Mauritius bank shares fall after Moody's review

* Bank shares lead fallers in Mauritius on Monday

* Bankers' association says review unwarranted

* Mauritius bank sector seen growing 6.5 pct in 2009

By Jean Paul Arouff

PORT LOUIS, July 6 (Reuters) - Shares in State Bank of Mauritius SBML.MZ and Mauritius Commercial Bank MCBL.MZ fell sharply on Monday after Moody's rating agency said last week it was reviewing them for possible downgrades.

State Bank slid 8.7 percent to 63 rupees ($1.96) per share, while Mauritius Commercial Bank fell 4.76 percent to 120 rupees, making them the two biggest losers on the Mauritius Stock Exchange. .MDEX.PL.MZ

Moody's said last week it may lower the banks' ratings for financial strength, long and short-term local currency deposits and their issuer ratings.

Analysts say while the banks' overall financial strength remains robust, supported by strong capital levels and profitability, the ratings agency expects the global downturn to hit the island's key tourism and manufacturing sectors.

"(The review) was prompted by Moody's expectation that a weakening operating environment in Mauritius will exert pressure on the banks' asset quality, leading to higher credit losses on their loan portfolios than were previously incorporated in the ratings," UBA Capital's Jonathan Harrison said in a note.

Aisha Timol, chief executive of the Mauritius Bankers Association, said she did not think the review was justified as the banks' profitability levels remained unaltered, even though banking sector growth was set to slow in 2009.

"(This is) more a result of the current cautious international outlook on the banking sector in general and the prudent stance being taken by rating agencies ... rather than on the performance of these banks per se," she said.

The global downturn is expected to dent the growth potential of the banking sector in Mauritius, with a forecast of 6.5 percent in 2009 compared to 12.9 percent in 2008, she said.

"These two banks continue to be well capitalised, with Capital Adequacy Ratios above the Basel II norm of 8 percent and the domestic requirement of 10 percent, with solid fundamentals, good liquidity conditions and remain under the close scrutiny of the central bank," Timol said. (Additional reporting and writing by Richard Lough in Antananarivo; Editing by David Clarke and Will Waterman)