by an out-of-court settlement of 250 million rupees last year, according to financial statements on its website.

“It is, on balance, a positive result given the challenging backdrop,” including the stronger rupee, Withers said. “The economic climate is undoubtedly tougher. We see that in a range of businesses. Cash flow is tighter than before.”

Allowances for credit impairments almost doubled to 373.7 million rupees for the nine months through March compared with the similar period a year earlier, the company said when it reported nine-month figures on May 14. For fiscal 2011, impaired loans were 315.1 million rupees.

Regional Growth

Withers said growth in the lender’s corporate and institutional business in the Indian Ocean region is outpacing that in its home market. MCB, as the lender is known, operates in Reunion Island, Seychelles, Madagascar, Mozambique and the Maldives, it said in its fiscal 2011 annual report.

“If the results are on par with last year, it would be a commendable performance given the current economic environment,” said Bhavik Desai, an analyst at Port Louis-based Axys Stockbroking Ltd., which has a buy rating on MCB.

MCB was founded in 1838, making it the island’s oldest bank. The lender also reported on May 14 that nine-month profit was “virtually unchanged” at 3.03 billion rupees, while net interest income advanced 11 percent to 4.84 billion rupees.

The island’s economy is expected to grow 3.6 percent this year, Statistics Mauritius said on March 30, reducing its previous forecast of 4 percent. Tourist arrivals from Europe shrunk 2.7 percent during the first quarter through March.

The stock has outperformed the 38-member SEMDEX index this year, gaining 1.2 percent compared with a 3.3 percent drop in the Mauritian benchmark.

To contact the reporter on this story: Kamlesh Bhuckory in Port Louis at kbhuckory@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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