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MOODY’S INVESTORS SERVICE – Rating Action: Moody’s affirms ratings of Mauritian Banks; all outlooks are now stable

29 Jul 2022

Rating actions follow action on Mauritius’ government ratings

Limassol, July 29, 2022 — Moody’s Investors Service (“Moody’s”) has today affirmed all ratings and

assessments of the three rated Mauritian banks, namely: Mauritius Commercial Bank Limited (“MCB”), SBM

Bank (Mauritius) Ltd. (“SBM Bank”), and Absa Bank (Mauritius) Limited (“Absa Mauritius”). As part of the same

rating action Moody’s has changed the outlooks to stable from negative on MCB’s and SBM Bank’s long-term

deposit and issuer ratings. The outlook for Absa Mauritius’ long-term deposit ratings remains stable.

A full list of affected ratings can be found at the end of this press release.

The rating action follows Moody’s decision to downgrade the Mauritian government’s long-term issuer rating to

Baa3, from Baa2, with an outlook change to stable from negative on 28 July 2022. The stable outlook on the

sovereign captures Moody’s expectations that Mauritius’s credit profile will remain aligned with Baa3-rated

sovereigns. For further information on the sovereign rating action, please refer to Moody’s press release:

“Moody’s downgrades Mauritius’s rating to Baa3, changes outlook to stable”,

https://www.moodys.com/research/–PR_467667 .

RATINGS RATIONALE

The affirmation of the three Mauritian banks’ ratings reflects the resilient financial profile despite the

increasingly challenging operating environment. While banks asset risks remain elevated, to varying degrees,

banks maintain strong liquidity and solid capital buffers, and we expect their profitability to rebound following

the pandemic.

While the post-pandemic economic recovery remains fragile, following Russia’s invasion of Ukraine that will

lead to higher inflation and lower global growth rates, we expect any asset-quality deterioration for Mauritian

banks to be manageable as a result of targeted support measures. Affected households and businesses have

benefitted from moratoriums on loan repayments and wage assistance schemes, and large enterprises have

received longer-term support from the Mauritius Investment Corporation (MIC).

The creation of MIC, a special purpose vehicle that is fully owned by the Bank of Mauritius and funded through

$2 billion of international reserves, has supported financial stability by providing funding to systemically

important corporates. The creation of MIC has, in this way, shielded the local banks from a sharp surge in

asset quality’s deterioration, which is positive for the banking system, but in turn exposes the central bank’s

balance sheet to increased credit risk.

The stable outlooks on the three banks’ long-term deposit and issuer ratings reflects Moody’s view that the

banks’ ratings already capture the current risks to the banks’ financials from the still challenging operating

conditions. The stable outlooks on the banks’ long-term deposit and issuer ratings also incorporate the stable

outlook on the sovereign rating, as Moody’s expects that the sovereign’s capacity to provide support to banks,

in case of need, will remain broadly stable.

ISSUER-SPECIFIC RATING DRIVERS

MAURITIUS COMMERCIAL BANK LIMITED (“MCB”)

The affirmation of MCB’s Baa3 long-term deposit and issuer ratings reflects its solid capital levels, with a

shareholders’ equity-to-assets ratio of 10.3%. At the same time, high liquid banking assets-to-tangible banking

assets ratio of 51% as of March 2022; and its stable domestic funding profile, mitigate MCB’s sizeable offshore

deposits and growing market funding reliance. Despite a drop since the pandemic, MCB’s profitability strongly

positions it among its global peers and Moody’s expects a gradual improvement supported by reduced loan

loss provisions, the recent high growth in its international lending and the higher interest rate environment.These drivers are moderated by residual risks to MCB’s asset quality amid the bank’s high borrower

concentrations, and in the context of the still fragile post-pandemic economic recovery and following Russia’s

invasion of Ukraine that will lead to higher inflation and lower global growth rates.

MCB’s Baa3 long-term deposit and issuer ratings reflect its ba1 Baseline Credit Assessment (BCA), and a

one-notch rating uplift, resulting from Moody’s assessment of a high likelihood of support from the Government

of Mauritius in the event of need, driven by MCB’s importance to Mauritius’ domestic financial system.

The stable outlook on MCB’s long-term deposit and issuer ratings reflects Moody’s view that the bank’s ratings

already capture the current risks to the bank’s financials from the tough operating conditions. The stable

outlook also incorporates Moody’s view that the sovereign’s capacity to provide support will remain broadly

stable, given the stable outlook on the sovereign rating.

SBM BANK (MAURITIUS) LTD. (“SBM BANK”)

The affirmation of SBM Bank’s Ba1 long-term deposit and issuer ratings reflects the bank’s high share of liquid

assets at 64.5% of tangible banking assets as of March 2022, its predominantly domestic retail deposit funded

profile, with a low loan-to-deposit ratio; and strengthened capital levels with a reported regulatory Tier 1 capital

ratio of 16.4% as of March 2022.

The ratings also reflect SBM Bank’s weak asset quality, with a higher share of NPLs at 10.0% of gross loans

as of year-end 2021, that remains its key credit challenge. Residual risks remain in the context of the still

fragile post-pandemic economic recovery and following Russia’s invasion of Ukraine that will lead to higher

inflation and lower global growth rates.

SBM Bank’s Ba1 long-term deposit ratings reflect its ba2 BCA and a one-notch uplift, resulting from Moody’s

assessment of a high likelihood of support from the Government of Mauritius, in the event of need.

The stable outlook on SBM Bank’s long-term deposit and issuer ratings reflects Moody’s view that the bank’s

ratings already capture the current risks to the bank’s financials from the tough operating conditions. The

stable outlook also incorporates Moody’s view that the sovereign’s capacity to provide support will remain

broadly stable, given the stable outlook on the sovereign rating.

