10 years of
Performance

The year 2018 marked the 10^th anniversary of the start of the global financial crisis which had shaken world markets like never before. Although economies across the globe did post robust growth numbers over the past two years, strong threats were posed by the increased polarisation between both economies and societies. Globalisation is no longer perceived as an option. Countries have become more inward looking with rightist governments coming into power across the world.

In the international political arena North Korea’s sabre rattling exercises are expected to continue after the failed second historic summit between Donald Trump and Kim Jong Un in Vietnam. A smooth Brexit looks like a distant dream after the British Parliament rejected the long negotiated proposal that Theresa May had worked out with the EU leading to further uncertainty around a no deal situation. The longest economic shut down in the US made headlines, following the House of Representatives refusal to clear the USD5bn Budget proposal by the Trump Administration to build a wall along the Mexican border.

On the economic front, although the US boasted the lowest unemployment numbers in decades, fears of inflation raising its ugly head led the Fed to raise interest rates. This, of course, increased the pain points in the developing world. The Venezuelan crisis, the US opting out of the Iran deal, uncertainty in the Middle East led to a spike in oil prices. Currencies and stock markets in emerging markets took a hit. The situation was further exacerbated by the ongoing trade war between the US and China – another strong deterrent to economic growth and free trade agreements.

In the backdrop of this uncertain global environment Mauritius continued to be an island of relative serenity. The country celebrated its 50^th Anniversary of Independence in March 2018 amid much pomp and splendour with a lot of pride, given its overall performance both in terms of economic progress and political stability. GDP grew at the rate of 3.7%. The budget deficit stood at 3.3%. Unemployment numbers eased with the Government’s huge spending thrust on infrastructure. Tourism showed signs of healthy growth which gave a boost to the economy. The key sectoral drivers of growth continued to perform well with financial services, food processing, retail and wholesale trade, information and communications technology growing at a rate of 5%. Diversification into medical tourism and higher education will further strengthen the country’s economic prospects. Mauritius retained its #1 rank in Sub-Saharan Africa on the World Bank’s Ease of Doing Business Report.

The Bank of Mauritius pursued a tight money policy in the first half of 2018 sucking out excess liquidity from the economy in an attempt to curb inflation. Consequently liquidity pressures built up in banks and interest rates gradually moved northwards. The Central Bank’s Golden Jubilee Bond Issue aimed at individuals and NGOs also attracted significant investment. Other regulatory changes involved tighter implementation of anti-terrorist financing and anti–money laundering laws. On the fiscal front the tax laws changed narrowing the taxation gap between GBCs and domestic companies.

Transformational changes were undertaken as part of the decennial goals. Starting with a complete upgrade of the Core Banking Software and IT systems, a serious effort was made to improve our customer experience. Both the Retail and International Banking Divisions welcomed new Heads – also part of the Bank One initiative to grow our business, offer new products and branch into new territories. Substantial success was achieved in both these areas. The refurbishment of branches also gave fillip to the exercise. Our Asset Book grew steadily, but we experienced muted profitability owing to a one-off provisioning exercise. We posted a lower NPA ratio. Some of the major achievements in this past year include a new custody offering which was well received by our High-Net-Worth Individual clientele and earned us the award for the Best Private Bank in Mauritius. Our E-Commerce business focused on new product development and entry into new markets leading to improved business volumes and better visibility. In the Credit Card segment, our enhanced security measures for online shoppers along with other customer friendly measures led to a sharp increase in the number of cards issued.

At the Board Level there was one change, Mr. Jozef Tournel, an Independent Director resigned in November 2018. His replacement is expected to join us once the regulatory approvals are in place. I would like to thank Mr. Tournel for his contribution to the successful running of the Board. I would also like to thank my fellow Directors for their active and animated participation in all matters related to the Board and whose support and advice have been invaluable in successfully overseeing and steering the Bank towards achieving its strategic vision. I would also like to place on record the Board’s appreciation of the efforts of Bank One’s Management and Staff to make 2018 a successful year for the Company. We have always had the advantage of very supportive and active Shareholders – as a Board we recognise their contribution to the growth of the Bank. Last but not least we are thankful to our External Auditors for keeping a watchful eye on our books and to our Regulators for helping us in our efforts to be compliant.

Sandra Martyres
Chairperson

10 years of progress

On 22 February 2008, CIEL Investment Limited and I&M Bank Limited, two leading conglomerates in Mauritius and Kenya respectively, came together as a 50:50 joint venture to take over First City Bank. An amazing journey began with the refresh of the brand name from First City Bank to Bank One Limited on 8th August 2008. This partnership brought together local and regional synergies resulting in establishing its presence and expertise to transform the Bank into a strong player on the offshore landscape.

2018 was marked with the celebration of Bank One ten year’s anniversary. As we look back on how far we have progressed, we feel proud of what has been achieved during these ten years. We have recorded a substantial turnaround in profit after tax from a loss of over MUR100m to a profit of MUR393m. The Asset book, Deposits and Advances all multiplied more than fivefold, with the workforce growing only by 70% from 225 to 382 headcounts. As a direct consequence, the cost to income ratio improved markedly from 240% in 2008 to 45% in 2018. In the meantime, the client base grew by 30%. On the risk side better management led the gross NPL Ratio to improve from 11% to 4.74%.

