While Côte d’Ivoire, the largest economy in the WAEMU zone, has the densest banking market in the region with 25 credit institutions, the country still has to rely on a sector that is far from being as efficient as could think so.
In a report by the rating agency Moody’s, which Financial Afrik publishes a summary, the Ivorian banking sector is described as “relatively underdeveloped” and must accelerate the reforms in a context where the top five borrowers account for one third of credits.
A “relatively underdeveloped” banking environment
With around 30% of total UEMOA banking assets, Côte d’Ivoire is the largest banking system in the region, ahead of Senegal (20%) and Burkina Faso (14%). Despite relatively rapid credit growth in recent years – bank assets grew by 17.8% in 2016 and 24.6% in 2015 – contributing to rapid economic growth, private debt to GDP remains low at 22 , 5% and has been broadly stable in recent years, “reflecting a relatively underdeveloped banking environment that has only recently begun to reform.”
A concentrated banking portfolio
The country that records a “low banking penetration” of 15% in 2017 only “belatedly” adopted, in 2016, the mechanism of the Bureau of Credit Information to improve the quality of the banking offer.
The credit portfolio remains highly concentrated. Moody’s notes that at the end of 2017, “the five largest borrowers accounted for 98.9% of bank capital and about one-third of total loans”. In addition, the loans are concentrated in “large quasi-governmental entities and private conglomerates” thus increasing “the volatility potential of the quality of banks’ assets”.
Credit risks are also exacerbated by “weaknesses in corporate governance, risk measurement tools and lending practices, a certain tolerance for institutions (especially public banks) that do not comply with prudential rules. , such as minimum capital or liquidity requirements and maximum credit concentrations “. Also, the use of collateral in the event of insolvency remains expensive and problematic.
In addition, the banks’ financing structure still poses risks, “in particular concentrations of depositors with public entities and large conglomerates, and a mismatch between short- and long-term deposits”. Also according to Moody’s, several banks did not meet the liquidity and stable resources requirements imposed by the BCEAO (respectively, four and three banks in December 2016).
On the other hand, in a context of rapid credit growth and limited access to deposits and savings, the banks in the region maintain a structural net liquidity deficit (CFAF 2,900 billion at the end of 2017) that the BCEAO owes refinance, the agency notes. In the case of Côte d’Ivoire, banks “have a wide range of liquidity that they can put in collateral to access the refinancing of the BCEAO”. In December 2017, the level of liquid assets, as defined by the IMF, was 50.6% of total assets and 74.1% of total deposits, compared to 37.1% and 50% respectively from December 2013.
5 banks dominate the sector
The five largest banks (out of 25 in December 2016) accounted for around 60% of banking system assets in December 2016 and the four largest banks (Société Générale des Banques in Côte d’Ivoire, Ecobank Côte d’Ivoire, Banque Atlantique Cote d Ivory and the Ivorian Bank Corporation) are majority-owned by foreign capital. These five institutions are also among the top 10 largest banks in the UEMOA zone and have pan-regional or pan-African activities.
Exacerbated competition from microfinance and mobile money
In addition to the strong presence of players in its market, the Ivorian banking sector is facing increasing competition from microfinance institutions (MFIs) – there were 51 at the end of 2017 – and mobile money operators. These have made the country, with a mobile penetration rate of 115%, a regional leader in digital financial services. While only 15% of the population had a bank account in 2016, this rate approaches 40% when mobile money accounts are included, says Moody’s.
However, “high fees and commissions, interest rates capped at 15% for banks and 24% for microfinance institutions, limited agency networks and relatively high operating costs still limit bank inclusion. “.
In this context, the increased promotion, through national and regional regulation, of MFIs and mobile money “should put pressure on bank profitability and access to deposits in the years to come”. For example, in 2014, the banking regulator increased the number of free products and services offered by banks, which reduced the revenues from bank fees and commissions, which represented around 45% of their total revenues in 2016, says the agency. .
Similarly, with the establishment of their own e-money subsidiaries after an initial partnership with banks, mobile operators are positioning themselves more as banking competitors. These structures are encouraged in this way by the national and regional authorities “whether for the issuance of electronic money, payments, transfers or credits”.
Reforms in progress
Reforms have been undertaken both at the level of the Ivorian government and the regional central bank, the BCEAO.
At the level of the BCEAO, in response to difficult credit conditions, it has been undertaken to accelerate reforms to improve the prudential framework of banks. The first step was to introduce, up to 2022, higher capital requirements in accordance with Basel III standards since January 2018 in order to strengthen the prudential framework for financing and liquidity. Then, stricter credit concentration limits are gradually implemented until 2022. Also, banking supervision will be strengthened and finally, the operationalization of the credit information offices since 2016.
For its part, the Ivorian State has also progressively privatized, recapitalized, restructured and / or liquidated four public banks in difficulty under forbearance from regulation. However, Moody’s expects that these reforms will only gradually improve credit conditions over the next 3-5 years.
Financing Profile of the Ivory Coast Banking System (December 2016)
Customer deposits at sight: 55%
Term deposits: 19%
Interbank deposits: 22%
Debt and subordinated debt: 1%
Other funding: 3%
Ivory Coast Banks Market Share by Total Assets (December 2016)
SGBCI (Société Générale de Banques in CI): 15%
Ecobank CI: 14%
Atlantic Bank CI: 13%
SIB (Ivorian Bank Company): 9%
NSIA CI Bank: 9%
BICICI (International Bank for Commerce and Industry of CI) – 7%
Bank of Africa – CI: 6%
BNI (National Bank of Investment): 5%
BGFIBANK – CI: 3%
Bridge Bank Group CI: 3%
Other: 16%
