Fitch says outlook on Moroccan banks’ operating environment stable

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Attijariwafa Bank.
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  • Fitch upgraded to AA(mar)/Stable the rating of Morocco’s Attijariwafa Bank (AWB).
  • Five banks, which account for nearly 77 percent of Morocco's banking system assets were reviewed by the ratings agency.

Fitch Ratings has upgraded to AA(mar)/Stable the rating of Morocco’s Attijariwafa Bank (AWB), one of the five Moroccan banks whose peer review was recently completed by the ratings agency and which account for approximately 77 percent of Morocco’s banking system assets.

AWB’s rating reflects the bank’s extended record of resilient performance, particularly through the recent cycle, backed by a stable and diversified business profile and cautious growth, Fitch said in a statement.

AWB’s National Rating is one notch above that of domestic peers but below the subsidiaries of large French banking groups, SGMB and BMCI as they benefit from potential support from their foreign shareholders.

The other banks reviewed are Bank of Africa (BOA), Credit Immobilier et Hotelier (CIH), Societe Generale Marocaine de Banques (SGMB) and Banque Marocaine pour le Commerce et l’Industrie (BMCI).

The review also led to Fitch revising its outlook on the Moroccan banks’ operating environment to stable from negative.

“This reflects our view that pandemic-induced risks on the operating environment have sufficiently eased with the opening of the economy and Morocco’s export markets, and that, despite prevailing risks, the five banks will continue to deliver resilient financial metrics in 2022,” the statement reads.

Fitch said asset quality at the five banks remained in line with its expectations, underpinned 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 percent in 2021 compared to 2020: a 6.3 percent contraction, one of the sharpest declines in Middle East and North Africa.

At end-1H21, the consolidated Stage 3 loans ratio was 11.1 percent of gross loans in average for the five banks (unchanged from 2020). Fitch expects the ratio to improve slightly to just below 11 percent in 2022 with higher loan recoveries and the continuing pick-up in business activity.

There was a strong recovery in profitability driven by loan growth and lower impairment charges, despite the benchmark interest rate remaining at 1.5 percent.

The average consolidated return on equity (ROE) at the five banks increased to 10.3 percent in 2021 from 5.5 percent in 2020. Fitch expects a further strengthening in profitability this year although a return to the pre-pandemic return on equity of around 12 percent appears distant.

The banks’ capitalization held up in 2021 although Fitch believes buffers continue to be modest relative to regulatory minimums, particularly for banks exposed to large regional operations.

One key positive is that funding and liquidity conditions proved to be stable in 2020/2021. There were no deposit outflows and domestic capital markets continued to function well. Customer deposits, which represent the bulk of Moroccan banks’ funding, increased by 4 percent in 2021.

The banks were able to issue additional Tier 1 and Tier 2 capital securities locally, which also strengthened their funding profile and helped them to better manage their liquidity mismatches.

Our concerns for 2022 centre around lower-than-expected economic growth (Fitch forecasts GDP growth of 3.2 percent), a delayed recovery in the country’s vital tourism sector, high inflation (1.8 percent in 2022) as well as sustained high unemployment (11.2 percent in 2022).

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