Interview: Mauritius creating new bank from bailed out institutions - CEO

By Edmund Blair

EBENE, Mauritius (Reuters) - A new Mauritius bank being created from two banks bailed out by the government will launch in January and could seek a strategic investor in three years, the executive leading the merger said.

MauBank will be formed by joining MPCB, a bank weighed down by bad loans amounting to 25 percent of its portfolio, and some parts of what was Bramer Bank, which was nationalised this year after suffering a run on deposits.

The Indian Ocean island, which has been building an offshore financial centre, was shaken by the turmoil in its domestic banking and finance sector. It presented a crisis for the new government just months after taking office in December.

"In three years, we should have turned it around and made it into a very credible and a very attractive institution," said Sridhar Nagarajan, who took up the post of chief executive of MPCB in September to lead the merger.

"We can offload a strategic portion of the bank" after that period, he said, adding this would mean the state recouped funds it had injected and still retained a stake in the institution.

Nagarajan, a former chief executive of Standard Chartered Bank in Mauritius, said it was too soon to say how big a stake would be offered in MauBank, which will have a balance sheet worth about $1 billion when it launches.

Some of the funds making up MauBank's capital come from the government's budget pledge to commit 2.2 billion Mauritius rupees to support lending to small and medium-sized enterprises (SMEs).

As well as creating a new healthy bank from other banking assets, Nagarajan said MauBank would be used as the vehicle to deliver on the government's promise to support SMEs.

MPCB had a healthy SME lending business that could be expanded, Nagarajan said, adding the bank's bad debt pile had grown from lending in other areas due to "governance issues".

In addition to focusing on SMEs, the new bank would build on a good corporate business and small international operations that had been salvaged from Bramer Bank.

He said Africa would be a focus for the bank's international business, supporting the government's own push to make Mauritius a regional financial and trade hub for the continent. Until recently, much Mauritius business has been focused on India.

In three years, he said the international business could be contributing 20 to 25 percent to profits, and could involve opening offices in centres such as Johannesburg.

(Editing by David Evans)