ABSA BANK (MAURITIUS) LIMITED (“ABSA MAURITIUS”)

The affirmation of Absa Mauritius’ Ba1 long-term deposit ratings reflects its strong liquidity buffers at 63% of

tangible banking assets as of March 2022 and solid capital levels with a reported regulatory common equity

Tier 1 capital ratio of 19.0% and a total capital adequacy ratio of 23.1% as of December 2021. The bank’s

profitability and franchise benefit from the close cooperation with its parent, Absa Group Limited (AGL, Ba3

stable), and other group companies in the region, as well as its role as the group’s international banking,

wealth management and asset hub, results in its ability to source good-quality regional business in the broader

Africa continent.

The ratings also capture the high credit risks stemming from the still fragile post-pandemic economic recovery

and following Russia’s invasion of Ukraine that will lead to higher inflation and lower global growth rates.

Absa Mauritius Ba1 long-term deposit ratings reflect its ba2 BCA and a one-notch uplift to its BCA, stemming

from Moody’s assessment of a moderate likelihood of support from the Government of Mauritius, in case of

need.

The stable outlook on Absa Mauritius’ long-term deposit ratings reflects Moody’s view that the bank’s ratings

already capture the current risks to the bank’s financials from the still challenging operating conditions. The

stable outlook also incorporates Moody’s view that the sovereign’s capacity to provide support will remain

broadly stable, given the stable outlook on the sovereign rating.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Any upward pressure on Mauritian banks’ ratings is limited, given the difficult operating environment.

Mauritian banks’ ratings could be downgraded if their financial metrics weaken beyond those of global peers

that Moody’s rates similarly.

LIST OF AFFECTED RATINGS..Issuer: Absa Bank (Mauritius) Limited

Affirmations:

….Adjusted Baseline Credit Assessment, Affirmed ba2

… Baseline Credit Assessment, Affirmed ba2

….Long-term Counterparty Risk Assessment, Affirmed Baa3(cr)

….Short-term Counterparty Risk Assessment, Affirmed P-3(cr)

….Long-term Counterparty Risk Ratings, Affirmed Baa3

….Short-term Counterparty Risk Ratings, Affirmed P-3

….Long-term Bank Deposit Ratings, Affirmed Ba1, Outlook Remains Stable

….Short-term Bank Deposit Ratings, Affirmed NP

Outlook Action:

….Outlook, Remains Stable

..Issuer: Mauritius Commercial Bank Limited

Affirmations:

….Adjusted Baseline Credit Assessment, Affirmed ba1

….Baseline Credit Assessment, Affirmed ba1

….Long-term Counterparty Risk Assessment, Affirmed Baa2(cr)

….Short-term Counterparty Risk Assessment, Affirmed P-2(cr)

….Long-term Counterparty Risk Ratings, Affirmed Baa2

….Short-term Counterparty Risk Ratings, Affirmed P-2

….Long-term Issuer Rating, Affirmed Baa3, Outlook Changed To Stable From Negative

….Long-term Bank Deposit Ratings, Affirmed Baa3, Outlook Changed To Stable From Negative

….Short-term Bank Deposit Ratings, Affirmed P-3

Outlook Action:

….Outlook, Changed To Stable From Negative

..Issuer: SBM Bank (Mauritius) Ltd.

..Affirmations:

….Adjusted Baseline Credit Assessment, Affirmed ba2

….Baseline Credit Assessment, Affirmed ba2

….Long-term Counterparty Risk Assessment, Affirmed Baa3(cr)

….Short-term Counterparty Risk Assessment, Affirmed P-3(cr)

….Long-term Counterparty Risk Ratings, Affirmed Baa3

….Short-term Counterparty Risk Ratings, Affirmed P-3

….Long-term Issuer Rating, Affirmed Ba1, Outlook Changed To Stable From Negative….Long-term Bank Deposit Ratings, Affirmed Ba1, Outlook Changed To Stable From Negative

….Short-term Bank Deposit Ratings, Affirmed NP

Outlook Action:

….Outlook, Changed To Stable From Negative

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks Methodology published in July 2021 and available

at https://ratings.moodys.com/api/rmc-documents/71997 . Alternatively, please see the Rating Methodologies

page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections

Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and

Definitions can be found on https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain

regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series,

category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from

existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this

announcement provides certain regulatory disclosures in relation to the credit rating action on the support

provider and in relation to each particular credit rating action for securities that derive their credit ratings from

the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory

disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be

assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms

have not changed prior to the assignment of the definitive rating in a manner that would have affected the

rating. For further information please see the issuer/deal page for the respective issuer on

https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this

credit rating action, and whose ratings may change as a result of this credit rating action, the associated

regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following

disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated

entity.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no

amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit

Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related

rating outlook or rating review.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit

analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates

outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf,

London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK

endorsement status and on the Moody’s office that issued the credit rating is available on

https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the

Moody’s legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each

credit rating.Christos Theofilou, CFA

Vice President – Senior Analyst

Financial Institutions Group

Moody’s Investors Service Cyprus Ltd.

Porto Bello Building

1, Siafi Street, 3042 Limassol

PO Box 53205

Limassol, CY 3301

Cyprus

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

Antonello Aquino

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

Releasing Office:

Moody’s Investors Service Cyprus Ltd.

Porto Bello Building

1, Siafi Street, 3042 Limassol

PO Box 53205

Limassol, CY 3301

Cyprus

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

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MOODY’S INVESTORS SERVICE – Rating Action: Moody’s affirms ratings of Mauritian Banks; all outlooks are now stable

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