confidence - Investing In Africa

Management Discussions & AnalysisOperation Review (cont’d)In order to compute RAROC for a meaningful comparative basis, the capitalallocated in 2004 has been adjusted to reflect revised risk weights andadjustments for one-time income and expenses and related tax charges from2004 and 2005 data. Group RAROC has decreased marginally in 2005 to38%, mitigated mainly by reduction in unrated portfolios thereby requiringlower capital despite an increase of over ten per cent in risk weighted assets.The credit risk profile of Personal Banking line of business improved year onyear, thereby warranting lower provisions and capital. The profitability ofPersonal Banking is somewhat mitigated by higher operating costs due to theneed to have service delivery channels such as ATMs and service units.Business Banking’s clients are categorised by portfolio, which carry differentinherent risks depending on the industry. A well-balanced mix of portfolios andclients will therefore help in balancing the risks of Business Banking. Chart 1shows the portfolio mix of Business Banking for the Mauritius operations only,together with their associated RAROC for 2005.Value initiativesThe logical suite to the performancemeasurement and planning processare value creation initiativesundertaken with the commonobjectives of achieving world-classperformance and productivitygrowth. During the year a number ofinitiatives were undertaken rangingfrom processes review in the light ofspeed of delivery and quality service,cost management, review of certainkey items of expenditure with theobjective of managing expensesthrough better control procedures aswell as need based analysis andcredit management review for betterquality assets.Chart 1 - RAROC of Business Banking by PortfolioLooking forward to next year, some ofthe key initiatives that will beMRs' Million5000450040003500300025002000RAROC (%)1801501209060undertaken will include an in-depthanalysis and reflection on our salesand service culture, further managingproductivity and efficiency at the bankand building human capital.78150010005003000-30AgricultureCommerce RetailCommerceWholesaleInfrastructureJob ContractorsManufacturingOthersManufacturingTextilesNew EconomyReal EstateServices FinancialServices OthersTourismAssets Rs MLiabilities Rs MRAROC %While the performance team examines value created in the past, the Bankresponds rapidly to changes in the market environment through quarterlyrolling budgets so that lines of business are always alert and are able tomeasure achievement against budgets set by the Board and accordinglyadjust their strategies in time, if need be.