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AfrAsia Bank reported a net interest income (“NII”) of MUR 2.0bn, that is, 12% lower than in the prior year. The year-on-year decrease was mainly driven by higher interest expense of MUR 1.1bn (2019: MUR 0.9bn). This effect was mainly on the back of the COVID-19 pandemic creating trade related uncertainty plunging the average volume and balances of placements and bonds due to financial market volatility and erosion of market value both in the domestic as well as international markets. Terms of many financial assets had to be renegotiated leading to dwindling interest income on customer grounds. While the Bank coped to manage its interest income, the growth in interest expense was the final knockback which dragged the net interest income down.

In terms of split, it is to be noted that the ad-valorem of segment B is MUR 1.2bn making 60% of net interest income compared to 69% last year.


The underlying contraction in interest income from MUR 3.2bn to MUR 3.1bn is predominantly on the back

of reduced interest income on loans as a result of repricing of several loans following the change in Prime Lending Rate and LIBOR. Interest income on placements and nostros was down by MUR 116.2m compared to last year.

Furthermore, interest income on investment securities increase to the tune of MUR 216.2m, that is, 24% to reach MUR 1.1bn from MUR 911.2m. During the year under review, the largest driver on interest income is investment securities. The constituents of the latter are fore mostly sovereign and graded bonds with reputable institutions.

The segmental split of the interest income can be represented by Segment A at 42% and Segment B at 58% compared to a larger bearing in Segment B (62%) last year.

The return on assets is as tabulated below:

% MUR FCY (Inclusive of USD) FCY (USD only)
Customers Banks Securities Customers Banks Securities Customers Banks Securities
FY20 4.85% 3.13% 3.71% 3.40% 1.27% 1.82% 3.57% 1.84% 1.85%
FY19 6.63% 3.56% 3.83% 4.03% 1.69% 2.24% 4.37% 2.48% 2.42%


A rise of 27% in interest expense was noted in the reporting year reaching MUR 1.1bn, of which, 93% counted as interest expense on customer deposits as a result of growth in customer deposit base in both local and international markets. An interesting paradigm shift through the segmental lenses, is Segment B’s contribution to interest expense being greater than Segment A as compared to previous years.

The associated cost from deposits is mainly tracked down from the fixed deposits slice of our deposit base which grew by 6% year-on-year.

The cost of funds is as tabulated below:

% MUR FCY (Inclusive of USD) FCY (USD only)
Customers Banks Customers Banks Customers Banks
FY20 2.15% 2.08% 0.48% 0.65% 0.63% -
FY19 2.43% 3.58% 0.39% 1.58% 0.57% 2.48%


Non-Interest Income makes up 47% of the total operating income for the year being reported and showed an increase year-on-year of 29% with the main stimuli being:

  • Net fee and commission income amounting MUR 0.5bn; and
  • Other revenue of MUR 1.3bn.

The split can be illustrated as follows:


Net fee and commission grew by 9% from MUR 426.8m to MUR 466.9m with the major component being net commission earnings reckoning a year-on-year growth of MUR 51.0m, i.e. 15%.

Net custody fees showed a positive allocation between its income and expense components rose by 3% up to MUR 110.0m (2019: MUR 107.2m) on the back of cost containment on the custody horizon and increased trading fees induced by the volatility brought about by COVID-19.

Retrocession fees saw an increase of 12% from MUR 48.7m to MUR 54.7m.

We observed considerable fall in net card related income by 74% to reach MUR 4.0m (2019: MUR 15.6m) driving the income down.


Other revenue stood at MUR 1.3bn representing a 38% increase compared to prior year at MUR 1.0bn. Other income contributes 35% of total operating income. The year-on-year improvement of MUR 364.1m was driven by an increase in trading income relating mainly to fair value gain and profit on disposal of securities. Additionally, the CCIRS deal brought a further gain of MUR 98.9m to the books.


