u003cpu003eu003cstrongu003eAfrAsia Bank just announced profits of Rs 303 million for the financial year ending June 2013. James Benoit, CEO of the bank, elaborates, in the interview below, on the banku0026rsquo;s success strategy, on the African segment and on expansion plans.u003c/strongu003eu003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eAfrAsia Banku0026rsquo;s profits have grown by 68% this year to reach Rs 303 million. Where doesthis growth stem from?u003c/strongu003eu003c/pu003eu003cpu003eWe have been spending a lot on branding and advertising, and have sponsored some media events locally. Also, we went on the global scene and carried out road shows in Singapore, Shanghai, Hong Kong, Beijing, London and Luxembourg.u003c/pu003eu003cpu003eOur incoming deposits, both from our corporate and private clients in Mauritius and our global business clients from over 80 countries, have really provided us with a huge growth in deposits. Our lending book has been growing as a result of that.u003c/pu003eu003cpu003eAfrAsia has been active with investing in some local bonds issued by corporates as well. We also earned a fair amount of origination fees from the loan book. Our Treasury segment registered a substantial increase as well. On overall, it has been a good financial year for our domestic and global business clients and we are very much happy with the results.u003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eThis performance is also the result of a u0026lsquo;strong fee incomeu0026rsquo; which is one of the concerns of Central Banku0026rsquo;s governor, Rundheersing Bheenick. He finds that banking fees are overpriced. What is your stand on this?u003c/strongu003eu003c/pu003eu003cpu003eI am not going to comment on the industry at large. AfrAsia is a new bank and, clearly, if our fees were above market, people would not come to us given the variety of other choices; at the end of the day, there are a lot of banks competing in the domestic market.u003c/pu003eu003cpu003eI guess the main point is whether it is the Mauritius Commercial Banku0026rsquo;s results or ours, increasingly, around 50% of banksu0026rsquo; profitability is being generated by Segment B business u003cemu003e(banking activities that give rise to foreign source income)u003c/emu003e. These clients are not complaining about the fees. Instead, they are enjoying the great service and all the other benefits that Mauritius offers as a financial centre.u003c/pu003eu003cpu003eThere may be certain segments of companies or individuals where we need to review the level of fees. However, the bottom line is: Mauritian banks are increasingly very international and I donu0026rsquo;t think thereu0026rsquo;s a case to say we are too expensive on that side.u003c/pu003eu003cpu003eThe demand for Segment B business is very elevated and has been growing strongly. Mauritius is very much becoming a regional financial centre. Many companies are choosing this route for expansion into Africa, India and the neighbouring regions.u003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eHow is the Indian segment of the business faring?u003c/strongu003eu003c/pu003eu003cpu003eWe have been doing just fine. We cannot comment on all the other competitors but we havenu0026rsquo;t experienced any credit losses from India. Our custody business and our global business for India have been steady. So, for us, India has been a very good place business wise.u003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eAfrAsiau0026rsquo;s activities in Zimbabwe were negatively impacted this year, largely due to non-performing loans. What has been/is being done to address this?u003c/strongu003eu003c/pu003eu003cpu003eWeu0026rsquo;ve put in place a lot of governance structures on credit to be processed during the year and that allowed us to identify some of the problems. We have taken the decision to recognise those loans and deal with the consequences. Weu0026rsquo;ve already done a lot of work at board level to identify issues.u003c/pu003eu003cpu003eSecondly, we have been putting in place a new corporate management structure, brought in an experienced risks officer and are continuing to put new executives there. Weu0026rsquo;ve done an upgrade on the overall governance of the bank there.u003c/pu003eu003cpu003eThirdly, to help consolidate the bank in Zimbabwe, we had to increase the existing capital and our shareholders decided that they would not be able to continue to borrow. So we ended up buying their stakes. As a result of this, we will now be rebranding the bank there as AfrAsia Bank Zimbabwe Ltd. Thereu0026rsquo;s a comprehensive turnaround plan in place.u003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eDoes this mishap come to highlight that investing in Africa could be far more risky than anticipated by foreign investors?u003c/strongu003eu003c/pu003eu003cpu003eRisky might not be the right word. Instead, Africau0026rsquo;s been high in volatility. This is demonstrated by the recent tragic events in Kenya, for