Reuters logo
Fitch: African Expansion Weighs on Moroccan Bank Credit Profiles
May 11, 2017 / 1:53 PM / in 6 months

Fitch: African Expansion Weighs on Moroccan Bank Credit Profiles

(The following statement was released by the rating agency) LONDON, May 11 (Fitch) Moroccan banks' ambitions to further expand across Africa are a drag on their credit profile, at least in the short term, Fitch Ratings says. Moroccan banks that establish or acquire banks in markets with lower sovereign ratings are exposed to the large portfolios of local government bonds that these subsidiaries will typically hold. In most African markets, domestic sovereign bonds are rated several notches lower than Moroccan sovereign bonds (BBB-). Operating environments are also typically more risky, exposing banks to greater asset risk, and regulatory standards may be less developed than they are in Morocco. Fitch's assessment of risk appetite, capturing our view of the risks of African expansion, has a high influence on the standalone Viability Ratings of Morocco's Attijariwafa Bank (bb-) and BMCE Bank (b+). We do not rate Morocco's other systemically important bank, Groupe Banque Populaire Centrale (GBPC). Attijariwafa and BMCE's Long-Term Foreign-Currency Issuer Default Ratings of 'BB+' reflect our view of potential support from the Moroccan state, if needed. Attijariwafa closed on its acquisition of Barclays Egypt business last week, marking another step in its African expansion plan, a strategy also followed by GBPC and BMCE. African subsidiaries have helped to offset weak credit growth and narrowing margins in these banks' Moroccan units, and are becoming increasingly important contributors to overall earnings, generating 32% of 2016 net income for BMCE, 29% for Attijariwafa and 12% for GBPC. If Attijariwafa's new Egyptian subsidiary continues to be as profitable as it has been recently, African banks' contributions to consolidated group results could become even more important. However, this boost to Moroccan banks' profits is not risk-free and the steady growth of African lending means that these loans accounted for about 20% of loans at Attijariwafa, 15% at BMCE and 12% at GBPC at end-2016. In 2016, according to Attijariwafa, Barclays Egypt reported net income equivalent to 6.5% of Attijariwafa's net income, and in 1Q17 it reported a 4.3% annualised return on assets, considerably higher than the 1.4% achieved by Attijariwafa in 2016. Its consolidation into the Attijariwafa group from 2Q17 could mean that well over one third of the group's profits are being generated by its African network. However, the Egyptian business is unlikely to maintain such high profitability once yields on Egyptian government bonds fall. Net interest margins for Egyptian banks were boosted in 2016 by the 300bp increase in policy rates to tighten monetary conditions following flotation of the Egyptian pound. We expect yields on Egyptian treasury bills to decline this year as the operating environment stabilises after the currency depreciation that followed the free float, translating into lower margins for banks. Moroccan banks' network of African subsidiaries, mostly in sub-Saharan countries, is considerable. BMCE has subsidiaries in 19 African countries, Attijariwafa in 13 and GBPC in eight. The subsidiaries vary in size and franchise. For example, BMCE's subsidiaries in Benin, Burundi and Djibouti are market leaders controlling over a quarter of banking sector deposits, while its banks in Ghana, Kenya, Rwanda and Tanzania each have market shares of about 2%. Contact: Janine Dow Senior Director Financial Institutions +44 20 3530 1464 Fitch Ratings Limited 30 North Colonnade London E14 5GN David Prowse Senior Analyst Fitch Wire +44 20 3530 1250 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below