The Bank recorded its impairment loss at MUR 839.1m which represented a jump of 79% compared to MUR 468.4m in 2019.

The net impairment loss on financial assets was MUR 161.5m for Segment A and MUR 677.6m for Segment B as compared to last year of MUR 14.1m for Segment A and MUR 454.3m for Segment B, which is an increase of 1,046% in Segment A and 49% in Segment B respectively.

The impairment figures were attenuated by bad debts recovered of MUR 108.3m (2019: MUR 89.2m).

The segmental split of the impairment is illustrated year-on-year as follows:


The Bank invested MUR 718.1m, that is, 56% of its total operating expenses to impel and sustain its personnel during the year compared to MUR 646.3m last year. The headcount as at 30 June 2020 stood at 413 vis-à-vis 402 the prior year. The Bank ensured that staffs were provided with the paramount safety measures by bringing to their availability all precautionary gears with the endeavor amounting to MUR 3.2m during the pandemic period.

In terms of IT costs, the Bank made continuous outlays to upgrade its banking environment to enhance user experience and produce dynamic improvements from both an employee and a client perspective. During the year under review, IT related expenses comprising running expenses (including amortisation and depreciation) increased by 34% to MUR 166.5m.

The major elements of the Bank’s other operating expenses include amongst others:

  • Repairs and maintenance and service contracts occupied the major chunk of the other operating expenses, it is to be highlighted that 96% of this figure represent IT related expenses explained earlier in this discussion;
  • Communication costs augmented by 33% to MUR 56.2m;
  • Professional fees increased by 30% to MUR 62.7m;
  • Advertising and marketing expenses was 16% lower than last year reaching MUR 53.4m (2019: MUR 63.7m), expenditure was extenuated by the downturn in economic activities propounded by COVID-19. In line with its usual niche strategy, a substantial chunk of the expenditure resided in the sponsorship of AfrAsia Bank Mauritius Open (“ABMO”); and
  • Special levy increased by 28% to MUR 81.7m on the back of an increase in the leviable income.


The Bank’s income tax expense as at 30 June 2020 as per its Statement of Profit or Loss and Other Comprehensive Income comprises of Corporate tax, Corporate Social Responsibility (“CSR”) and Deferred tax.

Following the recent changes in Income Tax Act, the corporate tax as at 30 June 2020 are as follows:

  • Up to MUR 1.5bn taxable income – 5%
  • Over MUR 1.5bn taxable income – 15%

However, taxable income above MUR 1.5bn may be subject to graduated tax rate provided as per table below:

  • Taxable income of current year exceeds MUR 1.5bn;
  • Taxable income of base year exceeds MUR 1.5bn;
  • Current year’s taxable income exceeds that of its base year; and
  • Bank satisfies the prescribed conditions.
Taxable income Rate of income tax
Up to MUR 1.5bn 5%
Exceeding MUR 1.5bn up to amount equivalent to the taxable income of the base year 15%
Amount exceeding taxable income of base year 5%

As per Income Tax Act, 'base year' refers to taxable income for the year of assessment 2017/18, that is, financial year ended 30 June 2017. CSR is at a rate 2% of Segment A taxable income of the preceding financial year which are paid to Government-approved CSR projects. The Banks’ CSR contributions for 2020 is MUR 15.9m compared to MUR 6.5m for 2019.

Special levy is recorded under operating expenses at a rate of 4.5% of leviable income. Leviable income applies to banking transactions of Segment A and is defined as the sum of net interest income and other income before deduction of expenses as per VAT act. The special levy increased from MUR 63.8m in 2019 to MUR 81.7m in 2020 due to increase in leviable income.

The deferred tax asset is computed at the tax rate of 5% representing the rate at which the asset will be utilized in future years.

Overall, the Bank’s income tax expense decreased from MUR 239.2m in 2019 to MUR 146.8m in 2020. The effective tax rate decreased from 13.12% in 2019 to 8.80% in 2020. The lower effective tax rate was mainly on account of the change in tax rate.

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