July 5, 2017 / 3:53 PM / in 5 months

Fitch Affirms SGMB and Eqdom; Outlook Stable

(The following statement was released by the rating agency) LONDON, July 05 (Fitch) Fitch Ratings has affirmed Morocco-based Societe Generale Marocaine de Banques' (SGMB) and Eqdom's National Long-Term, National Short-Term and Support Ratings. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS NATIONAL AND SUPPORT RATINGS SGMB SGMB's ratings are based on Fitch's belief of a high probability of support from majority shareholder Societe Generale (SG; A/Stable), if required. This reflects SG's strong ability (as indicated by the bank's rating) and willingness to provide support to SGMB. SGMB's Support Rating is constrained by Morocco's Country Ceiling of 'BBB'. It is Fitch's view that SG has ample resources to support SGMB, whose liabilities accounted for just 0.5% of SG's at end-2016. Fitch views SGMB as a strategically important subsidiary for SG. Retail banking is one of SG's three strategic business lines (international retail banking and financial services). SGMB is SG's largest subsidiary in Africa and is seen as the group's entry point to the continent. SGMB has a reasonable franchise in Morocco (fourth-largest bank and largest foreign-owned bank with about a 9% market share in deposits) and SG's commitment to the country has not diminished in the past few years despite weaker performance at SGMB. Ownership has remained unchanged, with SG holding 57.4% of the capital and the balance being mainly held by a Moroccan family. SGMB is strongly integrated into SG. SG tightly controls its Moroccan subsidiary, at which senior management responsibilities are broadly shared with SG members. SG oversees SGMB's credit, country, market, operational and liquidity risks, and the subsidiary benefits greatly from SG's organisation, procedures, systems and tools. In addition, SGMB shares the same branding as its parent. Fitch understands from management that SGMB has never required any extraordinary support from SG. However, ordinary support in the day-to-day activities is well-entrenched, for instance in the form of counter-guarantees that allow SGMB to meet regulatory requirements on large exposures, and through short-term liquidity lines. EQDOM Eqdom's ratings are based on a high probability of support from ultimate majority shareholder (SG) in case of need. Eqdom's main shareholders are SG Consumer Finance (SGCF, 100%-owned by SG) and SGMB (AAA(mar)/Stable; 57.4%-controlled by SG). Their stakes in Eqdom are 34.9% and 18.8%, respectively. Fitch believes SG has ample resources to support Eqdom, whose assets accounted for less than 0.1% of SG's at end-2016. Fitch believes that Eqdom is of limited strategic importance to SG given its small size and negligible contribution to SG's operating profit. Nevertheless, SG is aiming to develop synergies between its specialised financial services and its retail banking subsidiaries globally, and Morocco is no exception. Eqdom is the second-largest consumer finance company in Morocco, with an overall 21% market share (more than half with civil servants, its historical core client base) and SG's commitment to the country has not diminished in the past few years despite a more challenging operating environment, including for consumer finance companies. Ownership has remained unchanged, with SG's subsidiaries owning total direct stake of 56.8% of capital at end-2016. Fitch views Eqdom's integration into SG as only moderate. Eqdom benefits from significant independence in its day-to-day management. Nevertheless, SG and SGMB together control Eqdom's board, with the CEO being an SG executive. Eqdom benefits from SGCF's credit risk tools and procedures and from funding support from SGMB. Integration with SGMB has been growing since 2013 to adapt to the more challenging domestic environment. Eqdom also receives funding support from SGMB. As a consumer finance company, it is wholesale-funded. Its non-equity funding is sourced from domestic medium-term debt issues and bank loans (near half of which are from SGMB). Refinancing needs are manageable and liquidity risk is mitigated by the potential support from SGMB. RATING SENSITIVITIES SUPPORT RATING SGMB A downgrade of SGMB's Support Rating could result from a reduction in SG's stake in SGMB, reduced strategic importance to or lower integration with SG. SGMB's Support Rating would also be downgraded if SG's Long-Term IDR is downgraded by at least four notches, which is very unlikely. Finally, SGMB's Support Rating would also be downgraded if Morocco's Country Ceiling is revised downwards by at least two notches, which Fitch also views as unlikely. EQDOM A downgrade of Eqdom's Support Rating could result from a reduction in SG's stake in Eqdom, reduced strategic importance to or lower integration with SG. Eqdom's Support Rating would also be downgraded if SG's Long-term IDR is downgraded. Finally, Eqdom's Support Rating would also be downgraded if Morocco's Country Ceiling is revised downwards by at least two notches, which Fitch also views as unlikely. NATIONAL RATINGS SGMB A downgrade of SGMB's National Ratings could result from a reduction in SG's stake in SGMB, reduced strategic importance to or lower integration with SG, or a three-notch downgrade of SG's Long-Term IDR, which Fitch does not expect. EQDOM A downgrade of Eqdom's National Ratings could result from a reduction in SG's stake in Eqdom, reduced strategic importance to or lower integration with SG. A one-notch downgrade of SG's Long-Term IDR would lead to a one-notch downgrade of Eqdom's National Long-Term Rating. An upgrade of Eqdom's National Ratings could result from greater levels of integration with SGMB or an increase in SG's ownership stake in Eqdom. A one-notch upgrade of SG's Long-Term IDR would result in an upgrade on Eqdom's National Ratings. The rating actions are as follows: Societe Generale Marocaine de Banques National Long-Term Rating affirmed at 'AAA(mar)'; Outlook Stable National Short-Term Rating affirmed at 'F1+(mar)' Support Rating affirmed at '2' Eqdom National Long-term Rating affirmed at 'AA(mar)'; Outlook Stable National Short-term Rating affirmed at 'F1+(mar)' Support Rating affirmed at '2' Contact: Primary Analyst Janine Dow Senior Director +44 20 3530 1464 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Nicolas Charreyron Analyst +971 4 424 1208 Committee Chairperson Alexander Danilov Senior Director Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. 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