The Mauritian banking industry is expected to face difficulties in domestic growth with an increasing number of players in an already highly competitive market, said a report.
As two main banks control 57% of total bank assets, there is strong competition in order to increase or maintain market share domestically, noted the report by Anglo-Mauritius Stockbrokers on the banking industry in Mauritius.
Moreover, investment, which is of particular concern to the banking sector, is expected to continue on a declining trend with private sector investment expected to contract by 4.1% (-1.9% in 2012), highlighted the report.
However, the report went on to add that the sector has remained resilient and profitable despite various shocks faced by the international banking sector resulting from the global financial crisis and weak economic activity worldwide.
The Mauritian banking industry currently comprises 21 banks, which number 9 local banks, 8 foreign owned subsidiaries and 4 branches of foreign banks.
Total bank assets grew by 10.2% to Rs 1,003.4 billion for the year ended 30 June 2013, said the report. Since then, according to the central bank’s Bulletin released in October 2013, total assets have expanded further to Rs 1,015.3 billion. Also, foreign assets accounted for 53.8% of total assets, their lowest level since December 2005.
However, Anglo-Mauritius Stockbrokers has noticed that there is a high level of non-performing loans in credit extended to the private sector, mainly geared towards the tourism and contraction industry which accounted for 16% and 25% of total credit respectively.
Due to the increasing levels of non-performing loans, the Bank of Mauritius recently introduced new guidelines on sectoral credit concentration on asset growth vis-à-vis real GDP growth. The limits are applicable as from July 1 this year and should be calculated as a percentage of a bank’s total exposures to the specified sector to its total exposure to the private sector.
Thus, the tourism sector, which attracts 25% of all bank credit currently, is expected to reduce to 24% as from July 1, 2014 and to 22.5% as from July 1, 2015; the personal sector from 15.0% to 12.5% as from July 1, 2015; and finally the commercial, residential and land parcelling sector is expected to reduce to 12.5% as from July 1, 2013
In its outlook for the banking sector, the report noted that Sub-Saharan Africa and India represent interesting markets for Mauritian banks and leading commercial banks are already paving their way towards these jurisdictions.
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