In a new report on Moroccan banks, an improved version of the two previous ratings of 2013 and 2016, the rating agency Fitch Ratings points to a low equity of the seven major banks of the kingdom (among others, Attijariwafa bank and BMCE Bank Of Africa). Another conclusion noted is the alarming proportion of outstanding debts.
The ratio of “bad debts” on outstanding credit was 9.8% at the end of the first half, “a much higher level than that of developed markets,” says the US agency.
With the entry into force of IFRS 9, banks were obliged to increase provisions for loan losses and credit risk coverage.
Has the adoption of this standard strengthened Moroccan banks? This is what appears at first reading since the provisions covered on average 83% of the impaired loans of the seven largest Moroccan banks at the end of June 2018 against 73% at the end of 2017.
Nevertheless, the agency believes that the implementation of IFRS 9 has revealed the capital weakness of the banking sector of the kingdom. The deduction of provisions for impairment of loans from equity has impacted the level of capitalization of banks. Useful to specify, IFRS 9 is gradually applied in Morocco over a period of five years, which allows institutions to adjust as and when.
If they are profitable, solid, liquid and have varying degrees of capital ratios above the minimums required, Moroccan banks face a high concentration of risks.
In the first half of 2018, the 20 largest loans in the sector accounted for an average of 20% of the total loans of all banks rated by the agency. Fitch believes that “the concentrations can be much higher for banks focused on large companies.”
The rating agency, a bit pessimistic, says it would degrade Moroccan banks if their rating was not supported by the assumption that they would receive support, if necessary, from the state (rated BBB – / stable) or their institutional shareholders.
