Moody’s – Morocco’s largest banks expand in Africa with uneven levels of risk absorption buffers

The research is an update to the markets and does not constitute a rating action.

Morocco’s three largest banks all follow similar universal banking strategies and have expanded into sub-Saharan Africa to bolster growth. Nonetheless, despite these similarities, there are differences between the three banks, particularly in their capacity to withstand further credit challenges, says Moody’s Investors Service in a peer comparison report published today.

The report “Attijariwafa, BCP and BMCE – Peer comparison — Large Moroccan banks expand in Africa with uneven levels of risk absorption buffers” is now available on www.moodys.com. Moody’s subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.

Attijariwafa Bank (Attijariwafa) (LT LC deposit rating Ba1, positive, ba3 baseline credit assessment -BCA), Groupe Banque Centrale Populaire (BCP), (LT LC deposit rating Ba1, positive, ba3 BCA) and BMCE Bank (BMCE), (LT LC deposit rating Ba1, stable, b1 BCA), Morocco’s three dominant banks, together represent two thirds of the nation’s banking assets.

The expansion into Africa was led by Attijariwafa and BMCE, who consequently have the highest proportions of loans sourced from the region on their books at 23% and 25%, respectively. BCP has a more modest exposure of 12%.

Those higher-yielding foreign operations, primarily focused on corporate banking, have significantly increased the three banks’ operating profitability, with BMCE sourcing 47% of its net banking income from Africa, compared with 28% for Attijariwafa and 17% for BCP.

However, Attijariwafa’s net profit ratios are higher than those of its peers, largely owing to its stable and lower operating costs, a higher proportion of income from fees and commissions than its peers and lower levels of loan-loss provisions.

“All three banks face elevated levels of problem loans, but Moody’s expects loan performance to stabilize within the next 12 to 18 months at all three banks as Morocco’s economy strengthens and the banks’ get better at managing risk at their foreign subsidiaries.” says Olivier Panis, VP Senior Credit Officer.

Attijariwafa had the lowest ratio of non-performing loans to gross loans among the three banks at 7% as of December 2016, compared with 7.7% for BCP and 8.3% for BMCE. Attijariwafa and BCP are best positioned to weather any additional stress on their asset portfolios, with problem loans representing respectively 36% and 39% of the banks’ shareholders’ equity and loan loss reserves, compared with 54% for BMCE.

BCP has a stronger funding profile than the other two banks, due to its large branch network that enables it to collect a large deposit base. As a consequence, the bank is less reliant on market funding than its peers. BMCE, however, has consistently displayed a higher level of liquid assets.