76% of investment securities are short term in nature, having a remaining contractual maturity of less than 12 months. Furthermore 78% of the Bank’s foreign investments that are held at amortised cost have a rating grade of AAA as per note 18 of the Financial Statements. Monies with banks, categorized as cash and cash equivalents/due from banks are what makes up the majority of the Bank’s total assets, at 46%.

From a maturity perspective, 80% of the Bank’s assets had a remaining maturity of 12 months or less, there of 75% maturing in the next 3 months or less, demonstrating the high liquidity profile of the Bank’s assets.

As from 1 July 2018, we adopted the new accounting standard, IFRS9 – “Financial Instruments” which provides for new requirements for the classification and measurement of our financial assets as well as the new methodology for calculation of credit impairments. These applications have effectively been reflected in our accounts as at 30 June 2019.

A deterioration in the Bank’s asset quality, with Non-Performing Assets (NPA) increasing by 32% from MUR 1.5bn to MUR 1.9bn is to be noted. During the year, the Bank managed recoveries of the order of MUR 89.2m and also wroteoff MUR 214.3m of assets which was fully provided for. On the other hand, it is to be highlighted that assets coverage ratio was healthy at 65% as compared to 39% last year.

Our deposit base continued its sustained growth, with an increase of 18% as compared to the previous year end, to stand at MUR 131.2bn. Consistent with last year, approximately 14% of our customer deposits is in MUR and the remaining in foreign currency, 61% of which is in USD. Customers’ monies are mainly held in current account and represents 69% of our total customer deposits, followed by 27% in fixed deposits of which 70% is in USD. The largest portion of our total customer deposits is from our Global Business Segment, which contributes 78% of the total deposits base, equivalent to more than MUR 102bn, of which MUR 72bn was in USD.

On the regulatory side, the Bank’s capital base stood at MUR 7.7bn, of which MUR 5.9bn in Common Equity Tier 1 capital and MUR 1.3bn in Additional Tier 1 capital, demonstrating that the Bank is well capitalized, with a Capital Adequacy ratio of 15.85%, against regulatory threshold of 12.88% as at 30 June 2019. The Bank also maintained a dividend pay-out of 30% to its Ordinary Shareholders, while at the same time meeting its obligations to Class A shareholders.

Being still qualified as a Domestic Systemically Important Bank (D-SIB), we are imposed an additional buffer of 1.00% over and above the regulatory benchmark and it is reassuring to note that the Bank therefore has sufficient capital buffer for its growth and should also be in a position to absorb any systemic shock that may arise in the future.

During the year under review, total operating income increased by 27% to MUR 3.7bn. Net Interest Income (NII) grew by 35% to MUR 2.3bn, driven mainly by the Bank’s important Non-Interest bearing dollar deposit base which sits at USD 1.6bn as at end of June 2019, while on the other hand, there was a favourable trend in the USD yield curve during Financial Year 2018-2019.

Net fee and commission Income registered a growth of 24%, principally on the back of increased commission income from transactional flows in the Global Business segment. Net custody income was rather subdued this year on account of a drop in global market indices and stronger competition, resulting in the Bank having to reduce its tariff to maintain market share. Ignoring an abnormal impact last year, returns from our credit card business grew marginally this year, contributing to approximately MUR 16.0m to the bottom line.

With the first time adoption of IFRS 9, there have been several changes in the recognition, presentation and disclosure of financial assets which also had a net positive impact in the Bank’s NPAT. Indeed, these changes led to a transition impact of a net tax credit impairment of MUR 429.4m to be recognized against retained earnings, while there was concurrently a drop of around MUR 599.2m in the Bank’s “Net impairment loss on financial assets” from MUR 1.1bn to MUR 468.4m.

Operating expenses increased during the FY under review by 20% to MUR 1.1bn, split 58% between personnel expenses and the balance in other expenses. The growth in personnel expenses of 22% is on the back of our headcount increasing from 368 to 402 as well as an increase in the Performance Bonus pool.

Other expenses also grew year on year to reach MUR 462.3m, representing a growth of 16%. The main component of this increase is on account of IT costs (annual maintenance costs and IT amortization) growing by 17%, making up MUR 123.3m of the total other expenses.

Taxation of Banks has gone through several changes following the enactment ofthe Finance Act 2018 and 2019. The Bank's tax expense increased by 69%to MUR 239.2min20t9 which was driven by increase in profit and change in the deferred tax rate. A lower effective tax rate of L3.L% was reported for 2019 as compared to 15.6% in 2018, mainly on account of the reclassification of special levy worth MUR 63.8m to total operating expenses.