Monday 06, November 2017 by Matthew Amlôt

Moody's affirms Baa3 ratings of two Mauritian Banks, maintains stable outlook

Moody's Investors Service (Moody's) has affirmed Mauritius Commercial Bank Limited's (MCB) and SBM Bank  (Mauritius) Ltd.'s (SBM) local and foreign-currency deposit ratings at  Baa3/P-3 and their baseline credit assessments (BCA) of ba1. Moody's  maintained the stable outlook on the long-term deposit ratings assigned  to both banks.

MCB's and SBM's Baa3 long-term deposit ratings reflect their Baseline  Credit Assessment (BCA) of ba1 and Moody's assessment of a `high' probability of Government of Mauritius (Baa1, stable) support in case of  need.

The banks' ba1 BCAs reflect: (1) their very high liquidity buffers, (2)  comfortable capital levels and (3) good earnings generating capacity.  These positive credit drivers are moderated by banks' (1) elevated credit  risks owing to sizeable borrower concentrations and problem loans,  although on a declining trend and (2) reliance on relatively high portion  of foreign-sourced deposits, which are confidence sensitive to any  disruption in Mauritius' off-shore business sector, although part of  these deposits relate to corporates and high net-worth individuals that  are more sticky. The high government support assumption is driven by the  banks' importance to the domestic financial system given MCB's  approximate 45% market share of domestic customer deposits, and SBM's  around 23% market share combined with its indirect government ownership  of around 28% through state-owned entities.