MAURITIUS COMMERCIAL BANK LIMITED - Moody's downgrades The Mauritius Commercial Bank Ltd's deposit ratings to Baa3 from Baa1

Moody's downgrades The Mauritius Commercial Bank Ltd's deposit ratings to Baa3 from Baa1

The Mauritius Commercial Bank Limited
(Incorporated in the Republic of Mauritius)
(Incorporated by Royal Charter in 1838 and registered as a limited
liability company in the Republic of Mauritius under Mauritian law)
Company code: BIMCB
(“Mauritius Commercial Bank”)

Moody's downgrades The Mauritius     Commercial   Bank   Ltd's   deposit
ratings to Baa3 from Baa1

Moody's Investors Service has, on 31 October 2014, downgraded The
Mauritius Commercial Bank Ltd's long-term and short-term deposit
ratings to Baa3/Prime-3 from Baa1/Prime-2. Concurrently, Moody's
lowered the Bank's baseline credit assessment (BCA) to ba1 from baa3
within the D+ standalone bank financial strength rating (BFSR)
category.

Moody’s attributes the downgrade of The Mauritius Commercial Bank
Ltd's ratings to: (1) the decline in its core capitalisation,
following a group restructuring, which has reduced the Bank's loss
absorption capacity and raised single-borrower concentrations; (2)
the recent weakening in asset quality, which is also pressuring the
Bank's profitability through higher provisioning expenses; and (3) a
moderation of Moody's government support assumptions incorporating
the insights gained from the global financial crisis and a
recognition of the still large size of the Bank relative to the
balance sheet of the government, despite recent regulatory measures
to ring fence the Bank's non-bank and international subsidiaries.

All ratings are placed on review for further downgrade. The review
will focus on a forward-looking assessment of further downward
pressure on asset quality, profitability, and capital, including an
assessment of risks relating to large-single borrower concentrations
and cross-border operations.

While taking note of the rating action, the Bank highlighted that its
financial soundness has been maintained. In particular, it is well
capitalised with the Bank having raised some USD 180 million in the
form of long-term Tier 2 capital during the last financial year,
which more than offset the anticipated impact on its capital base
resulting from the Group restructuring exercise. In fact, the capital
adequacy ratio of the Bank on a standalone basis reached 13.6% as at
June 2014 under Basel III while its Tier 1 ratio stood at 10.6%, with
both being comfortably above the regulatory requirements of 10% and
6.5% respectively. Besides, there is strong support from the holding
company to boost capital should the need arise. As for asset quality,
the Bank stressed that the recent deterioration therein can be
regarded as being exceptional as it principally relates to
discontinued business with some Indian Global Business files which
have been appropriately provisioned.



3 November 2014

Debt Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)

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