example. I think we have to appreciate that the core growth opportunities are there but one has to make sure that he is managing the risks in his specific business. I will add that none of the risks encountered in Zimbabwe were unidentified, they were just larger in scale. It is something we worked really hard at but it has taught us that, as a Mauritian company, it is going to be important to have lots of extra skills to be present in Africa.u003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eSeveral banksu0026rsquo; profits in Mauritius, including AfrAsiau0026rsquo;s, are being generated by the global business segment. What kind of message is this sending out to the business community?u003c/strongu003eu003c/pu003eu003cpu003eI think it sends out a great message because the reality is Mauritius is only 1.2 million people. With Mauritius serving as an International Financial Centre (IFC), there is a population of 2 billion or 3 billion people around us.u003c/pu003eu003cpu003eThe increase in global business activities shows that Mauritius is increasingly becoming that regional IFC that we all keep saying we are trying to be. So, I think itu0026rsquo;s not a bad thing at all; it just means the market around us is much bigger than our people. As time goes on, we can expect that our sources of revenue stemming from the region will expand. To sum up, it means that banks are well capitalised, very liquid and ready to do a lot of business here and internationally.u003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eHow does the bank face up the local and regional competition?u003c/strongu003eu003c/pu003eu003cpu003ePretty successfully so far. Weu0026rsquo;ve been fortunate to win a few awards, such as the u003cemu003eEuromoney Award for Private Bankingu003c/emu003e. We also recently won the u003cemu003eBest Bank in Southern Africau003c/emu003etitle conferred by u003cemu003eThe Banker Magazineu003c/emu003e. Weu0026rsquo;ll be earning another award later this month in Europe for another achievement. Iu0026rsquo;m not just speaking about us. In fact, when I look at some publications now, there are a number of Mauritian banks recognised in the Top 200 across Africa.u003c/pu003eu003cpu003eI would add that it is the collective effort of many of us (banks) that is really starting to position Mauritius as the banking hub of the African continent. I think our banking industry is being perceived as a substantial provider of capital and access to finance in Africa.u003c/pu003eu003cpu003eu003cstrongu003eu003cspan style=color:#ff8c00;\u003eBUSINESSMAG.u003c/spanu003eCould you elaborate on the banku0026rsquo;s long-term strategy?u003c/strongu003eu003c/pu003eu003cpu003eOur strategy is to continue developing our presence here. We are waiting for approval of a new branch and for moving a lot of our support functions to Ebène because we are continuing to expand. We are nearly 140 people now. Our head office will however remain in Port Louis. We will also continue to consolidate our investment into AXYS Capital Management, which is our fund Management Company, and AfrAsia Corporate Finance as well, which will be completing our acquisition process until we are a wholly-owned subsidiary.u003c/pu003eu003cpu003eWe are looking at some selective investments into other countries in Africa as well, which we will announce when we can. We are also in the process of applying for a representative office in London. So, basically, we want to have a good footprint in key African countries, obviously with Mauritius at the centre. We just want to make sure we are the leading, original preferred investment bank in Africa from Mauritius.u003c/pu003eu003cpu003eu003cspan style=color:#ff8c00;\u003eu003cstrongu003eBUSINESSMAG.u003c/strongu003eu003c/spanu003eu003cstrongu003eAre there any major projects in the pipeline?u003c/strongu003eu003c/pu003eu003cpu003eThe Ebène branch will be a big project for us, because it will be regrouping a lot of departments, such as marketing, finance and asset recovery. We will be hiring more people and will be expanding by another 20% this year. We are really trying to become more visible. We will continue to advertise our brand and invest in people and locations.u003c/pu003eu003cpu003eWe hope to be coming up with a lot of new investment products. We are also doing a lot more of sophisticated treasury products which are being used by a lot of corporates. These two will continue to be key priorities. We also have a couple of special products for our private clients coming up, centred on credit cards.u003c/pu003eu003cpu003eu003cspan style=color:#ff8c00;\u003eu003cstrongu003eBUSINESSMAG.u003c/strongu003eu003c/spanu003eu003cstrongu003eWhen can we look forward to the listing of AfrAsia Bank on the Stock Exchange of Mauritius?u003c/strongu003eu003c/pu003eu003cpu003eThis is under consideration awaiting a further corporate holding company restructuring and is not expected for at least 12 months.u003c/pu003e
James Benoit: “The core growth opportunities are in Africa”
