OREANDA-NEWS. Fitch Ratings has affirmed Morocco-based Attijariwafa Bank's (AWB) Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB+', Long-Term Local Currency IDR at 'BBB-', Viability Rating (VR) at 'bb-' and Support Rating (SR) at '3'. The Outlook on the Long-Term ratings is Stable. A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS

IDRS, NATIONAL RATINGS, SUPPORT RATING AND SUPPORT RATING FLOOR

AWB's IDRs, National Ratings, SR and Support Rating Floor (SRF) reflect a moderate probability of support from the Moroccan authorities. AWB is one of the leading Moroccan corporate and retail banks with respectively a 26.2% and 24.9% market share in deposits and lending at end-2015. It is domestically-owned and operates internationally with subsidiaries in Tunisia and in sub-Saharan African countries. The Stable Outlook on the bank reflects the Outlook on the Moroccan sovereign rating.

Fitch believes that the Moroccan authorities would have a high propensity to support AWB if needed, given the bank's systemic importance in the country. However, Fitch views the probability of support as only moderate given Morocco's financial strength (BBB-/Stable).

AWB's 'BB+' SRF is at the Moroccan banks' SRF for domestic systemically important banks (D-SIB), reflecting the bank's high systemic importance.

VR

Fitch views the combination of AWB's modest capital ratios and significant risk appetite as having a higher influence on the bank's VR than other factors. The VR also reflects AWB's leading domestic franchise, moderate asset quality, overall solid funding and liquidity profile and a capacity to generate sustained profitability.

AWB's capital ratios are modest given the significant risk appetite of the bank as reflected in its high loan book concentration, substantial exposure to volatile markets - such as sub-Saharan African countries and Tunisia (together 22% of total assets at end-2015) and high related-party lending. AWB's Tier 1 capital ratio is only adequate (10.1% at end-2015) and we expect it to be stable in 2016.

Fitch views AWB's asset quality as moderate. The bank's impaired loans ratio (7.1% at end-2015) compares well with domestic peers' although Fitch believes that it may be under-estimated compared with international standards. The impaired loans ratio has been deteriorating over the last four years, reflecting a lack of domestic loan growth and economic pressure encountered by corporates and SMEs (about 60% of loan portfolio at end-2015), a still challenging operating environment in Tunisia (Attijariwafa Tunisie: 6.8% impaired loans ratio) and weak economies in sub-Saharan African countries (average impaired loans ratio at AWB's subsidiaries of 10.6%). Fitch expects impaired loans to keep rising in 2016, albeit only moderately, due to persistent economic uncertainties in those countries and a still stagnating domestic economy.

High obligor concentration in AWB's loan exposes the bank to event risk - in common with domestic peers. Five credit exposures represented more than 10% of AWB's equity at end-2015, with the top 20 obligors representing about 1.9x equity. This concentration reflects, to some extent, the concentration of the Moroccan economy in certain sectors and AWB's high domestic market shares. Those large exposures include significant related-party lending to AWB's main shareholder - Societe Nationale d'Investissement (SNI; 31% of AWB's equity at end-2015), given the parent's large presence in several domestic economic sectors. Fitch views this as a rating weakness.

Fitch views AWB's funding and liquidity profile as solid. Stable retail deposits form the bulk of funding and liquidity has been improving - in common with domestic peers - as a result of slowing demand for loans and continuously growing client deposits. AWB's buffer of domestic government bonds is satisfactory, covering 12 months of short-term market funding.

AWB's profitability is solid, but will be affected in 2016 by a lack of growth in Morocco. and still high loan impairment charges. However, Fitch expects AWB's profitability to benefit from net gains on its large securities portfolio following the 1Q16 decrease in Morocco's interest rates.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS, SUPPORT RATING AND SUPPORT RATING FLOOR

The IDRs, SR and SRF would be sensitive to a change in Fitch's view of the Moroccan state's willingness or ability to support the bank. These ratings are also sensitive to a change in Fitch's assumptions around the availability of sovereign support for Moroccan financial institutions should any progress be made towards providing a framework for resolving banks, including a bail-in tool.

AWB's National Ratings would be downgraded if the sovereign is downgraded by multiple notches or if the Moroccan state's willingness to support AWB diminishes, most probably as a consequence of reduced systemic importance. Both scenarios are unlikely in the near future.

VR

The VR would benefit from an improvement in AWB's capital ratios. Conversely, evidence of a higher risk appetite or a significant deterioration in asset quality leading to weaker capital ratios could put pressure on AWB's VR.

The rating actions are as follows:

Attijariwafa Bank

Long-Term Foreign Currency IDR: affirmed at 'BB+'; Outlook Stable

Short-Term Foreign Currency IDR: affirmed at 'B'

Long-Term Local Currency IDR: affirmed at 'BBB-'; Outlook Stable

Short-Term Local Currency IDR: affirmed at 'F3'

National Long-Term Rating: affirmed at 'AA-(mar)'; Outlook Stable

National Short-Term Rating: affirmed at 'F1+(mar)'

Support Rating: affirmed at '3'

Support Rating Floor: affirmed at 'BB+'

Viability Rating: affirmed at 'bb-'