Fitch: Moroccan Banks' Performance Reliant on Domestic Economy
However, the three largest Moroccan banks' performance, particularly BMCE Bank's (BMCE; BB+/Stable/b+), will continue to be supported by their lending activities in sub-Saharan African countries. Fitch expects 2016 net profit at these banks to also benefit from non-recurring gains on their bonds portfolios on the back of the 25bp decrease in interest rates at end-1Q16.
Asset quality is under pressure at Moroccan banks and Fitch views the largest Moroccan banks' asset quality as modest by international standards while obligor concentration will remain a weakness. Quality metrics have largely deteriorated since 2012 and Fitch expects this to continue in 2016. The main reasons are a fragile SME sector in an economy that is still awaiting a significant rebound in exports to Europe, the difficulties encountered by a few national players and the overall low demand for loans in the absence of strong economic growth.
Impaired loan ratios at the French banks - Societe Generale Marocaine de Banques (SGMB), Banque Marocaine pour le Commerce et l'Industrie (BMCI) and Credit Du Maroc (CDM, not rated) - are significantly above the largest Moroccan banks'. Fitch believes that the main reason behind it is stricter loan classification.
Attijariwafa Bank (AWB; BB+/Stable/bb-), BMCE and Groupe Banque Centrale Populaire (GBCP, not rated) have expanded into sub-Saharan Africa to offset the slowdown in domestic loan growth. This expansion is a source of income diversification, but also of higher credit and operational risks. Fitch expects the substantial exposure of the three largest banks to weaker African economies to continue to weigh on their risk profiles. Fitch expects focus on organic growth although new acquisitions could take place in 2017.
Capital ratios should remain modest in 2016 given loan book concentration, only adequate reserve coverage of impaired loans and exposure to volatile African countries. Capital ratios are not expected to rise above minimum regulatory requirements at the largest banks. In Fitch's view BMCI is the only Moroccan bank whose capitalisation is commensurate with its risk profile.
The funding profile of Moroccan banks is solid, with stable and largely unremunerated retail customer deposits forming the bulk of their funding base. Liquidity has largely improved since 2013 and is satisfactory. Fitch expects this trend to continue at least till 2017.