Island banks in good shape

The Bank of Mauritius says the island's banking sector has emerged virtually unscathed from the global financial crisis with just a marginal drop in the sector’s assets.

Governor Rundheersing Bheenick said banking sector assets declined by 0.4% in the year to December 2009 while deposits increased by 2.1%.

He did not give total values. “Overall profitability continued at satisfactory levels with a healthy year-on-year growth of 11.3% posted for the year ended June 30, 2009,” he wrote in an annual letter to stakeholders.

The growth rate of bank credit to the private sector, he said, slowed down considerably to 2% during the first 11 months of 2009, compared to 19.9% in the corresponding period of 2008.

Mr Bheenick said the decision by the ratings agency Moody’s to downgrade Mauritius Commercial Bank and State Bank of Mauritius in late 2009 remained a “sore point”, came at a bad time and had risked hurting the island’s open economy.

Moody’s made the downgrade due to a change in methodology. More broadly, while Mr Bheenick considered the domestic and global economy to be in a better state than a year ago, he cautioned against excessive optimism.

“In advanced economies, growth is still very low; unemployment is high and still rising; bank credit is yet to pick up and de-leveraging is yet to run its course,” he said in the letter.

Last year’s economic slump in important European markets knocked tourism and textile revenues, both crucial drivers of the Mauritian economy, as both sectors dropped prices to counter sluggish demand. Foreign Direct Investment also slowed sharply.

In an interview with Reuters earlier, Mr Bheenick forecast gross domestic product would increase by 4.5% this year, up from 2.8% last year barring any policy change or massive external shock.

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