Fitch Ratings has just announced the completion of the review of five major Moroccan banks representing about 77% of the assets of the national banking system. These are Attijariwafa Bank (AWB), Bank of Africa (BOA), Crédit Immobilier et Hôtelier (CIH), Société Générale Marocaine de Banques (SGMB) and Banque Marocaine pour le Commerce et l’Industrie (BMCI). Excluding AWB, the international and national ratings for the other four banks are affirmed.
“AWB’s long-term national rating has been upgraded to “AA (March)”/Stable, reflecting the bank’s prolonged record of resilient performance, particularly in the recent cycle, supported by a stable and diversified business profile and prudent growth. AWB’s domestic rating is one notch above that of its domestic peers but below that of the subsidiaries of major French banking groups, SGMB and BMCI, as they benefit from the potential support of their foreign shareholders,” the British rating agency said in a statement released Friday.
The review also led it to revise its outlook on the operating environment of Moroccan banks from stable to negative. According to Fitch, this reflects its view that “pandemic-induced risks to the operating environment have sufficiently subsided with the opening of Morocco’s economy and export markets, and that, despite current risks, the five banks will continue to provide resilient financial measures in 2022.
Fitch also notes that the asset quality of the five banks has remained in line with its expectations, supported by the authorities’ comprehensive pandemic support measures in 2020. While debt relief measures ended in 2021 for most borrowers, the banks’ asset quality was supported by a strong rebound in GDP growth estimated by Fitch at 6.2% in 2021.
Profitability, capitalization
For impaired loans, their ratio is established at 11.1% in the first half of 2021. For the year 2022, the rating agency expects the ratio to improve slightly to just under 11% with higher loan recoveries and continued recovery of business activity.
Fitch further stresses that it is reassured by the strong recovery in Moroccan banks’ profitability, driven mainly by loan growth and lower impairment charges, despite the benchmark interest rate being maintained at 1.5%. “The consolidated average return on equity (ROE) of the five banks increased from 5.5% in 2020 to 10.3% in the third quarter of 2021. We expect profitability to strengthen further this year, although a return to the pre-pandemic ROE of around 12% seems far off,” the same source continued.
Fitch also notes the maintenance of the capitalization of banks in 2021. It indicates, without this sense, that Bank Al-Maghrib has introduced in 2021, in line with its efforts to move towards international best practice, a minimum leverage ratio Basel III of 3%, which the five banks meet relatively easily. The parameters are supported by sound internal capital generation, the agency adds.
A key positive raised by Fitch: funding and liquidity conditions have proven stable in 2020/2021. “There was no deposit outflow and domestic capital markets continued to function well. Customer deposits, which represent the bulk of Moroccan banks’ funding, increased by 4 percent in 2021. Banks were able to issue additional Tier 1 and Tier 2 capital locally, which also strengthened their funding profile and helped them better manage their liquidity. Shifts,” it explains.
Fitch finally notes that its concerns for 2022 center on weaker-than-expected economic growth (Fitch forecasts GDP growth of 3.2%), a delayed recovery of the country’s vital tourism sector, high inflation (1.8% in 2022), as well as sustained high unemployment (11.2% in 2022).
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