2018 – A year of progress on a clearly defined path

2018 has been a strong year for Bank One in which we continued to develop and build momentum for the future. The balance sheet has grown rapidly with a year-on-year increase in total assets by 25% from MUR32bn to MUR40bn. Total deposits book substantially went up from MUR28bn to MUR33bn representing a growth of 18%. This growth, combined with a good dynamics of fee generating businesses and with a one-off revenue of MUR141m, from a long outstanding litigation, resulted in a strong progression in revenues by MUR463m – a growth of 48%. The profit before impairment reached MUR789m from MUR412m for the preceding year. However, a large impairment provision and a change in tax legislations negatively impacted the final profit figure which closed at MUR393m.

We are working together as ONE team to ensure that all actions within the Bank are aligned towards successfully achieving our strategic vision. A number of new initiatives have been launched and we have created capacity to prepare for future growth anticipated to arise from the momentum that the Bank has created. Bank One has been able to penetrate further the local market and is fast emerging as a Bank where the young as well as experienced people want to work and one that clients want to engage with.

There is still a long way to go. However, we see lots of opportunity in our chosen segments and lines of business. We will continue to create the capacity to manage the opportunities, strengthen our risk culture and ensure we achieve our strategic vision.

Strengthening our Foundations

Even as we pursue growth aspirations, we acknowledge that this needs a strong foundation. In 2018, therefore, we have invested significant time and efforts to strengthen our operating platform so as to deliver better service, enhance controls and create internal capacity to manage expected growth. On the technology side we have upgraded our Core Banking system and our Internet Banking, as well as introduced a new Mobile Banking App. We have increased our investments in cyber security and have started to further fortify and strengthen our channels and access points. On the people side we have concluded some top-quality hires that bring new experience and expertise to the Bank. We have also reinforced our capital base with an additional Tier II Sub Debt issuance of MUR200m. Our funding base has also been augmented, with a senior debt of USD30m from a German development financial institution. All these factors have enabled us to prepare better for the future and to build a more digital, efficient and leaner organization.

Re-Engineering and Transformation

We have made good headway on efficiency and reengineering of our key processes. This effort will pay dividends in 2019 and future years and will enable us to be more innovative and market focused. Our Core Banking upgrade will now enable our digitization journey. This, along with a re-engineering of our key processes, will enable us to achieve a much enhanced customer experience, improve managerial information and cut down transaction costs. A number of agile teams have been formed to tackle individual elements of our transformation. Separately, we have engaged with our shareholder groups to develop longer term value-added propositions which are more in line with what a modern successful bank needs.

Lines of Business Performance

We have had a strong business performance in 2018 across almost all our business lines. Our International Banking business has delivered a good performance and continues to be a driver of growth. It will be critical in the future balance sheet and revenue growth of the Bank.

E-Commerce has had an excellent year driven by increased volumes and a diversification of its income streams. Our partnership with UnionPay International was a key achievement for future business opportunities.

Treasury has also had a strong year with good flows and increase in volumes on both the interbank and client side. New products have been added to the portfolio which will give us an added edge.

Private Banking has emerged as a key provider in the market for External Asset Managers and has grown its portfolio of Assets Under Custody strongly. Volumes and revenues are up and good growth is anticipated in the coming years.

The Corporate Banking business had a difficult year driven by collapsing margins and poor opportunities for growth in a very competitive market. We are already emerging as the Key Bank or the top 3-5 banks for some groups and will continue to build on that positioning.

We have successfully managed to refocus our Retail Banking unit. With a new head of business in office, the entire momentum of the business has gathered pace and we are looking for an exciting 2019 both on the product side and in increasing volumes and improving profitability.

Economic Environment

Whilst general elections are more likely to happen in early 2020, we do not expect much of disruption and the country should continue to grow its GDP at a steady rate of 3.5-4%. The construction sector is doing particularly well and thanks to a number of new projects including the Metro, new flyovers and improved road networks; a positive effect is trickling into the economy. Tourism has also been a bright spot with total tourist numbers up 4.3% in 2018 from 1.34m to 1.39m. The Financial Services sector in Mauritius will continue to consolidate with the impact of CRS, India Double

Taxation Treaty, Kenya Amnesty Scheme, and BEPS now being strongly felt. The sector will have to innovate and come up with new services to stay competitive and relevant.

On the international front, there is an expectation of a slower global GDP growth in 2019 and 2020. Coupled with trade tensions between the US and China and a number of flashpoints across the global economy, our international business growth will have to be very prudent. Whilst a complete meltdown is not expected, there will be increased headwinds coming from several directions to navigate through. Africa will continue to be an area of focus for us and we will look for selective opportunities to grow our business there.

Conclusion

I would like to conclude by highlighting that this is an extremely exciting time for Bank One. We have invested in our foundations and controls and created the capacity to handle a much larger business. The business strategies are well articulated and execution will be key to ensuring success. The team is bright and young, and with the right passion and creativity we can seize the various opportunities that come our way. This will enable us to truly outperform and realize our vision of becoming the “One Bank of Choice”.

A huge thank you to my executive team for their belief and efforts in our journey, our staff who are so passionate and involved as well as the Board who constantly guides and advises us. All this progress would not have been achieved without the unwavering support of our shareholders. I am also thankful to the regulators for their guidance and advice.

Ravneet Chowdhury
Chief Executive Officer